Kōrero: Economic thought

Whārangi 7. Post-war economics

Ngā whakaahua

Economics flourished in the post-war years. Tertiary education spread and there were more jobs for economics graduates in the public service and business. University staffs expanded and so did the range of economic thinking. Many specialities were introduced. Development economics and econometrics were especially important.

Attacking the cranks

 

Post-war economists continued to enter public debate by exposing errors in public thinking. Alan Danks, professor of economics at Canterbury, became prominent by describing the fallacies underlying Social Credit, which had returned to political significance in the 1950s.

 

Development economics

Development economics grew from European thinking about post-war reconstruction and growth in newly-independent countries in Latin America, Africa and Asia. Development economics provided many practical ideas for economic policy, though some ideas were less successful than others. Import-substitution industrialisation set out to establish industries making products that a country previously imported, saving import costs and providing jobs. But over the 1960s and 1970s east-Asian economies favouring export development outstripped economies which favoured import substitution (especially those in Latin America). The most enduring New Zealand contribution to this thinking included Horace Belshaw’s Population growth and levels of consumption.

Within New Zealand W. B. Sutch adapted ideas of import substitution. Sutch was perhaps New Zealand’s best-known economist, crossing the boundary between public servant and public figure. He made the economics of education and the economics of design more widely understood. Sutch’s appeal as a public figure was as a radical dissenter. He attempted to guide New Zealand on a path of economic nationalism based on import-substitution industrialisation. In New Zealand such industrialisation was not aimed at growth of gross national product per capita, or exports. Instead it pursued social goals such as employment, and building a more varied economy capable of providing jobs for people with different skills and aptitudes.

International development economics influenced New Zealand most in its attempt to utilise the power of co-ordinated efforts through centralised planning. Conferences established economic objectives and implementation plans, and provided advice. Sir Frank Holmes, a professor at Victoria University, was a leading participant.

Government planning which aligns incentives for individual and group behaviour remains central to contemporary thinking about economic policy, but it is often subordinated to the notion that centralised management is inherently desirable.

Econometrics

Econometrics uses quantitative and statistical methods to study economic problems. It grew out of two major developments:

  • the advances in applying mathematics to economic theory in the 1920s and 1930s (especially in the United States) and to agricultural economics (in which the Canterbury school had made minor contributions)
  • statistical theory and computing power.

It became feasible to relate economic theory to vast bodies of empirical data. Initially, there were hopes that big economic models could be built to provide precise answers to policy or business problems. In practice, even large models generated more questions than answers. The complexity of the models made it hard to evaluate results.

Econometrics changed the nature of economic thinking by more clearly separating economic theory from business studies. It also marked a line between rigorously researched economics and emotive media commentary, and added immensely to economic knowledge. In New Zealand the Reserve Bank pioneered the use of econometrics in economic thinking, and it remains a characteristic of Reserve Bank analysis. Other providers of economic services, such as consultants, have had to pick up econometric skills to remain competitive.

Me pēnei te tohu i te whārangi:

Gary Hawke, 'Economic thought - Post-war economics', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/mi/economic-thought/page-7 (accessed 18 June 2019)

Story by Gary Hawke, published 11 Mar 2010