Someone once said if you laid all economists end to end you'd never reach a conclusion. I fear they were right.
Henry Egas and co are simply wriggling around trying to find an acceptable reason to maintain 'status quo economics' theory and power.
What is needed is a new paradigm way of doing business...one that takes into account the darker side of human nature and keeps it in equilibrium.
Business alone can't be trusted and aggregation leave too many victims with too few winners. Bold thinking people Bold thinking.

"It is crucial to recognise the severe limitations that afflict our ability to forecast and centrally manage the economy."

Doh!

Man has never been able to see the fuure buddy. So why would we think anyone can now. Get John Edwards if you want to know such things as he can ask the dead what's going to happen can't he?

Just beware anyone who says they know anything about what to invest in. Be it stock market, casino, racing or even politics. They don't know a thing until the results are in.

End of story.

Of course the really bold economists of our times were the Chicago Boyz inspired by Hayek and Friedman.

The devastating results of their cultural wrecking project is described in The Shock Doctrine by Naomi Klein. And their ruthless SHOCK and AWE methods too.

Plus their exercise in changing the laws, without any democratic process, to expidate their PLUNDERINGS. And to thus "legally" obstruct any efforts to dismantle their new BRUTOPIAS.

Plus the consequences of their follies are also criticised in the two other essays on todays forum.

The de-regulation of the financial system was/is just a symptom of the fact that there is no system in place to regulate anything in our now totally inter-connected global "civilization".

And it could be said that the Bushites systematically dismantled what systems that did exist. Systems that had been put in place by patient and systematic multi-lateral negotiations since the end of world war two.

And to think that some kind of necessary planetary order can be created by the operation of the untramelled "free" market is a complete delusion.

Hence we have the situation described in this reference.

http://www.ispeace723.org/gcfprinciples2.html

Many of our economist simply guess just like those on the climate change gravy train. The boom was not predicted, the bust was not predicted and now they want to tell us what is going to happen in the future. It would be very funny if so many people did not take them to seriously.

Surely, in an unpredictable world, there are two maxims that are sure stars to steer by:

Firstly, the famous quote from Sam Warner:

"Don't make predictions, particularly about the future."

Secondly, the famous quote from Mr. Micawber:

"Annual income £20, annual expenditure £19/19/6, result happiness;

Annual income £20, annual expenditure £20/0/6, result misery."

Anyone interested in the whole story should read the Asia Times, as, unlike the whole western media, which reports entirely from the viewpoint of the debtor, the Asia Times reports from the viewpoint of the creditor. They are already wondering if Australia will remain a good country in which to invest.

The other thing that interests me, is that all these western governments who propose to borrow further enormous sums from foreigners, never seem to consider whether the foreigners will be prepared to lend to them. If the foreigners choose not to lend, there is absolutely nothing they can do about it, as they cannot print foreign exchange.

Henry Ergas is wise to urge caution on these proposals.

I note that while some of the economists signing the letter have distinguished records in other areas of public service, none have any impressive track record in macroeconomic forecasting. Eslake, for example, who is paid by the ANZ Bank to make forecasts, wrote in April 2007: "Corporate profits and the share market are at record highs –but the market isn’t ‘over-valued’"

The All Ords was over 6100 at the time. Today it sits just above 3500.

Rather than beware bold economists we would be wise to beware all economists - and especially this one proposing even lower taxes for the rich. One of the realities of our current situation is that money is more and more in the hands of the rich, and the only way everyone else can keep up is by engaging in the debt splurge that has got us into all this trouble. To compensate the Government provides welfare of some sort to pretty well everyone. Much better to pull back the difference between rich and poor, by taxation or whatever, and let the middle classes have a better standard of living with less debt and no handouts - as it used to be - and provide better welfare assistance for those in need.

Ergas says :"Firms have every incentive to minimise unnecessary costs and there is little evidence that they systematically fail to do so. ..... However, it is reasonable to believe that what investment funds those households do have are allocated efficiently among competing uses, including energy efficiency."

After more than 35 years involvement in many aspects of solar energy and energy conservation, both commercial and residential, I can assure Mr Ergas that there is very little evidence that many firms or householders have the faintest idea about the costs and benefits related to this area. Rational investment is only possible if one has the appropriate information and the appropriate analytical tools. I have seen numerous cases of bad investment- both over-investment (eg single person households buying solar water heaters and energy saving globes for the toilet) and under-investment (eg mining firms that could save $1.5million/year on a 2-year payback investment,; hotels that could save $30,000 year with zero investment other than a bit of staff and management time).

What is needed in this area is a whole lot of public education- but that might be a bit too slow to save the economy -this time around.

Once again, I appeal for INFORMED opinion, not just (mere) opinion. As Grimaldi said "L’aritmetica non è un’opinione"- "arithmetic is not an opinion"

Fiddling with superannuation contributions is a worry. The open letter’s signatories assumption that the extra money in workers’ pay packets will be spent in the same way as business and Government have pushed for: ‘spend for Australia’, with the $10 billion hand out to some people, is just an assumption. Sensible people will be more likely to pay it off their mortgages or hang onto it for a future which is going to be pretty rough.

Despite the usual jokes about economists, I’ll accept the comments of Henry Ergas on the other matters raised in the open letter. Although I’ve probably been guilty of saying something nasty about economists, I like this one: he talks plainly and makes sense.

