28fiscalpolicyAnother classic “Read it here 1st” at TBP:

What Good Are Economists Anyway? (Business Week)
Why they failed to predict the global economic crisis—and why their help is still crucial to a recovery

Economists mostly failed to predict the worst economic crisis since the 1930s. Now they can’t agree how to solve it. People are starting to wonder: What good are economists anyway? A commenter on a housing blog wrote recently that economists did a worse job of forecasting the housing market than either his father, who has no formal education, or his mother, who got up to second grade. “If you are an economist and did not see this coming, you should seriously reconsider the value of your education and maybe do something with a tangible value to society, like picking vegetables,” he wrote on patrick.net.

Take that, you pointy-headed failures! Go jump off a supply curve!”

Interesting take — looks kinda familiar. Now where else have I seen that sentiment expressed?

Hmmmm . . . Perhaps I  spilled a few pixels on the same subject previously. Let’s do a quick search — hey, whattataknow:

Why Economists Missed the Crises (January 5th, 2009)

http://www.ritholtz.com/blog/2009/01/why-economists-suck/

RIP Chicago School of Economics: 1976-2008 (December 23rd, 2008)

http://www.ritholtz.com/blog/2008/12/chicago-repudiation/

The Mystery of the Awful Economists
RealMoney.com, 3/2/2005 3:42 PM EST

http://www.thestreet.com/p/rmoney/barryritholtz/10211333.html

Mystery of the Awful Economists, part II (April 8th, 2005)

http://www.ritholtz.com/blog/2005/04/mystery-of-the-awful-economists-part-2/

Mystery of the Awful Economists (Part III) (April 13th, 2005)

http://www.ritholtz.com/blog/2005/04/mystery-of-the-awful-economists-part-iii/

The Illusory World of Economic Forecasting (September 19th, 2006)

http://www.ritholtz.com/blog/2006/09/the-illusory-world-of-economic-forecasting

You can read it in the MSM, or you can read it here first — in some cases, 4 years ago!

>

Source:
What Good Are Economists Anyway?
Peter Coy
Why they failed to predict the global economic crisis—and why their help is still crucial to a recovery
Business Week, April 16, 2009, 5:00PM EST

http://www.businessweek.com/magazine/content/09_17/b4128026000502.htm

Category: Data Analysis, Economy, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

37 Responses to “Read It Here First: “What Good Are Economists?””

  1. Chief Tomahawk says:

    “A commenter on a housing blog wrote recently that economists did a worse job of forecasting the housing market than either his father, who has no formal education, or his mother, who got up to second grade.”

    Great, a new source of panel material for a certain mustard-seed spreading program…

  2. hmmm.. ritholtz.com you say..

    no “Fair and Balanced” catch-phrase, no pretty Peacock, no serious looking Acronym…

    Must be one of those Un-reliable ‘Blogs’~

    Call me old-fashioned, but I like my Info-tainment Re-Lie-Able!

  3. VennData says:

    I’d like to hear the economists who demand no mandated health insurance who haven’t made a peep about mandated auto insurance.

  4. The vast majority of economists don’t even know the difference between inflation/deflation (both monetary phenomena) and price movements along or of the demand curve (a market phenomenon).

    Most of them still, particularly today’s neo-Keynesians, believe there is a trade-off between inflation and unemployment, even after a whole decade of having high rates of both (the seventies and early eighties) which was followed by a whole decade having high rates of neither (the nineties). Note to economists: If things aren’t correlated in time and space, it’s highly improbable that one causes the other.

    Yet we worship at the altar of the economist-in-chief, Bernanke, hoping beyond hope that his knowledge, completely untempered by wisdom, will guide us through the storm. Pffft!

  5. DL says:

    I’ve got two words:

    Gary Shilling.

    The point is, they’re not all bad. (Just 99% of them).

