Brian Easton (Journalist) Interviews Brian Easton (Economist)

Part I is IN OPEN SEAS: PART I: On the Seashore: (1943-1970) This was going to be published as a companion piece in Asymmetric Information but there have been no issues since August 2021

From Sussex University to Canterbury University?

It was very different economics department in 1970 from Sussex or from the one I had left seven years earlier, having shifted towards the mathematical economics paradigm. The jewel was Leslie Young, who had a terrific ability to identify the assumption – the equation – which gave the interesting outcome in a model. In most economics papers the writers have not got the foggiest idea of why they are getting their results. Tony Rayner headed econometrics where I did most of my teaching; the operations analysis group under Hans Dallenbach was also invaluable.

No non-mathematical economics?

There were residual appointments before HOD Bert Brownlie, who was appointed in 1965 after I left. I particularly valued Wolf Rosenberg, who was thoroughly trained in the 1940s but who also had that Central European gymnasium (high school) training. (One of his classmates was Albert Hirschman.) We had long conversations in which I would explain recent developments in economics. Wolfie, ever the gentleman, would patiently probe. Sometimes it would be the other way around with him presenting a traditional economics perspective. (We might disagree on ideological issues, although it was from Wolfie I really became conscious of the importance of full employment.) The dialogue was extremely valuable; if you cannot explain your economics to an intelligent, educated, informed person then you have not understood it yourself. (Later I would have similar discussions with Bryan Philpott and Jas McKenzie, although there was less divergence in our paradigms.)

What research did you do at Canterbury?

Lots. It was centred on distributional economics. When I got back I realised that it was a huge area waiting to be opened up. It proved much bigger than I expected, not only for ranging from welfare economics to statistics. I found myself having to use the standard tools from macroeconomics, growth economics and microeconomics. It was not easy. Where else in economics do you regularly meet bimodal and trimodal asymmetric distributions?

            Distributional economics offers a distinctive perspective on the economy as a whole. The standard economics approach is to assume distributional change does not matter. If it seems relevant – say, in housing analysis – the conventional wisdom about distributive matters is ad hoc without integrating the analysis.

            One eventual publication was Income Distribution in New Zealand, which brought together all the available data. I started off the research program with the conventional assumption that the income distribution was getting more unequal (there was much less data on wealth). It comes from a nineteenth-century vision that things are always getting worse under capitalism – a common conventional view today. But the data contradicted the assumption. Up to the early 1980s, the post-war income distribution was getting more equal on almost all measures. So I had to give a theoretical account of what had happened rather than just report the inequality change. (Chapter 50 of Not in Narrow Seas describes what has happened since.)

            The income distribution affects the political economy – the point of David Ricardo’s analysis. Very often the distributional impact of a policy change far exceeds the output change. The study of distributional issues opens one up to a holistic account of society and a more nuanced account of policy.

While you were at Canterbury you became the Listener economic columnist. How did that come about?

The first columnist was Conrad Blyth but he went on sabbatical to the OECD. I think they might have chosen me because I had submitted the occasional article and I was writing regularly in the New Zealand Monthly Review. I was also doing a lot of public interviews; broadcasting was much more decentralised in those days, and contributions from Christchurch were valued.

People say the columns (usually) read well. How come?

I don’t really know. It must be partly because I read omnivorously. Practice is important. I once took an economics assignment I had written to my tutor, Alan Danks, who said that I had got the economics broadly right but it was badly written. He added – you would not dare say this today – ‘Writing is a bit like making love; nobody can teach you, you learn with practice.’

            I find it hard to write without a clear notion of my audience. That is a bit different from the lecturer who has a captive audience who bloody well have to take notes.

            While I was at the Institute I tried having a guest contributor for every second column. It was not a success. Typically he or she could not meet the length requirement, did not meet the deadline and could not write for the Listener audience.

Why did you give up after writing columns for 37 years?

I was sacked.

Why?

The editor never told me. Today’s Listener is very different from the one I started writing for.

You’ve kept writing columns?

I write a longer column weekly for the Pundit website. Partly to clarify issues for myself, but also because a number of economists who valued the Listener column encouraged me to keep on.

            The columns I write mediate between the economics profession and the public, keeping them in touch with the informed debate. Sure, they are my views but usually they get checked out by other informed people including, sometimes, by those in government departments. Sometimes economists who have been in the heat of a policy battle have thanked me for a column even when I have criticised the resulting policy.

            There is a naive tendency for outsiders disagreeing with a policy to assume economists on the inside have failed in their analysis. Sure, they make mistakes but in my experience the cadres in the top departments are more competent than their university training – a consequence of the intense debates in which they participate. But announced policy does not always follow expert advice.

