The Filter^: An interview with Oskari Juurikkala

Oskari Juurikkala was born in Finland. He studied Law at London School of Economics, and in 2006-07 was a research fellow at the Institute of Economic Affairs, UK. He is currently working as a legal counsel of Magnus Minerals Ltd, Finland; an analyst at hedge fund Hopeahelmi Investment Ltd, Finland; and editor of Kultainfo.com (www.kultainfo.com). The interview was conducted by email in January 2008.

AJE: Where did you study prior to coming to the LSE?

OJ: I studied economics at the Helsinki School of Economics, Finland

Many non-US/UK countries pride themselves on having somewhat distinct "schools" of economics. To what extent do you think that Finland lends itself to a distinct blend of economic analysis?

That's a really interesting question, Anthony. On the positive side, Finnish people have a reputation for being honest and straightforward (which I think is broadly true), and this is a good grounding for economics. There are some good professors teaching, for example, neo-institutional economics, law and economics, and behavioural economics and finance.

But on the negative side, Finns can be rather too shy to challenge conventional wisdom. That is a challenge in economics, because I think that mainstream econ has major defects hidden under the camouflage of maths and stats. Thus economics teaching here tends to be too standard, too US-style.

As one of the better lights once pointed out, this may not be a wise strategy for Finnish business schools, because if you try to copy top US-schools, you inevitable (given lack of resources) end up being a second-class case with nothing to stand out for. In contrast, by being more original and innovative - multidisciplinary - we could be on the forefront of novel discoveries and breakthroughs in economics, despite our small numbers. The potential is there. This is the normal lesson in business strategy and I think it applies to economic research too.

Given that you have a background in Law, what is it about the discipline of economics that makes you interested in a cross-disciplinary approach?

Economics is a really broad subject. Almost all human phenomena have an 'economic' aspect. It shouldn't be seen as the only aspect (as can happen with people like Gary Becker), but it's always there. When you use economics correctly, it brings clarity and rigor to our analysis of all kinds of social issues.

It does need complements, though, which is why I firmly believe in the importance of a cross-disciplinary approach to economics.

undefined or psychological economics is a great development. I don't mean just people like Kahneman, but also Robert Frank and Bruno Frey, who are writing interesting stuff about economics, morality and human motivation. Their discoveries challenge the very foundations of mainstream microeconomics.

Then I'd like to see more work on philosophy and economics. The Acton Institute (www.acton.org) is doing good work in this direction, but we need more. I mean basic questions about life and man: what is happiness? why do we do things? If money can't buy love, why are we so obsessed about economic growth?

There are some people asking these questions - think about Amartya Sen - but it's not mainstream, and lots of questions are unanswered (I don't think Sen has really gotten to the heart of the matter either). It should be mainstream. Philosophy should be the starting point of thinking about economics, and not some esoteric add-on for the bookworms.

At the Institute of Economic Affairs you were part of the "IEA Empowerment Through Savings Programme". Can you tell us a little about the background to that project, and what your role was?

The idea of the project was firstly to take a comprehensive, global look at pension systems and alternatives. One of the limits most discussion around pension reform is that it tends to be narrowly focused on the specifics of each country. This lends itself to tunnel-vision, where you only examine the obvious problems but fail to think outside the box.

In pensions this is a crucial problems, because old-age security is such a complex issue. It is not just a fiscal issue. It is not just an economic issue. It also relates to tax policy, sociological issues, cultural issues, national history, public choice issues and so on.

So the project wanted to look at the big picture. But secondly it sought a global vision understood in geographic terms. We examined a wide range of countries - UK, US, EU, Chile, Eastern Europe, India, China, Singapore - in order to get a better grasp of (1) the broader alternatives available to countries like the UK, and (2) the challenges facing the different approaches.

I think this was crucial, because you can learn so much by studying different kinds of concrete policies and their outcomes. In economically less developed countries, there is presently a push towards Western-style state pension schemes, but little understanding of the problems that they have created or are creating here.

The project was headed by Nick Silver, who is an actuarial consultant. I was the lead researcher in the project. We also had lots of other contributors of articles and analysis.

In an article [http://www.mercatornet.com/articles/poor_countries_need_freedom_and_children/] you've said that "Overpopulation is a myth, and a silly myth at that". What do you think the main danger of people believing that the world is overpopulated is?

