The Nobel Prize and Economic Policy

The Nobel Prize and Economic Policy
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
October 18, 2010

The winners of the Nobel Prize in Economics have been announced. The 1.5 million USD prize will be divided equally among three candidates: Peter Diamond. Dale Mortensen, and Christopher Pissarides. But the prize money is a minor matter. The reputations of these Nobel laureates will be enhanced dramatically. That is a far greater reward. The Swedish Central Bank established the Noble Prize in Economics in 1968. Since then, controversy has raged over whether the awards criteria and even the science of economics are objective.

One best-selling author became famous when he warned of the financial tsunami in advance. The day before the award was announced, he filed a claim against the Swedish Central Bank. Nobel Prizes were awarded to scholars who invented a portfolio risk model. Their portfolio risk model received the blessing of the Nobel Prize Committee, and encouraged bankers to take their theory seriously. The result was a serious blow to the global economy. Investors suffered heavy losses, and taxpayers were compelled to bail investors out with their hard-earned money.

Worse still, after this prize-winning portfolio risk model failed, more heavyweight Nobel Laureates in Economics warned that the world would be plunged into a terrifying Great Depression. Their columns led to the collapse of public confidence in the world's governments, and the paralysis of the global economy. They worsened the financial tsunami by pouring gasoline on the fire.

Two years have passed since the 2008 financial tsunami. The economies of the United States, Europe, Japan and other countries have yet to fully recover. Constant fear of a second recession remains. Are economists attempting to stem the tide, or make larger waves? Actually, they are doing both. Another accomplice looks on, far from the crime scene. The Great Depression led to the development of Keynesian theory in the 70s. Keynesianism has been repudiated by three decades of experience. But when the global economy became paralyzed, governments the world over rallied behind the US and collectively adopted Keynesian deficit spending policies. They did everything possible to borrow, spend, and build. Mainland China was the most extravagant. In a single breath, it invested four trillion RMB in new highway construction, high-speed railway construction, and housing construction. The result was no improvement to the economies of many countries. Meanwhile, because the proportion of government debt was too high, they turned to tax increases and budget cuts, in accordance with Keynesian policies of austerity. Such on again, off again policies, operating in fits and starts, battered their economies. Government debt was so heavy, their political stability was at risk.

Not only that, economic experts painted such a terrifying picture of the financial tsunami, Keynesian deficit spending policies were taken to an extreme. Monetarists -- long time rivals of the Keynsians -- offered their own policies. They lowered interest rates to zero or historic lows. They resorted to loose money policies to save the market. This policy was tantamount to printing paper money, and pumped unlimited quanties of paper money into the market place. Industries supposedly helped by real investments remained in the doldrums. Instead, hot money scattered, creating trouble everywhere. Financial bubbles burst in every country.

These mutally contradictory policies were ineffective, even counterproductive. The Nobel Prize in Economics has been awarded for 32 years. The United States has a virtual monopoly on them. These leading economists have touted, advocated, and promoted failed policies. This proves one thing: The science of economics remains frozen at a primitive stage of development. Theories abound, but none of them has stood the test of reality. Contrast this with the Nobel Prize in Physics or Chemistry, first awarded in 1901. There is no comparision.

The biggest difficulty with economics, is that it studies the behavior of mortal human beings. To compare them to atoms, molecules, gravity, and other non-human entities, is to artificially impose a mechanistic model from physics, in order to give the study of economics a "scientific" veneer. In reality, doing so turns one's back on the unique nature of human behavior. Ironically, doing so moves economics further and further away from genuine science. Therefore the more economics resorts to models, abstractions, and quantification, the less its conclusions conform to reality, and the less useful they are to us in the real world.

The three new laureates' greatest contribution is their realization that the market does not conform to the world of economic theory. In the world of economic theory, information is complete and readily available to both buyers and sellers. In the world of economic theory, unemployment and lack of work never coexist. Diamond's 's search markets theory first discovered that consumers and job seekers must bear expensive search costs, before they can obtain satisfactory results. If we were to ask the man in the street, he would give us the same answer. Is it really necessary to construct an elaborate mathematical model?

The world will arrive at its own evaluation of economic theories, based on how well they fare during financial crises. Nobel laureates' halos may be tarnished, but this should not be considered a bad thing, After all, when 10 different economists offer 11 different opinions, it is dangerous to put too much stock in any one of them.

