A career as an economic adviser

I published my first book in 1951 – 60 years ago! It argued for the amalgamation of finance of national insurance with the direct tax system. It got a certain amount of notoriety but did not set the world on fire – I can claim to have helped to keep the subject on the policy agenda, where it still remains. My subsequent economic advice to reform the welfare state to become the welfare society, making all personal transfers from the state to individuals by direct payments or by voucher, was rejected, even by the better sort of liberal politicians, as too revolutionary. I am still licking my wounds.

But my next sortie in advice-giving was much more successful. In the 1960s, Victor Morgan, then of Swansea, had the bright idea of setting up the Economists Advisory Group (EAG) as a Partnership of economics professors, the original group consisting of John Dunning of Reading, Dennis Lees of  Nottingham, Jack Wiseman and myself from York with Victor as Chairman. Our IEA connection is obvious… Slightly later we were joined by Brian Carsberg, then at Manchester, and a brave Graham Bannock left industry to become our Managing Director.

I pass over the initial problems of satisfying our universities that nothing we did was out of keeping with the high ideals of academe. Today they vigorously compete in offering professorial appointment to gurus familiar with the wicked world of social and political networking!

Professional economists are not subjected to guild rules or state regulations governing their practices. Anyone practising medicine without a medical degree risks prosecution, whereas, as Amasa Walker, a well known US 19th century economist put it, ‘anyone who can read or write can call himself an economist’. So in setting out the EAG stall, convincing evidence of trustworthiness and skill had to be on offer. The qualifications and experience of all partners and of the MG were listed, a guarantee was given that we would work to agreed deadlines, that clients would be kept informed of progress and could even help in the reviewing process itself, that no final report would be submitted without the approval of at least one partner, the submission itself being tied to a meeting with the client where its conclusions would be presented for discussion and criticism and, if need be, revisions would be made, particularly if the client wished it to be published. It defies belief today that this kind of information is often sparse in consultants’ literature.

Despite dire warnings that we were entering a market where professors, even of economics, should fear to tread - Max Stamp said we would have to pack up within six months - EAG survived as an economic consultancy for 30 years. It gained a reputation for being a ‘niche’ operator producing quality output, with known expertise in helping firms, trade and professional associations in their dealings with their government regulators.

It was not always easy to persuade partners to move outside their specialism or to be strict at meeting agreed deadlines, but this was essential if we were to match our talents to the demand for particular services. In contrast, it was sometimes difficult to persuade clients that it would not do them much good to expect us to act as hired guns willing to distort evidence in their favour.   

There was one important feature of attempts to expand business that we found difficult to introduce - client commitment to continuous advice, such as monthly economic reports. These are the bread and butter of consultancies. Exceptionally, Jack Wiseman and I were commissioned to write a monthly report by a firm in the gilt-edged market which would help them take a position over interest rates. We reckoned the job would last a year or two and by then they would have discovered that we had taught them how to do it. It lasted for nearly six! Not surprisingly we occasionally encountered sharp practice. A client might request that, alongside any bid for business, we should provide a detailed account of the economic methodology to be employed. After submission a polite note of thanks would be received, coupled with a tinge of regret at not wishing to proceed further. The methodology had been purloined in order to specify how the work might be undertaken in-house.  

Nowadays, the spectrum of advice has widened and its method of delivery extended by rapid changes in business communication. Casual empiricism suggests that the range in quality of performance has been extended. Today, much more likely to be advising institutions looking for sound advice but no longer attempting to deliver it myself, I am struck by how often clients can be trapped into paying large sums to pretentiously-named consultancies with manifestly low standards of production. The bedrock of the market economy, as Adam Smith reminded us, lies in trust. Quality must be ensured, but certainly not by the introduction of some form of public intervention such as an officially appointed board of regulation.    

Sir Alan Peacock writes about his career as an economic adviser in Anxious to Do Good: Learning to be an Economist the Hard Way

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