After years on the outer, a long-time critic of the economic rationalists finds a new audience for his spiky commentary, writes Jessica Irvine.
The financial crisis dealt a body blow to the once-revered economics profession. Dragged down from their ivory towers, economists have been called to account for the complete failure of their most basic teachings: that markets are efficient, that humans are rational and, perhaps most of all, the idea that economic models have any predictive power, given their utter failure to see the crisis coming.
Subject to ridicule and scorn, who would want to be an economist these days?
I’m keen to ask John Quiggin, perhaps Australia’s most prolific academic economist and long-time critic of laissez-faire economics, or “economic rationalism”, over brunch at Heeley Street Espresso, in Paddington.
An avid blogger, columnist and commentator, in addition to his day job as an Australian Research Council federation fellow at the University of Queensland’s school of economics, Quiggin is in Sydney briefly after returning from the prestigious London School of Economics where he delivered a lecture on his new book Zombie Economics: How dead ideas still walk among us.
He is staying in Paddington with his son who, after an initial career as an investment banker, switched to private equity which is “more like capitalism as it’s supposed to work”, says Quiggin senior.
Published in time for Halloween last year, Zombie Economics started out as Quiggin’s attempt to kill the failed economic ideas that led to the financial crisis. But even as he wrote it, Quiggin says he found those dead ideas beginning to reanimate.
“The idea was to knock them on the head, but they have proved startlingly resilient.”
He says this resilience only shows why the world needs more, not fewer, people versed in the language of economics, who can fight zombie ideas in the language of their makers.
“Economists are going to dismiss criticism from non-economists at all times. I think where lots, or the majority, of economists are wrong, it’s even more important to have those viewpoints criticised by people who know what they’re talking about.”
But the real reason the world needs economics?
“Because it’s important. For all its failings, economic analysis still offers the best way forward on a range of thorny public issues such as addressing the ‘negative externality’ of pollution which contributes to climate change, or getting price signals right in water markets.
“Clearly on things like climate change, they’re areas where market-based policies have a big role to play. I think we have to have a carbon price. Everything else has been tried out by politicians and been proved to be very silly. And economists in that context, I think, have been right all along.”
After decades on the outer, as neo-liberal market ideas gripped the world, Quiggin’s ideas about government intervention have finally found a home in the heart of government with federal Labor’s embrace of Keynesian stimulus.
So is life less lonely on the left? “Certainly I think there’s less of a need to feel on the defensive.”
But Quiggin is keenly aware that intellectual ideas come, and they go.
“I think you have to take the long view. My working career has pretty much coincided with the era of market liberalism and so in that sense there are points that I was making 30 years ago that are only now getting more widespread acceptance. Those were very much minority views for a very long time and you just have to call ’em as you see them.”
And yet, it’s hard to pigeonhole Quiggin as left-wing. There could be no stronger advocate for the role of private markets and establishing clear price signals to solve the problem of carbon emissions. He is as well versed in neo-classical theory as its strongest advocates and was recently invited to be a fellow of the Econometric Society, an international body which assembles experts in theoretical and quantitative economics. No room for bleeding hearts there.
The reaction to Zombie Economics from free-market advocates is also a testament to the respect for Quiggin from all sides of the divide. A review of the book for the Centre for Independent Studies, while unwilling to concede the death of free market ideals, nonetheless credits Quiggin as “a king within the Australian economics profession”, “one of the most influential economic theorists in Australia” and “the smartest from the other side”.
“On the many occasions that Quiggin drives a nail into the head of illogical or discredited justifications for laissez-faire, he is doing everyone a favour,” the authors wrote.
While hardly a household name, Quiggin has spent a career influencing the public policy debate and pointing out the failures in conventional economic wisdom.
Born in 1956 in the lower-middle-class suburbs north of Adelaide, the young Quiggin moved to Canberra aged 14, where his father worked at the space tracking station at Tidbinbilla towards the end of the moon landings program.
“I probably would have gone into science – it was a par job for people like me. I was good at maths,” he says. “I took up economics by chance in high school.”
After working for the Bureau of Statistics and Treasury, Quiggin opted for a degree in pure mathematics at the Australian National University. “And this was when the world economy was falling to bits in 1972. I ended up thinking economics was important. I was old enough to remember the good times of the 1950s and ’60s and always felt we should aim to get back to those good times.”
As a student, he remembers, he stood on the steps of Old Parliament House on the day Whitlam was dismissed. “Of course at that time it was impossible to tell how things would play out. Right through the 1970s you couldn’t tell whether the whole system was going to fall in a heap. There were people on the right talking about the need for a man on horseback and people on the left still expecting revolution. Instead, we muddled through with this fairly unsatisfactory set of policies which eventually emerged as what I’m calling market liberalism in the book.”
Quiggin says it was striking even then how quickly economists forgot the obvious failings in their models so painfully exposed by the period of stagflation in the 1970s.
“It really struck me how many people completely changed, as if they couldn’t even remember … and I was like, at least you need to be a bit more sceptical rather than people who just seemed to blow with the wind of fashion, people who I felt switched from one view to the other with no bit of cognitive dissonance.”
After graduating from ANU, Quiggin took a job in the Bureau of Agricultural Economics where he undertook a part-time honours degree in economics, then a master’s, then a PhD. In the late 1980s he joined academia and was ranked, in a survey of Australia’s top 25 economists, as the second most prolific journal article contributor. He has penned a fortnightly column for The Australian Financial Review since 1994 and blogs almost daily.
Frankly, I wonder where he finds the energy. It could be the coffee – he confesses to drinking four to five double espressos a day. It probably also helps that he doesn’t watch TV. Instead, he recently took up triathlons, shedding 12 kilograms.
Asked which of his ideas will live beyond the grave, Quiggin nominates his advocacy for food to be excluded from the goods and services tax – to help low-income earners – and some theoretical research about risk and uncertainty, particularly the idea that people tend to focus on low-probability events like winning the lottery or dying in a plane crash.
He has been a strong voice against privatisation and in favour of action on climate change and public investment in broadband. His ARC federation fellowship is looking into water management.
Despite frustration with the lack of action on climate change and water, Quiggin remains an optimist. Action on climate change is inevitable, he says. “The only issue is how long it will take. At some point, the polar ice caps will melt and hopefully we will have started before then. There’s no real question about the facts, it’s only how soon we get moving, how much we lose and how expensive something we could have addressed at essentially zero cost if we’d started in 2000 we now have to pay substantially more for.”
After brunch, I offer to brave Sydney traffic and drive Quiggin to Maquarie University where he is due to give a lecture. We arrive late to campus and drive around aimlessly looking for the lecture hall until a passer-by advises us it is just a 10-minute walk away. As I fret about him being late, Quiggin departs with a cheery wave: “I’m sure I’ll make it.”
And he did.
Life and Times
1956 Born in Adelaide.
1977 Graduates from ANU with pure mathematics degree.
1978 Joins Bureau of Agricultural Economics.
1987 Completes PhD in economics (part-time, external) at the University of New England.
1988 Lecturer, University of Sydney.
1990 First book, on utility theory.
1994 Starts writing column for The Australian Financial Review.
1996 Professor, James Cook University, Townsville.
2000 Australian Research Council professorial fellow, Australian National University.
2002 Starts blog, johnquiggin.com.
2003 Australian Research Council federation fellow, University of Queensland.
2010 Fifth book, Zombie Economics.
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