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Some of you poo-pooed my idea of surveying economists, pointing out that they have a bad track record of predicting the big things that matter, such as the credit crunch, or oil at $145 a barrel. Does that mean a poll of economists would be useless even if they all agreed?

 

As economists like to say, "It depends."

 

First, let's agree that even if experts such as doctors and lawyers and engineers are often wrong, that doesn't mean they should be ignored. What matters is that consulting with experts produces a better result on average than whatever is the alternative. Depending on the sort of question being asked, economists are likely to be more reliable than the public at large.

 

If the question involves predicting the value of the stock market next year, economists aren't any better than a monkey with a dart board. And they know it. But if the question is whether using food crops for ethanol could hurt the economy more than it helps, or whether free trade is a good idea, or whether a gas tax holiday makes sense, you would be wise to listen.

 

Economists are also historians when it comes to their field. They would know, for example, that government price controls would be a disaster because they have failed in the past. If doing X with the economy caused Y to happen the last three times someone tried it, wouldn't you like to know it? Economists already do.

 

When you are talking about the global economy, making the right decisions just barely more often than before is a huge deal. So the bar is set low for economists. They only need to be right more often than the public and the politicians. Is that so hard?


I'll blog again in a few days.

 

  

 
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Jul 16, 2008
Economists can't do what they used to do, because inflation and deflation are happening at the same time--like oil prices rising and housing values falling. Lowering interest rates may help the housing situation, but will probably result in inflation because speculators will predict oil going up, because the demand increases.

We are in big trouble here, if we don't allow this situation to correct itself, even though it may make many in the business world uncomfortable. I was a history major, and I believe we are in the same situation as Weimer Germany: deeply divided politically, national savings eaten by hyper inflation, falling emloyment and waiting for a single man to rise up and save us. We may have ten years, maybe twenty, but history is about to repeat itself.

 
 
Jul 15, 2008
smartchica47 says economists
"point out that when you do A, you can perhaps expect B (at cost C), BUT ON THE OTHER HAND, you can also expect D to happen (which has a different cost E), OR you could do X, which is another way of getting to the same objective B but at a different cost F."

Not telling us very much are they?

Besides, accepting what you say is true, your argument concedes the point that economists do not know the best way of going about doing things, or what will in future be the most significant outcome of each action. They can only point out various alternative scenarios which any semi-intelligent person can figure out for himself.

The point I make is not that an economist's opinion is worthless; just that I would just not pay lots for it.

No offence meant to any economists :)
 
 
Jul 15, 2008
For those fuzzy on economics, this video should help you learn the basics: http://www.youtube.com/watch?v=VVp8UGjECt4
 
 
Jul 15, 2008
User Name: risingstarlp Jul 15, 2008
User Name: PeterJohnston Jul 15, 2008 0

RE: Heisenberg's uncertainty principle in economics

Dudes,

The uncertainty begins by assuming an absolute called "Electron", like assuming an absolute called "Soul" or an absolute called "US Dollar".

Energy requires space to exist. So space was created first. Now, you can't create space while being in it. So whoever created space in the first place was/is in another dimension.

Thats the meaning of the economists when they say, " It Depends". The chaps are in another dimension and hope to create an economy that will roll-out as they wish. It causes a big bang at times!

The only absolute here is awareness. What you do with it is volitional. In economics that would mean a concise awareness of the relative positions of each variable. What you do with it is an open question.

For God's Sake, don't ask the president!!! You might here something like, " Eh, yea, economics, well, we are short of paper. If only the canadians would sell us paper we could print more money."
 
 
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Jul 15, 2008
You got my vote because if nothing else, we should know what the people who're affecting our quality of life are thinking.

In very simplistic terms, what we can enjoy, is generally determined by how much money we have left over after the mortgage and bills (ignoring inflation for now). Our mortgage rates are in turn dependent on the financial risk assessors who are in turn driven by their economists' reading of the financial future, and it all connects back to the central bank's economics data and outlook of the economy.

So like it or not, economists have a firm grip on the steering wheel of this winnebago we call "free markets" as it meanders through the volatile terrain of the martian himalayas.

No one knows what's coming ahead, but wouldn't you want to understand his language when the pilot is telling you to buckle up ?
 
 
Jul 15, 2008
You said:

"They only need to be right more often than the public and the politicians."

Let's put it to the test. Put your survey out on the web for your readers to take. Several years from now we can see who was more right.
 
 
Jul 15, 2008
Firstly, never trust anyone without an opinion. But if it's numbers you want, no exclusions, then read up. http://www.johnlott.org/

"You can have your own opinion,but not your own facts"???

It's not just guns. Why should anyone invent a better cat food? Why eat, you'll just get hungry again?
 
 
Jul 15, 2008
Just out of curiosity - your educational background is ... ?

That's what I thought. No wonder you think economists are the best people to survey.

You know who is better? Moms. And you could narrow this to moms that have above average intelligence. Moms are very concerned about the future. And it has been my experience that they make decisions based on what is best, in the long run, for their kids. And they are used to making tough decisions that are multi-faceted.

FYI - I am not an economist or a mom, but (as you can tell) I have a ton more respect for moms than economists. Dump the economists - survey moms.
 
 
Jul 15, 2008
I think a lot of the problem is that people believe what they want to believe. So in the middle of the housing bubble, the economist employed by the real estate association got into the newspapers with insane arguments on how now was the right time to buy, not the economists who were saying that when the cost of owning a home is so much higher than renting the whole market is ready to fall.
 
 
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Jul 15, 2008
isn't it "prophecies", not "prophesies"?
 
