Wednesday, January 16

Economists operate in a fact free environment

So I read this with interest.

ECONOMISTS love to argue. Indeed, since the crisis, it has often seemed they cannot agree on anything, and especially not on important matters like how best to boost a sickly economy or when to trim government borrowing. “Schlock economics” was the judgment bestowed by Robert Lucas, a Nobel prizewinner, on the stimulus proposals of Christina Romer, then Barack Obama’s chief economic adviser. Another Nobel laureate, Paul Krugman, labelled a rival view of business cycles “Phlogiston economics”, a reference to a debunked 17th-century theory of chemistry. More soft-spoken economists worry the bickering may carry a reputational cost: the public may simply conclude that solid, fact-based conclusions are beyond economists’ reach.

Such concerns were discussed (politely) at the latest annual meetings of the American Economic Association. Dismal scientists throng together each year (this time in not-so-dismal San Diego) to gossip, test the job market and hear presentations on hundreds of new academic papers. Among them were a handful focused on economists’ image problems. They suggest that economists, in fact, agree on quite a lot but that the public is resolutely unimpressed when they do.

I started laughing like an idiot on the tube when I read this part.

Economists might conclude from this that they just need to shout their views more loudly. But communication is only part of the problem. Ms Sapienza and Mr Zingales note that when Americans are told what economists believe before answering a question, their view scarcely budges. Told that economists favoured a carbon tax, the share of the public supporting the tax rose only marginally, from 23% to 26%. The public actually grew more confident in its ability to pick stocks successfully after learning that economists think it is close to impossible. Americans seem to believe that economists operate in a fact-free environment, a bit like Buddhists, commented Robert Hall of Stanford University.

As an economist (well its a fairly specialised branch that I mess about in, financial economics, but also relating to international trade and macro-economics), I find this fairly distressing. For example, the idea of too much debt being bad for the economy is something that people simply do not get. And I find that absolutely gobsmacking. Painful, but then the flip side is, looks like when I talk about debt, a glazed look comes over people’s eyes..

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