Tag Archives: OECD

Lucas on an OECD Economic Expert Report

In a Carnegie-Rochester paper from 1979, Robert Lucas reviews an earlier report to the OECD by a group of independent experts. Lucas views the report as vacuous, eclectic, and dangerous:

… I know of no other way to convey the Report’s undisciplined eclecticism. It meanders through the long list of issues which have been defined in popular debate as “policy problems,” accepting all as equally suited to treatment by government action and equally amenable to economic expertise, offering ambiguous and unsupported opinion on each. Nowhere can one discern a consistent set of economic principles underlying either the choice of questions to be addressed or the policy stances which are recommended.

As an economist, I find this alarming, but not because I believe the Report will in any direct way contribute to a worsening in economic policy in the OECD countries. On the contrary, the Report is so nearly vacuous that it will be difficult to tell which governments are attempting to follow its guidance and which are not. It is alarming because of the vision of economics it presents, to the public and to us: an economics limited to the writing of safely ambiguous lines for insertion in the speeches of treasury officials and central bankers. It is opportunism posing as pragmatism.

And he argues that economics and economists can only lose from contributing to reports of this kind.

It seems certain that economic policy in the OECD countries in the coming ten years will involve a wide variety of government interventions in particular sectors and industries. The particular interventions which emerge will, looked at in the right way, presumably exhibit some pattern. (For a social scientist, this much must be taken as an article of faith.) The chances that it will be economic theory which provides coherence to these policies must be judged, however, to be near zero. In these circumstances, the McCracken Committee is attempting to create the appearance that economic advisors are technically in control of developments, guiding them in a spirit of flexibility and pragmatism, supported by the technical research efforts of an entire

Yet is it in the interest of economics that these political developments be viewed as being supported by a consensus of professional opinion? The main reason to answer in the negative, stressed in this review, is also the simplest: it is not true. There is also a second reason, of a more “pragmatic” nature. There is every reason to believe that the economic policies of the coming decade will, being guided by no economic principles, lead to very bad results. What can be the benefit of claiming for economic theory the blame for a collection of policies which in no way follow from it?

It would be interesting to know how Lucas assesses contemporary reports issued by the OECD and other bodies.

The End of Bank Secrecy?

Jeevan Vasagar and Vanessa Houlder report in the FT about the pledge by 51 countries to facilitate the collection and exchange of information on bank accounts and the beneficial ownership of companies and other legal structures. The agreement was drawn up by the OECD and previously endorsed by the G20. Going forward, the countries involved seek a consensus on the treatment of intellectual property income.

Christoph Eisenring in the NZZ and the FAZ provide additional information. Liechtenstein, Luxemburg, Bermuda, the British Virgin Islands and the Cayman Islands signed the accord; Switzerland and Singapore promised to follow soon; Panama and the US didn’t. German finance minister Wolfgang Schäuble declared the end of bank secrecy. While not signing the agreement the US is credited for helping to make it possible, due to the FATCA treaties is has signed with many countries. Those treaties also stipulate an automatic exchange of tax information. However, so far the US has not produced the legal base to provide such information to foreign governments.