 
Jul 15, 2008
I would submit there is huge difference between other proffesionals and an economist. If you consult two different doctrors on an ailment, the result, for both would be to no longer have the ailmnent. If you consult two different lawyers about a legal issue, they might use different case law, but they want the same outcome (a healthy fee). Ask two different building engineers on a building, and they might have a differnet view on a truss, but they are after a structally sound building as an end result.
Economists may have a different end result (more trade, less tarriffs, more tarriffs less trade) in minbd with any desred policy so it is a ot bigger than "it depends"
 
 
Jul 15, 2008
User Name: PeterJohnston Jul 15, 2008 0
"Heisenberg's uncertainty principle also applies - you change things by measuring them."

Umm, wrong. Heisenberg's uncertainty principle in no way, shape or form applies in any metaphorical or literal equivalent to economics. Electron wave-particle duality, which is the underlying principle for Heisenberg's uncertainty principle does not analogize with that. Electrons behave irratically due to their low mass, this is no mathematical way to predict their position and velocity accurately at the same time according to the principles of quantum mechanics. The reason economics is difficult is because of too many variables. The fact that the more you know about economics makes predictions more accurate shows there's a correlation of results and knowledge, which is contrary to trying to predict the velocity of an electron, given its position, which over time would always come out to be random guessing.
 
 
Jul 15, 2008
The problem with finding solutions by surveying economists isn't that they like to disagree with each other or that they are wrong a lot. It is that they are all economists, and therefore are more similar thinkers. They tend to see the world in a similar way, care and don't care about the same things, and even read and watch the same people. That would be the bias in this survey, that economists are too similar and would miss the same things. It would be better to survey other people as well, who come from a different perspective.
 
 
Jul 15, 2008
I'm pretty sure most economists were pointing to a major problem in the housing market well before the collapse actually hit. They might not have predicted the credit crunch exactly, but there were lots of people saying we were in a property bubble. That was not rocket science, any more than the fact that we were in a tech bubble in 2000.

I believe most economists have also been aware that oil prices are going to be a problem for the last couple years.

The problem with consulting economists is that they may well know what has to be done, but what can be done in light of political realities is another matter. For example, I think most economists would agree that the current housing subsidies in the tax code (mortgage write-offs for federal taxes, Prop 13 in California) create serious and problematic market distortions, and were a significant contributer to the housing bubble. It's clear that from an economists perspective, this sort of thing should go and everyone would be better off. But that's not going to happen politically. Likewise, I doubt you'll find a serious economist who would argue that free trade doesn't make us all better off. Convincing the electorate of that is another matter entirely. I think both candidates are believers in free trade but have to take protectionist positions for political reasons.
 
 
Jul 15, 2008
Scott,

You said: "So the bar is set low for economists. They only need to be right more often than the public and the politicians. Is that so hard?"

No, its not hard, especially if, as an expert in the field, you couch your answers/predictions in a clever enough manner to be "right" no matter which way the future wind blows.

Having been a student of economics, I can tell you with some conviction that the reason there is always an economist available to the news media that correctly predicted any given current event is because economists as a whole are so wildly divergent in their outlooks that damn near anything that can happen has already been predicted by one or more of them. Because at least ONE economist correctly predicted any given outcome to every situation, and the media trots them out as the expert of the day, the public tends to perceive economists as having a grip on the future.

Half
 
 
Jul 15, 2008
hbmindia says, "But economists are notoriously lax at anticipating the secondary consequences, or the unintended consequences that a action will produce." That's confusing what economists say/do and what the politicians listen to/the media reports. Economists are actually notoriously GOOD at pointing out unintended consequences - that's pretty much what we do. We highlight trade-offs and incentives, which is also why the uninformed public believes that economists never agree, since rather than advocating for particular issues, we point out that when you do A, you can perhaps expect B (at cost C), BUT ON THE OTHER HAND, you can also expect D to happen (which has a different cost E), OR you could do X, which is another way of getting to the same objective B but at a different cost F. That's not disagreement, that's pointing out your options and leaving the value judgments to someone else.
 
 
Jul 15, 2008
Some economists have been predicting the housing bubble and credit crunch following it's burst since the Clinton Administration (not just 2003). If you have time to watch it check out the video (search google video) "The Money Makers". It's long as all hell but really informative about how the central bank (in the US known as the Federal Reserve) has been doing this sort of thing since it was first created in Europe centuries ago. Towards the end of the video the guy actually talks about how in the relatively near future the Federal Reserve would manipulate interest rates and the amount of money in the market to create a massive real estate boom which would go unchecked until it was too late and the bottom would fall out of the market causing a major credit crisis in the US. Again keep in mind the video was created during the Clinton administration (I'm not sure of the exact date though). It's a very informative video although it does sound a bit like a conspiracy theory at times.
 
 
Jul 15, 2008
Scott wrote, "...even if experts such as doctors and lawyers and engineers are often wrong, that doesn't mean they should be ignored."

Based on that theory, and the fact that a stopped clock is right twice a day, from this moment forward I'm basing my idea of the correct time by consulting a room full of stopped clocks. At least one of them is bound to be right. Right?
 
 
Jul 15, 2008
"if the question is whether using food crops for ethanol could hurt the economy more than it helps, or whether free trade is a good idea, or whether a gas tax holiday makes sense, you would be wise to listen."


Economists may agree on the primary consequences of the action.
But economists are notoriously lax at anticipating the secondary consequences, or the unintended consequences that a action will produce. And in some cases, the unintended consequence will be of far greater significance than the primary benefit/loss.

The benefit of expert advice is not in following it blindly, but in using it as input for your own decisions. While the poll may add some value to your thought-process, it will be far too little value at far too great a cost.
 
 
-4 Rank Up Rank Down
Jul 15, 2008
Any economist who knows economic history can tell you
short of getting into a war
the government can do damn little
to affect the economy.

Your survey should tell you that.
 
 
 
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