ECONOMIC POLICY‐A REVIEW ARTICLE
| Published date | 01 June 1972 |
| Author | Frank Blackaby |
| DOI | http://doi.org/10.1111/j.1467-9485.1972.tb00520.x |
| Date | 01 June 1972 |
ECONOMIC POLICY-A REVIEW ARTICLE
FRANK
BLACKABY
C.
D.
COHEN.
British Economic Policy 2960-2969.
London
:
Buttenvorths,
1971. f3.50 (cloth) f1.90 (paper).
SIR
ALEC
CAIRNCROSS
(ed.).
Britain’s Economic Prospects Reconsidered.
London
:
George Allen
&
Unwin, 1971. f3.25 (cloth)
El
.90 (paper).
SIR
ALEC
CAIRNCROSS.
Essays in Economic Management.
London
:
George
Allen
&
Unwin, 1971. f3.50 (cloth) E1.90 (paper).
T. W.
HUTCHISON.
Economics and Economic Policy: some aspects
of
their
interrelations.
London
:
George Allen
&
Unwin, 1968. E3.00.
R.
A.
COOPER,
K.
HARTLEY,
C.
R.
M.
HARVEY.
Export Performmce and the
Pressure
of
Demand: a study
of
firms.
London: George Allen
&
Unwin, 1971. f3.50.
SUSAN STRANGE.
Sterling and British Policy: a political study
of
an inter-
national currency in decline.
London
:
Oxford university Press, 1971.
€4.00.
Nobody can complain these days that the best economic brains spend their
time
on
abstract questions of economic theory, and do not deign to deal with
real-life policy problems. This may have been true once; it
is
certainly not
true now. It is quite difficult to think
of
any prominent British economist
who has not in the last decade gone on record with the expression
of
some
view on some question of economic policy. Economic policy is now added
as a special section in many modern general text books
on
economics;
indeed, some courses on macro-economics are built round policy questions.
The books discussed in this article constitute only
a
fragment of the sum
total of writing on economic policy in recent years.
But who
is
listening? The reputation of economists as advisers on
economic policy is at the moment low.
It
is a period of
‘
what is wrong with
economics
’
articles, which one columnist or another writes at about quarterly
intervals. The Common Market debate, with
a
symmetrical pair
of
letters
to
The Times
from economists for and against, did not help economists’
reputations. When Government Ministers decided to lay part of the blame
for the present high figures
of
unemployment
on
the bad advice
of
their
economic advisors, it was noticeable that nobody sprang to the defence of
this embattled group. It might reasonably have been expected that some
member of the establishment would have done
so;
it is after all normally
accepted that it
is
not done for Ministers
to
attack their civil servants and
at the same time to deny them their right to defend themselves
in
public.
Nothing was said; it was only economists who were being blamed. It would
have been different had it been permanent secretaries.
So
there is here a slightly contradictory situation. More and more
economists are working on economic policy problems; less and Jess attention
189
190
FRANK BLACKABY
is being paid to what they say. The economists’ take-over bid for economic
policy has failed. What has gone wrong?
In
looking for an answer it is useful to begin with some model
of
economic policy in mind. Most
of
the authors who are writing about
economic policy in the books discussed here have adopted implicitly, though
not explicitly, a Tinbergen-type model. It is surprising that none
of
these
books refer to him; he does not appear in the index
of
any of these volumes.
But his concepts of objectives, instruments, and trade-offs provide the basic
framework
for
virtually all policy discussions in these books. Anglo-Saxon
writing
on
economic
policy
has rather drifted into adopting a Tinbergen
model, without reference to the discussion in the oriaal s0urce.l Tinbergen
deserves more acknowledgment than he receives.
The Tinbergen model
is
one of aims, objectives and instruments. Aims
are the ultimate purposes of Government policy-general concepts such as
welfare, justice, security, power, and
so
on.
However, since economists could
hardly work with vague and unquantifiable concepts of
this
kind, Tinbergen
converted the economic aspect of these aims into a set of quantifiable targets
or objectives. Some of Tinbergen’s targets are fully familiar by now-full
employment, price stability, balance
of
payments equilibrium, and economic
growth. Some
of
these objectives are complementary, and some conflicting;
hence the idea
of
trade-offs. To achieve these objectives the Government
has to hand economic policy instruments; these instruments are conceived
of as levers which can be pushed forward
or
pulled back to shift the
economy in one direction or another. The problem of economic policy
is
twofold; first, to discover the optimum attainable collection of objectives;
and secondly, to select and operate the instruments to attain them.
Notice in this idealised model the dominant position of the economist.
He is the man who operates the levers, because he knows how the machine
works and what happens when various levers are pulled. Further, he has a
big
say
in selecting the combination of objectives, since he and not the
politician knows what the trade-offs are. Indeed, in this idealised picture,
all the politician has to do when he comes into power
is
to tell his resident
economists his set of weights-how he values price stability as against full
employment,
or
growth as against a balance
of
payments
surplus,
and
so
on.
Then he can sit back and relax. From then
on
it is a technical economic
problem to calculate the optimum set
of
objectives and to set about operating
the machine.
In
all
this, it is very clear that the economist is king.
Why in fact has it not worked out this way? Certainly
no
one can say
that this is a picture of what
in
fact happens, here
or
in any other country
(though
it
is true there is still more respect for economists in the Netherlands
and Norway, for example, than in Britain). The model
is
basically a good
and useful model; but there are three great difficulties. The first is the
J.
Tinbergen,
Economic Policy
:
Principles
and
Design.
Amsterdam
:
North
Holland Publishing Company,
1956.
See
also
for
further elaboration
of
the
model,
E.
S.
Kirschen and associates,
Economic Policy in our Time,
v01.
1.
Amster-
dam
:
North
Holland Publishing Company,
1964.
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