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Reviving academic research on Australian economic policy

By Tony Makin - posted Thursday, 14 May 2020


The COVID19 crisis with its distinct health and economic dimensions obviously warrants extensive future Australian university research as a high priority topic.

Some of the critical economic questions that the virus has prompted are: How should we value human life by age cohort? How should the trade-off between saving lives and maintaining employment be gauged? How can monetary and fiscal responses to health crises of this sort be improved? How serious is the attendant hike in Australia's public debt and what new taxation and public expenditure policies are needed to address that debt?

Unfortunately, you can expect very little Australia-focused economic research to emerge from our universities on these topics. This is because there are strong disincentives to exploring Australian economic issues, in contrast to other social science disciplines.

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Economists will be the first to tell you that human behaviour is essentially driven by incentives. And strong disincentives now deter academics working in Australian universities from addressing important economic policy issues of relevance to Australia.

Following a campaign by The Australian, the Minister for Education, Dan Tehan, earlier this year announced that the federal government would encourage university research on Australia-focused historical and social themes via a new Australian Research Council (ARC) program.

This special ARC program for the first time explicitly acknowledges the importance of research into Australian society, history and culture, and this is to allocate up to some $12 million for up to forty approved peer reviewed research projects.

Although not large in the context of the ARC's annual budget of hundreds of millions, it does provide a welcome signal to university researchers that focusing on Australia-specific social issues is a worthy endeavour.

Provided the subsequent research output stemming from the new grants program does not degenerate into more intense ideological warfare, rekindling the history wars for instance, Australian taxpayers who pay academics' salaries and fund their research should also welcome the initiative.

What this new, or any other ARC program, omits however, is any mention of encouraging research on Australian economic themes. Yet how well the Australian economy fares especially in recovering from the COVID19 crisis will determine how much revenue is raised to publicly fund academic research on any topic, Australian or non-Australian focused.

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It would seem obvious to ordinary taxpayers that Australian government funded economics research should be focused on Australian economic issues, and many undoubtedly presume this, but it's become more the exception than the rule.

This was not the case in the past when Australian academic economists were more engaged in the economic policy debates of the day, for instance about fiscal, monetary, competition, environmental, resources and trade policies.

There are two main reasons for this. First, academic research in economics worldwide has become increasingly technical and divorced from contemporary economic policy issues. It is defined more by the mathematical and statistical techniques deployed (usually the latest fashionable methods taught in US Ivy League graduate schools), than the novelty of the underlying economic ideas.

As the American economist Kenneth Boulding said: "Mathematics brought rigour to economics. Unfortunately, it also brought mortis."

As a result it's been said, many articles published in premier economics journals are unreadable and remain unread (except by the peer reviewers who recommended publication).

These days a paper submitted by an Adam Smith, David Ricardo, John Stuart Mill or John Maynard Keynes would immediately be culled by mainstream economics journal editors on submission, without even making it to reviewers. Keynes himself as long ago as the 1930s despaired that economists were losing sight of the real world "in a maze of pretentious and unhelpful symbols."

Many published papers in economics today simply apply advanced techniques to either mathematically model, or empirically test, old economic propositions. In the field of macroeconomics for instance, a truckload of papers has been published since the Global Financial Crisis to test the Keynesian multiplier, with mixed results that essentially depend on whether the starting assumptions are Keynesian or non-Keynesian. Few new theoretical insights have emerged.

For instance, studies yield positive multipliers in support of activist Keynesian fiscal policy if economies are assumed to be closed to international influences, with no international trade, foreign capital flows or exchange rates, whereas other studies show sometimes negative multipliers when economies are presumed open with forward looking economic agents who factor in the implications of the rise in public debt that accompanies fiscal activism.

The second major disincentive for academics to research Australian economic issues is entirely home grown. It is the somewhat arbitrary ranking of academic economics journals by the Australian Business Deans Council (ABDC) which ranks several sound Australian economic policy- oriented journals at B level, beneath internationally edited journals ranked in the A and A* categories.

A* and A ranked journals are nearly all edited in the United States and Europe.

Yet these international journals are simply not interested in publishing research that focuses solely on Australian issues. So, perversely for Australian economics, this has led to Australian university-based researchers addressing often esoteric technical issues of relevance to other economies.

Ranking Australian economic policy journals at B level is also at odds with journal rankings for other academic disciplines, such as Business Law and Taxation, which has numerous Australian edited and focused journals ranked A* and A.

Australian economic policy journals worthy of at least an A ranking includeEconomic Analysis and Policy, Australian Economic Review, Australian Economic Papers andEconomic Papers.

Economic Analysis and Policy achieves a higher citation score by the internationally recognised Scimago journal rating system than any other Australian based journal and is placed in the top tier of economics journals worldwide.

Yet curiously and anomalously it is ranked B by the ABDC, below the only generalist Australian economics journal ranked A , The Economic Record.

Earmarking ARC funds for Australia-focused economics research and upgrading Australian economic policy-oriented journals to A rank would not only strengthen Australian economic research in a self- fulfilling way, but better inform Australian economic policy-makers.

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This article was first published in The Australian.



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About the Author

Tony Makin is professor of economics at the Gold Coast campus of Griffith University and author of Global Imbalances, Exchange Rates and Stabilization Policy recently published by Palgrave Macmillan. He is also an the academic advisory board of the Australian Institute for Progress.

Other articles by this Author

All articles by Tony Makin

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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