Well, I think there are lots of dangers associated with the overpopulation myth. The main one is cultural. If you believe that the world is getting overpopulated, you will be more inclined to supporting policies that favour small families and even no families. You will more likely behave that way too on a personal level. Of course, having a large family requires lots of sacrifices, and these people need a lot of support. It seems to me that ultimately he overpopulation myth is an excuse for pseudo-feminist and anti-family
ideologies.

(I say 'pseudo-feminist', because feminism is totally contra femininity, opposed to the real dignity of women as women. It wants to measure women on a masculine scale and ends up degrading true
femininity.)

But apart from the cultural side, the overpopulation myth appears to be destructive economically too. Artificial or forced reduction in population size causes challenges economically and socially, as we see is the case with pension systems. It is also bad for economic development, as Julian Simon has persistently argued.

In fact, one of the things we realised in our research, is that families and extended families are the main source of old-age security and social security in economically less developed countries. What's more, it works. There are even theoretical studies by economists showing that families better avoid the typical information and agency problems that pervade both public and private pension and insurance arrangements. Families and other informal types of association are also more flexible and thus capable of reacting to difficult circumstances. True, these people would be even better off if they could combine family-based security with savings and formal pensions. But if you build the latter to the detriment of the family, you are creating problems.

Funnily enough, you often hear these conspiracy theories about how top investment banks and the oil industry are deliberately trying to stop LDCs from developing economically, so they would be easier to control and exploit materially. (You've probably heard this too.)

Earlier I would have brushed it off as Marxist propaganda, but I've been coming to different views now. Even Julian Simon wrote about these things in his classic "The Ultimate Resource" (http://www.juliansimon.com/writings/Ultimate_Resource/). He clearly was no Marxist! I haven't studied the arguments carefully, but I don't rule out the possibility any more.

This takes my thoughts to another topical issue (if you can bare with me). If you look at what's going on right now in financial markets, with the deepening credit and derivatives crisis, you see a total
double standard.

The people who created the mess are trying to hide the truth as long as possible - and they're using our money (including pounds and euros) to bail out the bad guys. I wonder if Bernanke, King and Trichet are
all puppets of much more powerful sources.

That sort of speculation naturally raises the question: Who's running the show? I don't know. But it's not all accidental. Did you read the news about how Goldman Sachs made a fortune with the "subprime
crisis". It was no surprise for them. I think they played too well for it to be just good luck, especially when you consider how deep they were in the same game just a while earlier.

You have two articles available through the Mises Institute [http://www.mises.org/articles.aspx?AuthorId=309]; "Old-age Security Without the State" and "Making Kids Worthless: Social Security's Contribution to the Fertility Crisis, and "Pensions, Fertility and Families" [http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1044351] was published in the December 2007 of Economic Affairs. What are the most important lessons about this research?

Some of the ideas are related to what we were just discussing. Namely that the family (and extended family) is and should be the natural, primary source of social and old-age security in a free society. This
doesn't mean that it's the only source, and certainly people should be free to save, invest etc. in order to get other sources of financial security too. But the state should not force them to do much or anything, and it should keep out as far as possible.

That's precisely the argument in "Making Kids Worthless": when you study the facts, it's clear that state-run and tax-financed pension systems have created a big problem, they have undermined families and encouraged low fertility rates. This is well supported by both economic theory and empirical evidence.

What are your plans for the future?

Right now I'm involved in a number of related projects which may give rise to something interesting.

I've started working as analyst for a precious metals fund in Finland, called Hopeahelmi Investment Ltd. We invest in gold, silver and the mining sector, with a view to profiting from the rising prices of precious metals.

A closely related project is Kultainfo.com (http://www.kultainfo.com), which stands for "Gold Info" in Finnish. We launched the site just a moment ago, but it's already becoming the leading information source in Finland on gold, silver and precious metals investing.

Our purpose is to inform people about this market, to share news and analysis. But it's not just about trading, it's about the macro economy, the banks, monetary policy, economic history - everything related to gold and silver, and that covers a whole lot more than many people realise.

In my "spare time" I'm also setting up a small macroeconomic consultancy, called Ansgar Economics
(http://www.ansgar-economics.com). "Ansgar" means "spear of God", although I chose the name because it's the same as Oskar, and Saint Ansgar (http://en.wikipedia.org/wiki/Ansgar) is thus my patron saint. Anyway, the idea of Ansgar Economics is to provide "big picture" analysis and training on macroeconomics in our unstable and changing world.

thanks!!

Thank you!

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February 04, 2008

An interview with Oskari Juurikkala

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