            Because economics is a discipline, an outside economist can often make a reasonable stab at the internal policy debate. I always assume on contentious policy issues that judgement is split 60/40 but you can’t predict which way. I try to get this across in what I write for the public. Perhaps I have been the insiders’ outsider, although readers might think I was the outsiders’ insider.

            Much of the business commentariat is vigorous and opinionated, but frequently uninformed in the best Mencken tradition – neat, plausible, and wrong. Listener features are often like that, One of the advantages of not writing for it any longer is that economists no longer complain to me about the poor-quality pseudo-economic features it occasionally publishes. (I was never consulted.)

Were your columns the reason that you were appointed to director of the NZIER in 1981?

Because of my research and my public contributions, I was already connecting with the Wellington economic community, including with some of the key appointment-board members. Bryan Philpott told me he wanted me move the Institute to the university, but for reasons that remain unclear, powerful figures in the economics department were not interested. Jas McKenzie hoped I would help balance the neoliberals in Treasury. Later I was told they were very opposed to my appointment; I did not know this at the time.

How did you find the Institute?

I went there on a misunderstanding. When I had been a research assistant there in the 1960s, it had a good funding base arising from business members’ contributions having been built up for a couple of years before it began operating. That had gone and I found myself under unexpected funding pressures.

            My vision, reflecting similar institutions overseas, was that there would be substantial public funding which would enable independent research programs. In fact, the funding was increasingly tied to contracts, so that while the Institute could do projects it was difficult to bring them together in a coherent way. Those pressures increased as public funding was withdrawn. The NZIER you see today is a consulting firm, very different from Blyth’s vision.

So the NZIER failed to do much research while you were director?

To the contrary, I am proud of what we achieved, as said my outgoing address: The Exchange Rate Since 1981, Performance and Policy (NZIER Discussion Paper 30), which brought together the research program over my time. Some of the research we published remains significant. We had a terrific team, including Alan Bollard and two women, Carol Propper and Nancy Devlin, who became senior economics professors in Britain. Its research performance and output when I was there was probably the highest in its history, although some may argue that Blyth achieved more and I greatly admire its achievements in industrial economics under Alan Bollard.

Then why did you leave?

When my five-year term ended, I declined the offered renewal. The financial pressures were wearing me down. The main reason was that a director has stewardship responsibilities and since it was clear that I was not acceptable to key public sector stakeholders, the steward stepped down.

            I had written a Listener column discussing economic interventions. It rejected Muldoon’s approach but went on to discuss when intervention made sense. A Treasury official told a friend that because of the column, the NZIER would get no general funding from Treasury. Not long after, we were cut out from a major contract despite the Minister of Finance directing we be involved. This happened before Labour took over in July 1984.

            Sometime after it did, the Reserve Bank advised us that it would end their base funding which gave us some research discretion. They made the decision while I was away and there was no consultation. After the Rogernome who led the charge departed, the RBNZ Governor apologised for the decision but said it could not be reversed. Another senior Bank economist told me that he had gone through the Bank’s papers (which I have never seen) and was appalled by what was going on.

            I hoped that when I left, the Treasury and the Bank would take a more benign approach to the NZIER and return to untagged funding, so avoiding transformation from research institute to consulting firm. They didn’t. That was one reason my immediate successor, David Mayes, familiar with the British approach, left after a few months. His successor, Alan Bollard, made a good attempt to hold the ship together but after he left, the NZIER ended up as a consultancy.

Were you not publicly criticising the Rogernomes’ policies at the time?

Not strongly, for the reason that they seemed to know something I did not. Otherwise the model which underlay their policies was incomplete. (I called it the ‘missing equation’.) I was reading the neoliberal economics literature widely, trying to identify what covered the lacunae. (I may well have read more than just about anyone else.) It would have been quite improper for me to have come out with a swingeing criticism of the Rogernomics model before I was certain the model was unsatisfactory.

            I made some cautious comments saying that there were alternatives, careful not to compromise the NZIER. But the Rogernomes required a total commitment and took no prisoners. In any case, I was persona non grata from the beginning.

            For balance, I add that they would probably argue that they saw no place in their ideal world for a research institute independent of consultancy income.

Did you ever find the ‘missing equation’?

What I concluded was that the Rogernomic model was incomplete. It assumed the New Zealand economy was very like the American economy, failing to appreciate the differences. For instance, America is the issuer of the international currency; the New Zealand dollar has no such standing. It was a very colonial – imitative – mind-set.

Weren’t there ideological differences too?

Oh yes. I try to be explicit about my ideology when I am writing. (Some appear to suspect me of a secret agenda, but I am wysiwyg.) My view is probably near the centre of traditional New Zealand thinking. But I won’t let ideology override my technical thinking.

            After I left the Institute there were two major points to be made: Rogernomics was technically deficient and it reflected a different ideological current through New Zealand’s history. I made the points.

The final part of this interview is IN OPEN SEAS: PART III: Paddling (1986- )