the limited and broad-brush nature of their contribution. One might have thought that such a group giving the public the benefit of its expertise could have done so in a more substantial manner than merely affixing their names to what is in effect a lengthy letter.
At this time of national economic crisis one might have wished that these 46 academics had applied their trained minds to jointly publishing an agreed and comprehensive treatise on the state of our banking system, the prognosis for our property sector and/or our general economic circumstances.
At a minimum they could have given us a detailed commentary on the legislation as published with proposals for specific amendments to enhance its workings rather than. If they were not prepared to engage at all with the Nama proposal then perhaps they could have given us an agreed, worked out and detailed alternative proposal. They could also have assisted the debate by giving us a full assessment of the Labour Party’s nationalisation proposal as against Fine Gael “good bank” option.
Whelan labels the article “curious”. Equally, however, I find it curious that someone who writes a weekly op-ed column—and hence knows that these articles need to be about 1000 words—would then criticise such a piece for not being a detailed commentary on a long piece of legislation, knowing that such a commentary simply could not be fitted into that particular format.
Furthermore, Whelan’s criticism that the 46 did not get together to publish an “agreed treatise” on life, the universe and everything is also quite strange. Pretty clearly, the 46 did not get together in a room to write this document. Rather, they agreed to add their name to a circulated letter. To get any kind of broad support, petitions of this sort need to be short and to the point, which I’m pretty sure Mr. Whelan understands.
But, look, this is standard tit-for-tat stuff, the kind you expect from political partisans writing for weekend newspapers, and that’s not why I’m writing this post. I think there’s a broader point worth discussing here.
Mr. Whelan is a barrister and I think it is perhaps understandable that someone from a legal background may think that the way to comment on a proposed policy is to put forward “proposals for specific amendments to enhance its workings”. Indeed, this isn’t the first time I’ve heard this idea, as it has also been put forward a number of times on this site by commenter Veronica.
Since this appears to be a source of contention, perhaps I might try to be constructive here and explain, from the point of view of an economist, how I see our role in commenting on public policy.
Let’s start with an obvious statement: Economists are not lawyers. This matters greatly when thinking about policy process because the process usually works something like this. Economists may put forward a policy proposal. If the government likes the proposal, then the legal people go to work constructing a bill that implements it and this process is often a long and complicated one.
To give a concrete example, an economist may review a particular industry, conclude that it is uncompetitive and recommend the establishment of a regulator to control prices. The economist’s proposal may take the form of a short report, outlining roughly what is to be regulated and explaining the perceived costs and benefits of the proposed approach. However, after the delivery of this short report, the legislation to implement such a proposal would most likely be highly complex, connecting the new legislation with existing law, dealing with various issues involved in establishing the statutory basis for new bodies, the legal limits to their powers, their relationship to existing arms of government, and so on.
Continuing with the example, when other economists would come to debate this policy proposal they would focus on the economics of the policy, not the legalities. So they would debate the competitive structure of this industry and the particular form of the regulation proposed. Debating whether Section 24, sub-clause (c) suggests a loophole of some sort is not what we would call our comparative advantage.
Which brings us to the draft NAMA legislation. Yes, the draft bill runs to 136 pages, so in that sense it is indeed a complex piece of legislation. However, the economics of the bill can be summarised in one sentence: The bill proposes to use bonds issued by the Irish government to purchase a large amount of assets, mainly loans backed by property, from the Irish banks, paying a price determined by what it calls “long-term economic value”.
From this economist’s perspective, the crucial aspects of the NAMA bill are (a) Sections 58 and 59, which define long-term economic value in a highly unsatisfactory ambiguous fashion and (b) The complete absence of any clause protecting the taxpayer from losses that may be incurred from purchasing these assets. These aspects render the bill extremely unsatisfactory and have attracted most of the attention from economists.
There are other aspects of the draft legislation that are unsatisfactory but the crucial economic questions are how much we will pay for these assets and what mechanisms are in place to protect the taxpayer. The 46 economists piece gets to the heart of these crucial issues and, as such, provides an important contribution to the public debate.
To suggest, as Mr. Whelan does, that the only acceptable way for economists to “engage with the NAMA proposal” is through the provision of a section-by-section discussion of legislation—proposing “amendments to enhance its workings”—is to misunderstand what economists do, and what they don’t do.
Whelan also criticises the piece for not giving “an agreed, worked out and detailed proposal.” Again, if he is expecting lengthy draft legislation, he is looking for it from the wrong people. But the 46 economist piece does make it clear that a large number of alternative proposals have been put forward and, in my opinion, it does a good job of distilling the common elements of these proposals.
And rather than focus narrowly on the question of tranferring bad assets, these proposals, for instance plans such as the one I offered here, have generally focused on resolving our banking problems in a systematic fashion rather than piecemeal approach offered by the NAMA bill.
As a final thought, I genuinely wonder which statements in the 46 economist piece Mr. Whelan considers to be “repetition of vague political charges.” I have looked through the piece again and can’t find anything in it that would correspond to that characterisation, nor would I have been willing to sign it if that was the case.