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Christian Odendahl and Ferdinando Giugliano: Fail.

Summary:
Oké. I’m a teacher. So, I’m primed and educated to be an arrogant nitpicker. But let’s make the best of a this dire situation and trash the work of Ferdinando Giugliano and Christian Odendahl who defile the language of scientific economics. Which is not just a mistake but a dangerous act which might cause misunderstandings and destructive economic policies. On the website of the Centre for European Reform they state about Italy: “But Italy mostly has itself to blame. The abysmal productivity growth over two decades is also down to successive governments’ failure to invest in infrastructure, research, education and skills; to make its public institutions and judicial system more efficient in order to help the most successful and productive businesses grow; to raise the employment rate of both men and women; and to promote the deployment of labour and capital to productive companies”. I agree (though not entirely, the investment rate in Italy is not that low and, as in other European countries, the average level of education is higher than ever while. And when good companies can not attract good workers they should fire the managers). But they also state: Italy should: ‘switch expenditure from public consumption, such as the pension system, towards public investment’. Sigh. State financed pensions are not ‘government consumption’ but ‘transfer incomes’.

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Oké. I’m a teacher. So, I’m primed and educated to be an arrogant nitpicker. But let’s make the best of a this dire situation and trash the work of Ferdinando Giugliano and Christian Odendahl who defile the language of scientific economics. Which is not just a mistake but a dangerous act which might cause misunderstandings and destructive economic policies. On the website of the Centre for European Reform they state about Italy: “But Italy mostly has itself to blame. The abysmal productivity growth over two decades is also down to successive governments’ failure to invest in infrastructure, research, education and skills; to make its public institutions and judicial system more efficient in order to help the most successful and productive businesses grow; to raise the employment rate of both men and women; and to promote the deployment of labour and capital to productive companies”. I agree (though not entirely, the investment rate in Italy is not that low and, as in other European countries, the average level of education is higher than ever while. And when good companies can not attract good workers they should fire the managers). But they also state: Italy should: ‘switch expenditure from public consumption, such as the pension system, towards public investment’.

Sigh. State financed pensions are not ‘government consumption’ but ‘transfer incomes’. ‘Government consumption’ is the kind of spending on education and the judicial system which Odendahl and Giugliano want to increase. As the Odendahl and Giugliano article will be read an all kind of civil servants will look at the statistics and advice the politicians to get ‘government consumption’ down, without realizing what ‘government consumption’ actually is, this might have dire consequences. This may sound far-fetched, but neoclassical macro-models make this grave mistake, too. And see this article about the demise of the Greek health system. One of the hallmarks of a proper science is a systematic use of words and definitions. Neoclassical macro does not pass this test. Which is a bad thing – and not just for science.

Merijn T. Knibbe
Economic historian, statistician, outdoor guide (coastal mudflats), father, teacher, blogger. Likes De Kift and El Greco. Favorite epoch 1890-1930.

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