從諾貝爾獎談經濟政策
【聯合報╱社論】
2010.10.18

諾貝爾經濟學獎得主揭曉，由戴門、莫忝生及皮薩里德斯三人平分一五○萬美元獎金；不過獎金事小，得獎者因諾貝爾的桂冠而身價大漲，更是難得的榮耀。然而，從一九六八年起由瑞典中央銀行設立諾貝爾經濟學獎以來，這個獎有否客觀標準，及經濟學有否客觀標準，皆仍是見仁見智的爭議。

就在揭曉的前夕，一位因在金融海嘯前事先提出警告而聲名大噪的暢銷書作家公然表示，要向瑞典中央銀行索賠，因為諾貝爾獎曾授予幾位發明投資組合風險模型的財金學者；由於諾貝爾獎的加持，使其理論大受重視，風險模型受到銀行家的高度依重，結果卻導致全球經濟重創，投資者蒙受嚴重損失，納稅者也要拿出血汗錢來紓困。

尤有甚者，在這個獲獎的風險模型失誤後，又有更重量級的諾貝爾經濟學獎得主厲聲恫嚇，恐嚇全球各國將陷入百年來最可怕的經濟大蕭條之中，透過其風行全球的專欄擊潰各國政府與人民的信心，導致世界經濟應聲癱瘓，為金融海嘯火上加油，雪上加霜。

事實上，從二○○八年金融海嘯爆發，至今已歷兩年，包括美、歐、日等國的經濟元氣未復，時刻擔心二次衰退；在這個階段，經濟學家究竟是力挽狂瀾，還是推波助瀾，實在是功過兼之。還有一個不在現場的幫兇，那就是七十年前為對治前一次經濟大恐慌而發展出來的凱因斯學說。儘管三十年來這一套理論早已被抨擊得體無完膚，但全球經濟全面癱瘓，各國政府在美國登高一呼之下，群起採取凱因斯學派的赤字支出政策，竭盡所能地舉債投入公共支出與建設，尤以中國大陸手筆最大，一口氣投下四兆人民幣大事興築高速公路、高速鐵路、住宅建築。結果許多國家景氣非但未見起色，卻因為政府負債比重過高，又反過來採取增稅、削減預算的凱因斯學派緊縮政策，如此忽正忽反，忽冷忽熱，經濟飽受摧殘，政府沉重的債務則令國家的穩定出現風險。

不僅如此，由於金融海嘯被經濟學者渲染得太過可怖，因而在凱因斯赤字支出政策用到極致的同時，一向與此派學者為死對頭的貨幣學派的政策也全面出爐，將利率壓低到零或歷史新低，並同時使出等同印鈔救市的量化「寬鬆政策」，無限量向市場撒鈔票。結果真正有助於實業發展的投資仍陷低迷，卻搞得熱錢橫流、四處為患，各國均深為泡沫所苦。

這些行之無效反有後患的種種相互矛盾的政策，在諾貝爾經濟學獎問世三十二年後，出現在幾乎囊括全部經濟學獎得主的美國，又由頂尖的經濟學家鼓吹、宣揚、推動，這證明了一件事情：經濟學仍停留在十分粗糙而幼稚的階段，雖有一家之言，卻難有顛撲不破之論，與一九○一年開始頒發諾貝爾獎的物理學、化學等實不可同日而語。

經濟學最大的困難，在於所研究的是芸芸眾生千奇百怪的行為，卻強要借用分析原子、分子、引力等非人對象、極其機械化的物理學分析工具，勉強撐出一個「科學」的面貌，實際上已與人的行為特性背道而馳，愈走愈遠。因而經濟學愈是模型化、抽象化、數理化，所獲得的結論即可能愈無補於實事。

即以此次三位新科得主而言，他們最大的貢獻，就是發現現實的市場並不像經濟理論中的世界，資訊完整而充分，不論買方還是賣方，都唾手可得，因而失業與缺工絕不可能同時存在。其實，戴門首創的搜尋理論即首先發現，不論消費者還是求職者，都要付出最昂貴的搜尋成本，才有可能得到比較滿意的結果。我們試以此詢問路旁的黃口孺子，同樣的答案脫口即出，何需精細複雜的數理模型努力推敲？

經濟學的威力及價值，經過此次金融海嘯的考驗，世人必將重新評價。或許以後諾貝爾獎得主的光環會大為減色，但這應不是壞事，畢竟當十個經濟學家就有十一個不同意見時，賦予其中任何一個意見太高的價值，恐怕都有極高的風險。