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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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-4 Rank Up Rank Down
Jul 15, 2008
http://www.nytimes.com/2008/07/13/business/13view.html?ex=1373601600&en=d29d44dcc70127bf&ei=5124&partner=permalink&exprod=permalink
 
 
+3 Rank Up Rank Down
Jul 15, 2008
Economists have been predicting the housing bust and credit crunch to follow since 2003.
http://www.econ.yale.edu/~shiller/pubs/p1089.pdf
Economists also have known the simple rules of supply and demand for ages, i.e. When India and China start demanding more oil and gas, with fixed supply the price will go up.
People don't like to hear what economists say because they are happy that their house skyrocketed in value or because they can afford to drive a giant SUV.
 
 
Jul 15, 2008
You forget the law of unintended consequences. However sensible the idea, there is always a side effect you haven't covered. e.g. more tax on the rich - so they have more incentive to find loopholes and the tax take decreases. Give white owned farms to the black people in Zimbabwe - so those farms no longer produce as much and the black workers starve. Biofuels is the best example - sounds like fuel for free and a great use for lots of unused land - then we discover countries stopping food production to do it and world food prices rocket. Economics is a big chess game - you have to think several moves ahead and allow for a massive number of variables. Heisenberg's uncertainty principle also applies - you change things by measuring them.
 
 
Jul 15, 2008
How are often are economists wrong? There seems to be two scenarios that answer this question:

(1) An economist is wrong the moment that there are more than one of them. Since, it is unlikely that two of them will agree...
QED.

(2) An economist is wrong when he/she disagrees with my political party. Since, I am sure that I can find at least one economist that agrees with my political party...see first scenario.
QED.

Thank you
 
 
Jul 15, 2008
Some people are just poo-pooers. Not that it's always a bad thing - it sometimes keeps optimistics like myself from floating away. But in this case, I plan on ignoring them and am looking forward to reading the results of the survey. Thanks for volunteering to bring that to your readers.
 
 
Jul 15, 2008
Sounds like simple common sense.
 
 
 
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