This September, the most important event in the Netherlands was undoubtedly the elections for parliament. The two key issues in this year’s elections were the national economy and Europe. For the latter even a newspaper like the Wall Street Journal was highly interested in the outcomes of these elections. However, as of the time of writing this column a new government is yet to be appointed. After a disastrous loss to Belgium in soccer in August, we do not want to lose to the Belgians again in surpassing the time it takes to form a government!
One of the key observations in the campaign was that the statements made by politicians in debates were checked by the media. ‘Meten is weten’, we say in Dutch, or ‘measurement is knowledge’. As an econometrician you must certainly like this saying. And even more than before, a lot of numbers were thrown at us in debates, newspapers, and other media, to support the many claims made by politicians.
Before the elections the Central Planning Bureau (CPB) had calculated the impacts of the different economic programs of the political parties. And indeed, some big differences were found; in expected economic growth, budget deficits, national debt, housing prices, household purchasing power and the like. These numbers from the CPB calculations typically get a life of their own, as politicians happily endorse them and conveniently pick out those numbers that they can use as weapons against each other when debating. I can imagine that many voters lost track in this number jungle.
As an econometrician I have always looked upon these CPB calculations with some amazement. Why only provide point estimates? Given the huge uncertainties in economic projections, I would not be surprised to learn that the different estimates for the policy measures by the different parties are not significantly different from each other. As the English would say: ‘It is Tweedledum and Tweedledee’; it does not matter which economic program you choose; all of them would a priori lead to outcomes that are statistically indistinguishable. That would make political debates a lot easier. There would be no need anymore for technical economic discussions.
So what should politicians be talking about then? If the numbers do not matter anymore, it should be about people and the way we organize our society. How can we make our country ready for challenges like aging, increasing health care and pension costs, environmental pollution and improving education? In other words, instead of economics, we should be focusing on political economy; the visions are more important than the numbers.
Going back to the numbers, I think it is almost an insult to Dutch people to withhold information about the dispersion of projected policy outcomes. Nowadays most weather forecast services, on internet and also on TV, provide us with nice graphs of temperature scenarios. And we all understand them. So why not provide the projections for economic variables in this way as well? It would be nice to see Coen Teulings, the director of the CPB, as an economic weatherman showing us the projected future developments of the Dutch economy using colorful scenario trees. My guess is, this will never happen…
Anyways, I wish you all the best in all your academic activities this year. A Happy New (Academic) Year!
Tekst by: Ronald Mahieu