On the Exponential Growth of the Irish Economist

Ah, the Irish Economist.  In the current climate, ask the average man on the street to name a full team of national soccer players that might tog out against Georgia next week and he would struggle.   Sure there is Keane, Duffer, Shay Given, and that guy with three grannies who won’t play, Stephen Ireland.   But the rest of the squad is not very visible, and wouldn’t slip off the tongue of Joe public.   However, ask him to name his economist dream team, and he would have no shortage of names to throw on the team sheet – Jim Power, David McWilliams, George Lee, Morgan Kelly, Alan Ahearn, Austin Hughes, Dan McLauglin.  These guys and their brethren get an enormous amount of face-time and print-line in our media, both back during the boom and now even more during the recession.   Do other countries have such an array of high profiles economists?  I doubt it.  Americans would generally know whether Greenspan or Bernanke are in charge of the federal reserve, but that would be as far as it goes.  Likewise in the UK.  But over here, these guys are borderline celebrities.  And they come in so many different flavours.


In retreat - Austin "Comical Ali" Hughes and "Desperate" Dan McLaughlin

There are the bank chief economists, the paid shills for mortgage banks who constantly predicted during the property bubble would never end and interest rates would never go up.  Austin Hughes at IIB and Dan McLaughlin of Bank of Ireland were the too most shameless mouthpieces here, constantly predicting interest rates would drop while in the real world they clicked up every month.  Finally, with the the house crash barbarians at the gate, they talked of a “Soft landing”, then a “Soft-Hard landing”, and finally gave up and retreated back into bank headquarters.    There hasn’t been a peep heard out of either in months.  A closely related species was the estate agent chief economist.  Again not sighted for some time, they may also be in hiding but more likely extinct.

Then there are the academic economics. These are a more recent media phenomenon, slowly coaxed out of the wood work as the clouds began to darken, with all sorts of doomy predictions that were not really predictions at all since the crash was apparent.  Morgan Kelly and Alan Ahearne seem to be the two main players in this grouping.  In fairness to Mr Kelly, he made a very strong if somewhat late call on the direction of the banks and the housing market, while his academic economic brethren kept their eyes closed.  A particularly rare species is the trade union economist.  I know it sounds like an oxymoron, but they do exist, and occasionally someone like Paul Sweeney from SIPTU will turn up on the radio waves to argue the economic benefits of communism.


Who is number one? - David "McDreamy" McWilliams or Jim "Max" Power

 And of course, who could ignore the freelance economist like David McWilliams.  Tied to neither boom nor bust, this guy has been a constant presence , coining the phrase Celtic Tiger, and predicting a house-price crash for over 15 years.  However, I think it would be cruel to say a stopped clock is right twice a day.  Despite the ginger Hugh Grant look ,and an awful habit for gimmicky stereotypes like the increasing extinct “Breakfast roll man” and the Asbourne inhabiting “Decklander”, I actually have quite a lot of time for him.  He stuck to his guns while others threw muck at him and called him a crackpot for ten years.  He even proposed the idea of a bank guarantee in the Sunday papers just before the government brought it in.  And while a scary thought, it wouldn’t be a stretch to imagine one of the Brians got the idea by idly reading the Sunday Business Post over breakfast.  In recent months, I think even McWilliams might have been overtaken as number one all round media economist by Jim Power.  He seems to be on Questions and Answers, Primetime, Newstalk, and writing newspaper editorials all day, every day.   Representing pension product operator  Friends First as their chief economist,  I can only surmise the company’s current sales strategy for flogging PRSAs is to put him on the airwaves 24/7 to whinge about public sector pensions and pile on uncertainty over the future of the masses.

Economist is a title that has been muddied and devalued over the years, particularly in this country.  It seems like any old hack with a business degree can now use the title.  And while the shameless exploits of the bank mouthpieces have done much damage to the profession’s reputation, the main reason I have little time for them anymore is that they are just not very good at their job.   As a social science, economics is always going to be a bit fuzzy, lacking some of the harder laws and certainities of the physical sciences.  But as current climate shows, none of them really have a clue what is going on.  They never agree and their predictions seem to change on a daily basis.   I would would have more faith the Eamonn Dunphy’s prediction on whether Ireland will qualify for the world cup finals than when Jim Power predicts we will climb out of recession. 