It seems to me that many economists don't stop to think how the
average punter thinks and they are not silly. People do things
for good reasons and the results affect our economy in a big way.

Australia still has one massive problem, ie our current account
deficit. Our trade deficit is not bad, it was actually positive
by 3 billion $ in September, but our current account deficit is
huge, due to all those interest payments to foreign lenders.

About half the money that our banks lend out is from local sources,
the rest is from overseas lenders. This year alone, our banks
will have to head overseas and ask for another 80 billion $ or
so. Only the Australian Govt guarantee will save their hides.
That is not a healthy situation for this country in the longer
term, yet it could be solved through taxation.

Your average punter knows that its a bit pointless saving your
money and putting it in the bank, for inflation will take half
the interest paid, marginal rates of tax will take much of the
other half.

So people prefer to borrow on housing, borrow on shares or whatever,
where they at least have a chance of coming out ahead in the
longer term. That means even more pressure on housing, even
more pressure on our current account.

Its time for fiscal honesty. If inflation is running at 4%,
interest on bank deposits should not be taxed on that amount,
for by the end of the year, that money has effectively vanished.

Give people an incentive to save and they might. That might mean
a bit less splurging on the latest plasma tv, a bit less living
it up for today and a reason and incentive to save. The affect
on our current account would be massive.

20 million Australians saving just 10$ each already adds up to
200 million !

Now why don't economists make a sensible suggestion as I am making ?

:)

its time people woke up to the simple fact that our super [laid on us as a subsitute for a wage increase ,is solely to cash up the investment/stock markets[full stop]#

howhard and cronies came up with the scam for their big buisness mates

same as having high definition tv[was to chew up spectrum so murdoch and packer wouldnt get new compition[so now we are cursed with this instead of more media][and seeing the media get boken[loss of advetising revenue]is not compensating for the evil that little man wrought

but there was more [like todays news of the GG pay out [or rather 100,000 PLUS discount on his super tax,thanks to how hards 2006 tax cut to the elites super[lest we forget paying the cash from selling telstra that got put into the public servents trust?fund for THEIR overgenerous supper to be paid up in full[lets return that to the people]

a big problem is with the states [like sydney tunnel has a built in govt guarentee [so there is a few billion going from nsw purse into big buisness who sold us a con for macqureie'investors'[mainly other companies [not all your so called mom and pop investors]

thats another con [our so called shareholders by and large own no shares[they largly are like us with super type SCEMES]i like the idea of cutting the stockmarketeering tax [gift?]in half FULLSTOP.

show me how gambeling on stock is different from gambeling on the horses or the pokies,
yet stock gambeling dont pay state taxes[its time they paid federal taxes [a day trading tax ;10%^]or a transaction tax[1%]on EVERY withdrawel.

this global carbon tax is to prop up big buisness[they will buy them up[and we pay whatever they are prepared to sell them to us[big buiness KNOWS about shortage of supply[remember the spectrum auctions, it is the same plan for carbon credits? just another tax [yet not named a tax]

[like howhards 'work choices' was about the boss chosing workers[see how their work contracts are protecting the workers now[miners are planed to be laid off by the largest miner

Name ONE economist who's been consistently right, or even right more often than not.

The enitre precept of the article is false. As has been mentioned, economists never agree on anything. News bulletins consists of a procession of talking heads with their own peculiar perspective; half the time you get the impression they're being paid by the word.

We might as well bring astrologers to the table as well. They're just as accurate.

Well said Bennie - astrologers often outperform 'professional' money people in the investment portfolios in the Sunday papers. The dartboard and blindfolded pin wielder would probably do well too.

Bennie and Candide

It is not the function of economists to predict the future, any more than it is of biologists.

It is the function of entrepreneurs to predict the future.

80 percent of businesses fail in the first year. Of the remainder, 80 percent fail in the next five years. We would all be better off, wouldn’t we, if we could predict the future, but it’s notoriously hard, even when you directly bear the risk of losses, and anticipate the benefit of profits.

There can be no more stupid way to try to predict the future than to give the job to someone who pays no cost for getting it wrong, or actually profits from getting it wrong and making it worse. This describes virtually all economic interventions of government.

You are spot-on that almost all, but not all, schools of economic thought failed to explain and predict the current financial crisis.

The Keynesians and monetarists that have dominated policy circles for the last 70 years are left with no credibility. If their theories were right, the crisis would not have happened in the first place. As recently as 2008, these high priests, replete with qualifications and impressive titles, were telling us all that the economy is fine, and all we needed was more easy money. In fact they have been the cheerleaders for, and have presided over the greatest act of destruction the world has ever known. Now they externalise the blame and their cure?: – more easy money, more printing presses.

The complexity of the subject matter would make economics difficult enough. But there is one fact that physics or chemistry don’t have to contend with: the special pleading of vested interests. While one policy may be to everyone’s benefit in the long run, some policies serve the interests of specific sub-groups at everyone else’s expense. These groups will spend their time and money persuading the public and politicians that what is good for them, is good for the whole society.

Candide,

You have got 100% right. Try as they may these sneaky neo-conservative economists cannot disguise their real agendas - business as usual only more of it. More power for the corporation and more wealth for the wealthy.

the best definition of an economist I have ever herd is

a person who is expert in every position documented in the Karma Sutra....

but lacking another person to perform them with.

Anyone who listens solely to the words of economists is deserving of and in for a very sad life....