What a perfect chance to rant after describing thinking about GDP this morning!  The econ news gods love to provide.

Look, I didn’t really agree with the Business New Zealand piece on New Zealand not being a “low wage” economy either – although I’d like people to be a bit clearer with their definition before they call anything low wage – but what the hell is this sort of article by a “data scientist”. [Note: I like data science and data scientists.  This is not an example of that.]

Now I’m back I’m calling this sort of trash “economics reporting” out – if we are going to publish articles where we are giving an objective rundown of the data we have to know the data and know the research at a basic level.

If we want to state our values (eg there are have nots in New Zealand that we want to support more) we don’t need to do this, we should all be allowed to state what we think matters and doesn’t matter.  But abusing the data and misstating trade-offs isn’t doing that, it is straight lace lying mate – irrespective of whether we disagree with the values associated with the person we are disagreeing with.

Reading it half a dozen times I think I’ve worked out what he is attempting to say.  Real GDP in NZ is probably between 15% and 30% lower in New Zealand than Aussie.  After tax wages are about 32% lower according to a measure they aren’t going to cite, because Stuff.co.nz has no shame about what it does with data (Note: It is probably the OECD disposable income measures).  Therefore wages can go up by increasing the share of income going to labour and we don’t need productivity growth.  Ignore the logical incoherence of that conclusion for now, the very premise of it is flawed to hell.  Let me explain.

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Proper posting starts next week but before we start I just want to outline the broad scope, but narrow method, of the posting that will occur here – and hopefully the critical comments of other people will follow the same idea when discussing these things.  Essentially let’s cover all sorts of social and economic issues based on two factors: questioning and understanding the context of the received wisdom that underlies them.  In this way, each post should start with an idea that some group accepts as true, and needs to both critique that but also understand the underlying concern or situation that led to that idea gaining traction.

Coming back to reading the news of the day I’m struck by how much “received wisdom” there is out there.  I know I used to complain about it and state that economists should be careful about how their simplifications could be taken as received wisdom, but to be honest I’d forgotten quite how extreme it is.

Now this may be all well and good but it isn’t how I like to think about economic and social issues.  Instead I like the idea that a good way to look at these questions is to be a bit of a child:

A good economist is like a petulant child.  They always ask why, never fully accept an answer, and rarely fully reject one.

All of us sitting here on our computers intend to be good economists, and this blog is a space where we can practice the art – asking ourselves whether the received wisdom we rely on to reach our conclusions about certain social and economic policies is really defensible, if you need some help setting up your business computer, try out one of the Chicago IT Support Companies.  But critique alone isn’t as useful as I used to think – we also need to ask why the received wisdom is accepted in order to understand where legitimate concerns regarding trade-offs exist.

I have noticed discussion of New Zealand’s “poor productivity performance” (among other things) here.

I have noticed the statement that people now are worse off than their parents (here and here).

I keep hearing that wages aren’t going up in New Zealand – a statement I find particularly surprisingly given that I have been sitting around in a dark room with the evidence of rising wages for several years.

Now each of these statements comes from something.  Productivity, the progress of generations, and wage growth are all short hand things that are used to define progress (assuming of course no trade-off) and a belief in their absence indicates that individuals in society are concerned about social and economic failure.

However, to a particular group each of these is a received wisdom that can be dropped in conversation.  The economist or policy analyst will use the first to signal to other economists that they know what productivity is.  The married couple in their 30s or 40s will use the second to talk to their parents over brunch about how they don’t understand how much harder it is for them than it was for the baby boomers.  The third is used by people the whole economy over to complain about how they should be paid more for the day they spend surfing facebook and commenting on stuff articles.

My cynicism aside, each of these pieces of received wisdom both includes true information in the context it was noted – and misleading information that is being used to support a set of beliefs for some group.

Take wage growth as an example.  During the Global Financial Crisis there was evidence wage growth was weak – in fact there are periods where wage growth will slow which demand explanation (including during 2017).  However, this is not evidence that wages are always and everywhere too low.  Real wages in New Zealand have grown persistently through time … if this is contentious to someone then don’t worry, this will be covered eventually.

Going forward lets evaluate some of these ideas on the blog.  We can try to figure out the context where they are useful – and the context where they are misapplied.  Uncomfortable statements for this wisdom such as “if lower productivity is a choice is it really bad” and “millennials in NZ are fundamentally wealthier in terms of goods and services than baby boomers were” can be placed alongside the nuggets of truth such as “lower productivity due to some group protecting themselves (poor competition) is a failure” and “many millennials are excluded from some things, such as access to the security of owning a house, that baby boomers weren’t”.

Received wisdom is there for a reason – and we should be keen to find out what people may be concerned about rather than ignoring it.  However, this does not mean that we should take received wisdom as given – since out of context it is often simply false statements used by a group to try to get something.

Lets do this.