The reality is the global economy is a vast, interconnected, non-linear system, and any prediction you hear on the radio from any economist, a shill or a genuine academic, should be first dipped in a tub of margurita salt.  We simply do not understand the system we have created.  And while economists never have a concensus on whether we are going to shrink or grow, because their simplistic models make accurate predicitons impossible, they are unified in believing that economic growth is a good thing that should be pursued at all costs.   Indeed, all economic theory revolves around the idea of growth.  In my opinion, that is the biggest problem.  And modern economic and monetary policy doesn’t just require linear growth, it needs to be exponential.  Unfortunately we live on a finite planet with finite resources.  Until the  economic theory moves to a model where things don’t go haywire when economies stop growing, it is doomed to failure.  And not just the failure of repeating cycle of recessions but the complete destruction of the planet.

However, I  am not asking the world’s economic theory be upended immediately.  The planet should survive my lifetime.  But what I do want is an exponential decline in the amount of Irish economists fighting for room in our media.  I’m over you guys.  Yes, we are in a recession.  Yes, you didn’t really see it coming.  Yes, I know, you have no idea when it will end.  But get off the TV, the matches are starting.  Did Andy Reid make the squad?

On Invention

There was a special Primetime program on RTE on Wednesday dedicated to the country’s economic predicament. The first half was heavy with the doom and gloom that has become so prevalent on the TV here.  A set of interviews with unemployed brickies and couples in negative equity, followed by a panel discussion, where the main participant from what I could see was George Lee’s ever more deeply furrowed brow.  However, to second half tried to be a little more upbeat, and the presenter,  Mark Lyttle, went out in search of some optimism and hope, exploring roads out the current mess.   The key message thrown forward was that a “Smart economy” (Knowledge Economy is so 2008) of innovation and invention would be required.  Several companies were profiled, and there was a discussion on how to drive invention in the country.

And who were these innovative companies?  NTR,  Creganna and Steorn.  Apparently NTR, of West-Link fame, have bought a company in Arizona developing solar Stirling engines, which while innovative, is only going to fatten the company’s coffers further, but not drive any real employment in Ireland.  It is still an improvement on gouging commuters for a living.  Creganna are a positive story, an indigenous producing innovative and viable biomedical products in an industry in which Ireland can compete.  The country badly needs more companies like it. 


Saviours of the economy?

 This brings me to Steorn.  Initially I laughed out loud about how we were pinning our hopes on a company that claims to have invented a perpetual motion machine.  Now while I am almost 100% sure that they are either a) not very good at taking correct measurements or b) a bunch of chancers and the whole thing is a continuous PR exercise to loosen gullible investor’s wallet, I tried to take something positive from it in these pessimistic times.  And there are some elements of the story I like.

Firstly, we need people challenging the so-called Laws of Physics, whether they are complete crackpots or people conducting legitimate research.  The term Laws of Physics has always made me uncomfortable.  It gives off the impression to the general public they are gospel, set in stone, some sort of platonic forms.  Whereas all they are in reality are base scientific rules we have learned from empirical evidence.  All the evidence we have found so far fits the rule, but we can never proves it is true.  The only thing we can do it possibly falsify them, and then come up with and new and improved rule.  Newton’s Law of Gravity becomes Einstein’s Law of General Relativity and so on.  And while this does not happen very often, it is no harm to have people continually pounding away at the foundations of science, just to make sure they are as solid as we think they are.

