Thursday, March 15, 2007

Irish Economists: Optimists and Realists - but where are the Cassandras?

Adam Smith (1723-1790) Photo: Baker Library, Harvard Business School - - Former Federal Reserve Chairman Alan Greenspan said about Adam Smith, who is regarded as the father of modern economics: "In the broad sweep of history, it is ideas that matter. Indeed, the world is ruled by little else. As John Maynard Keynes famously observed: 'Practical men, who believe themselves to be quite exempt from intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.' Emperors and armies come and go; but unless they leave new ideas in their wake, they are of passing historic consequence."

Philosopher-economist Adam Smith : A patron for 21st century trade unionism?

In the Irish Times Property supplement today, Economics Editor Marc Coleman referred to doom merchants, saying in relation to the Irish property market, that irrational predictions of doom can be self-fulfilling. Some people just need to pull themselves together and adopt a stiff upper lip: the market is correcting, not collapsing.

Growth should steady to low single digits for the next year or two, remaining below nominal income growth and thus eroding the modest amount of overvaluation in the market. With interest rates set to peak this year and start declining next year - and with the possibility of supporting the market by cutting stamp duty always at hand - the safety nets for house price levels in 2008 are effectively already in place.

Austin Hughes, Chief Economist of IIB Bank, in a commentary on the latest Irish inflation figures, wrote: While inflation in Ireland is above the European average and bears watching we think some of the recent concerns in relation to Irish inflation have been exaggerated to the point where they could damage consumer and business confidence.

Economists, as practitioners of what is termed the "dismal science," are stereotypically painted as seeing doom much faster than boom as accountants are branded as boring.

Any set of data can be viewed from different angles and forecasting the future can have a positive or negative slant.

The number of Irish economic commentators or economists is small and those who have a profile in the media, tend to work in financial services. If they were presenting many tales of woe, they wouldn't last long in their jobs.

As to other economists, where are the Cassandras?

Against the mass ranks of political spin and the self-interested optimists, is a small number who draw attention to the unbalanced economy with an over-reliance on construction.

In America, there is always a "next crash" industry but who is saying that the Irish sky is falling?

It is actually a stupid tack to take because it allows those who do not wish to look beyond the short-term, off the hook - basically two extremes talking past each other.

In the run-up to the General Election, the politicians have set the agenda with soundbites and there has been little reaction from the media and economists.

For readers who are not fans of the Greek Classics, the Merriam-Webster dictionary defines Cassandra as follows:

Etymology: Latin, from Greek Kassandra

Date: 1542

1 : a daughter of Priam endowed with the gift of prophecy but fated never to be believed 2 : one that predicts misfortune or disaster