Wednesday, 30 March 2011

Another mainstream economist, another idiot

News that government might be cutting bureaucrat numbers ever so slightly has summoned up idiocy from alleged economists and journalists alike. This morning’s Radio NZ report is representative. Take a look:

_Quote_Idiot Finance Minister Bill English is defending the timing of further cuts to the public service amid warnings this may ultimately be bad for the economy.

What’s this about “further” cuts? What decent cuts have we seen? And how could cutting the unproductive be at all “bad” for producers?

_Quote_IdiotMr English announced on Tuesday there will be more consolidation of departments and agencies over the next two or three years…
    He said he has no master plan …

Well, that much at least has been evident for all of the last two or three years.

The chief economist at research firm BERL, Ganesh Nana, says the cuts should be made when the economy is strong and public servants have somewhere else to go to get another job…

So it is somehow wrong to make cuts when spending is unaffordable. Is this guy an idiot? It would seem so:

_Quote_Idiot… Ganesh Nana says the cuts risk hurting the Government's accounts, rather than helping them and now is not the time for aggressive action… Cutting spending risks tipping the economy into a very long period of depressed activity and hurting the books even more, he says.

So let’s see if we can follow what passes for Mr Nana’s “reasoning.”

This alleged economist suggests that cutting spending when government debt is spiralling out of control (even by the timid amount Bill English might countenance) will somehow be worse for government accounts. How’s that again?

His argument for this seems to be based on the ridiculous “circular flow” model of the economy which looks only at how much money passes from person to person rather than how much productivity those transactions purchase.

At present, in a New Zealand weighed down with government debt and an over-abundance of grey ones, those transactions are far too often producing no productivity at all.  (And that’s when they’re not paying grey ones to hinder productivity.)

Cutting spending on bureaucrats so there are more scarce resources available for productivity could be considered a bad thing only to an alleged economist who’s never understood what transforms resources into real wealth. And that’s certainly not paying for offices full of bureaucrats to make that sort of productivity impossible.


  1. I'm not sure I'd call Ganesh mainstream. Maybe 1960 mainstream.

  2. I think that should be

    "Cutting spending on bureaucrats so there are more resources ..."

    Hopefully there is more than one!

  3. Is this guy an idiot?

    I think he is.

  4. Is this the same Nana of the alcohol damage report?

  5. Eric is right. Nana and BERL are no longer the economic mainstream. They may have been back in the 60s but today the mainstream is more likely to be Greg Mankiw or John Taylor than Nana.

  6. @Shane: The one that provided Eric with so much fun? That would be him.

    @Paul/Eric: I know you two are always right (we're not worthy) and I only wish you were right now.

  7. It can be a trap when assessing the number of jobs cut in the public service. The number cut doesn't necessarily represent the savings to be achieved. I suggest the best way to measure the savings is to assess the numbers of CEOs in the public service who get axed. It is the CEOs and their immediate subordinates who soak up the bulk of the wage bill. If one CEO can do the job of three CEOs then the savings are discernible quickly. So far there's barely been a start. Keep chopping and merging departments at a decent pace.

  8. BERL are looking to cover their own income stream, and Nana is just being a duplicitous nurrnurr by spouting off more Keynesian claptrap.
    The grey ones need to be gotten rid off at 1000x the rate they are now untilthere are only 10% of the current numbers in Govt employment.
    If they can't get jobs in the productive sector, then that is probably a good enough reason to fire them anyway. If unproductive in private thenthey will be downright obstructive in Public Sector

  9. I have some experience with these roles, and there is far more going on than just the roles & their salaries.

    We know that the many of the service systems are broken and fundamentally flawed. Take health - my area of expertise.
    This flawed system develops layers of support - to both prop up the system and to develop matrices indicative of 'success'.
    These support layers themselves then can carry truly eyewateringly large budgets - for example - lets look at one tiny example: poor attendance rates at appointments (lets say free appointments to hospital based specialists). These "DNA's" are hugely expensive in time lost and wasted - (and, if you would believe the support systems justifying their own existence - expensive in terms of subsequent poor health outcomes as a result of missing treatment).

    Therefore, a system develops around ensuring appointments are made - transport (dedicated leased vehicles), drivers, support workers, social workers etc etc.. all paid for from taxation.

    This all because people/patients can not be bothered to attend their visit.

    The salaries are but a drop in the bucket.


1. Commenters are welcome and invited.
2. All comments are moderated. Off-topic grandstanding, spam, and gibberish will be ignored. Tu quoque will be moderated.
3. Read the post before you comment. Challenge facts, but don't simply ignore them.
4. Use a name. If it's important enough to say, it's important enough to put a name to.
5. Above all: Act with honour. Say what you mean, and mean what you say.