And then there is how Steorn claim to have invented the technology – Serendipity.  Accidentally discovering a perpetual motion machine while developing an anti-fraud device for a cash machine?  In this case it seems a little too big a leap to be credible.  But serendipity is the key to almost every great invention.  It is not too be confused with plain luck.  Louis Pasteur probably put it best when he said”In the fields of observation, chance favours only those minds that have been prepared”.  After the show, I talked to my dad about this idea and he reminded me of an invention of his own that came about from serendipity.  Working away in the UCD veterinary lab in the early 1960s, he was trying the concentrate the level of antibodies in a blood serum using a centrifuge.  He accidentally spun a test tube from the freezer than had not fully defrosted.  Along with noticing his mistake, he also noticed that some thick liquid that collected at the bottom resembled concentrated serum.  He tested it and found it was indeed concentrated serum.  Somehow, spinning half frozen serum was more successful than the regular method.  After a few more experiments, fine-tuning the temperature and centrifuge speed, he submitted a letter to Nature magazine,  “A Freezing-thawing Technique for Concentrating Antibodies in Serum”  outlining his method, although at this stage he did not know the exact underlying mechanism, merely that it worked.

Back in the 1960s, scientists only read journals in libraries, and without photocopiers, they would mail the authors for reprints.  My mum pulled out a dusty old bag that had been stored up in their attic, which contained over five hundred letters from laboratories and universities around the world that had been sent to my dad asking for reprints of the published letter.   Looking online, many biological and medical science papers in the 1960s cite my dad’s letter in Nature, with one Russian scientist referring to it in his 1966 paper as “McErlean’s Method of Concentration”.  Eventually a chemist wrote to him proposing the mechanism, and they fine-tuned the process further.  Essentially,  the ease at which serum is removed is due the to the fact that the water freezes first and the substances suspended or dissolved therein are trapped in the lattice work of ice crystals in a concentrated form and are removed by centrifugal force.  If the temperature is too high, the water doesn’t freeze, too low and everything gets frozen.  He never patented the idea, and it simply became standard laboratory practice over the years, his association with the idea fading from view.   He also managed to recover salts from solution using the same method, and it occurred to him later it could possibly be used as another method for de-salination of seawater.

Alexander Fleming was not very tidy

Unlike in this picture, Alexander Fleming's lab was apparently an untidy disorganised mess. If he had been tidy, we mightn't have antibiotics today

Serendipitous discoveries seem to be most prevalent in medicine, biology and pharmacology.  Possibly the two biggest weapons we have in fighting diseases, antibiotics and vaccination, were discovered accidentally by Alexander Fleming and Edward Jenner.  Fleming’s sloppiness meant fungus managed to grow on a sample he had forgotten about, and Jenner happened to be working in a rural community where cowpox and cow maids could be observed, something not possible if he had be working in an urban laboratory.  There was an rural myth about cowmaids being immune to smallpox and he was able to join the dots.  Another newer invention, reminiscent of Jenner’s, is that of this years Young Scientist winners, two 13-year-old boys from Cork, John O’Callaghan and Liam McCarthy.  They developed a cheap test for measuring the level of infection in dairy cows, by investigating a belief that infected milk visibly thickened when a drop of washing up liquid was added.  I doubt the initial person who spotted this deliberately added a drop of washing up liquid, and I doubt the two enterprising boys would have investigated and developed it further had they not lived on dairy farms, heard about the belief, and worried about the financial effects of undetected infection.

The bottom line to all this is we can try and plan a “Smart Economy”, but pouring money from a government venture capital funds into start-up companies and continuing billions in funding through SFI to heavily directed university research programs will not necessarily produce any immediately useful innovation.  Forced innovation has a very poor record. Instead, we need to focus on creating an army of prepared minds rather than a handful of PhDs, an army who are taught to question their everyday work, whether they are milking cows or designing anti-fraud systems for ATM machines.  And eventually someone, somewhere will eventually have a “That’s weird” moment, realise their mistake or result wasn’t a necessarily a bad one, and go on to discover something game changing.  And creating prepared, questioning minds starts well before university or industry, in a school system that promotes thinking, not learning things by rote, and practical application,  not repetitive homework.  And it would also help if we stopped being gloomy, downbeat and seeing failures before they happen.  And if they do happen, they are not always a bad thing.