Tuesday, July 01, 2008

If an economist falls in the forest...

Will people still ignore her? Ah, the age-old riddle: as economists gain powerful new data tools and vastly wider audiences, why don't they have any noticeable effect on economic decisions, especially at the government level?

Seriously, never have more bright minds outlined more reasonable solutions to today's problems only to serve as background mumbling for seemingly uninformed policy decisions. Consider these examples:
  • The carbon tax - clearly the better way to deal with carbon emissions. Not a prayer.
  • Free trade - without a doubt essential to continued prosperity here and abroad, and it could likely cost the election for Sen. McCain
  • Farm subsidies - nearly uniform repugnance across the economic community, and lawmakers couldn't ignore them more.
  • Speculation - the consensus of economists point out speculators cannot change prices long term, but regulators are aiming for them anyway.
  • Energy independence - the fool's gold of energy policy, and a the same time a standard campaign promise.
With economists blogs and quotes filling the media, why doesn't this profession get more credence? I'm baffled, but some thoughts.

First, many leading economists are unable to articulate issues in language other than academic. They are speaking in a foreign language to consumers. In the quest for precision of expression, they write abstruse, desperately-in-need-of-a-mean-editor prose that reads like mathematical Proust.

Second, habitual professional detachment when discussing economic issues tends to make them sound aloof and uncaring. (Giving the benefit of the doubt here) Indeed, many of their arguments seem to be about the arguments, not the problems of people.

Third, tenure isolates most economists from the emotional impact of bad economic news. I find myself more likely to listen to private sector economists even though they have a possibility to bias.

Fourth, and most alarming: they have no palatable answers. These guys are Bad News Incarnate - at least the competent ones. We've tried all the fun solutions already.

I am sure there are other factors, but it is clear to me that any innovative and helpful guidance from the economic community will be the exception, and will mostly exist within private business. Meanwhile they have great blogs.

Just nothing much to show for it in the real world.

3 comments:

Nate said...

I just don't think they are right most of the time. They call for a 3% increase in the price of something over said time and in that frame it doubles. Their predictions stick to the baseline, which over time holds true, but people look to them for insight to a situation and their standard deviations are all over the place. I mean in honesty is their anyone who hold Ron Plain and Glenn Grimes feet to the fire for their predictions? None that I know of. And they are paid by the university so they really could care less how accurate they are.

Someone else has to have a better take on this than I.

Ol James said...

Most of the blogs and so forth from the majority of economist should be listed under science- fiction. They are great at putting theory on paper, but not much at making it a reality. Now albeit, there are a good number of folks in the business that are good at both sides of the spectrum and are good at what they do.
Accountants,(to which economist are a part), should account, not dictate company policy, unless they want to do the job and take the responsibility.
Anudder quality post Mr. John!!

Anonymous said...

if you have read "The End of Agriculture in the American Portfolio" by Steven Blank - I would be interested in your thoughts. I haven't read the book, the $120 price tag was beyond my economics! :>)