  6. FromLori says:

    What good are the Communist Nightly News who did not Vet the imposter before the election?

    http://bluelori.blogspot.com/2009/04/jump-you-f.html

  7. primordial_ooze says:

    Two things that led me to believe that the housing bubble was going to crash were
    1) Housing prices kept going up and incomes weren’t (at least for most people)
    2) Debt levels were at a max for most people
    Obviously an economy that is based on consumer spending can’t survive if no one
    has any money to spend. This seemed to have escaped the notice of economists.
    Economists are just like everyone else, they have an amazing capacity for self-delusion.

  8. call me ahab says:

    fromlori-

    wow- quite the site- a bit inflammatory- good reading though- love the song- wish some of the bankers would take it to heart- or at least perform seppuku on themselves

  9. willid3 says:

    for a good laugh? as entertainment? to compare to the weatherman? And notice how much more reliable the weatherman is?

  10. snapshot says:

    “We can’t have a modern economy without solvent banks, but we can’t have solvent banks or a functioning economy without solvent families.”

    You go Doctor.

  11. CNBC Sucks says:

    With the 17th pick in the draft, the New York Jets select…Barry Ritholtz, fullback, Stony Brook?

    By the way, my favorite economist is Trish Regan, from the Miss New Hampshire School of Economics.

  12. Joe P says:

    Are you being serious, Barry? A blogger complaining about the unoriginality of someone else’s content? And then citing their own citations of other people’s work as proof that they got there first? Good God, this is rich.

    Two things.

    1. ‘the economists don’t know shit’ argument has been made millions of times over the years, so observing it in 2006 or whenever means you were decades, or possibly centuries, late yourself.

    2. the vast majority of every profession sucks — most professional baseball players aren’t good at their jobs. Most clerks at Duane Reade aren’t good at their jobs. Most bloggers aren’t good at their jobs. Making blanket statements about the idiocy of economists is playing the same bullshit game most of them do — it’s called feigning intelligence. The harder, more interesting work is finding the good ones, like Gary Shilling, who a previous commenter cited.

    I might add that a lot of economists aren’t forecasters & don’t believe in it, either. So again, pretty silly to make a blanket statement as if that’s all they do.

  13. Mannwich says:

    @Lori: That’s a little much, no? Let me guess – you voted for Bush twice and still think he did a good job?

  14. [...] good is BusinessWeek anyway? Jump to Comments Same question for “business” and financial journalists: Economists mostly failed to predict the worst economic crisis since the 1930s. Now they can’t [...]

  15. call me ahab says:

    What good is BusinessWeek anyway? « Stocks Go Up. Stocks Go Down. Says:
    April 25th, 2009 at 5:11 pm
    [...] good is BusinessWeek anyway? Jump to Comments Same question for “business” and financial journalists: Economists mostly failed to predict the worst economic crisis since the 1930s. Now they can’t [...]

    what is this exactly? I see a lot of these on this blog all of a sudden- saw some Cyrillic stuff too- what gives?

  16. Bruce in Tn says:

    Er…what good is the FED?

    Hmmmm….it would appear, at least in our lifetimes, much the same discussion could be had…

  17. Bruce in Tn says:

    Great hike…BTW…tremendous spring weather in East Tennessee today…

  18. olephart says:

    “What good are economists anyway?”

    From a mathematical standpoint they are of some good. Take an infinite number of possible economic scenarios (∞) and a finite number of economists (N). If each economist makes one prediction then the number of possible scenarios is reduced to infinity minus N (∞ – N).

  19. franklin411 says:

    Barry is 100% right on this one. Economists suck because the Chicago School has a death-grip on economics departments across America. If you’re a grad student and want to graduate at some point, you damn well better be either a Chicago School follower or know how to fake it. If you want to keep your job after graduation, see the above.

    It’s funny how the most rigid adherents of free market ideology are completely unwilling to allow a free market in ideas about economics. It reminds me of the old saw about the British royal family. Why does hemophilia exist? Because wealthy aristocrats interbred too much and harmful, recessive genes became dominant genes.

  20. call me ahab says:

    franklin-

    last I checked we were following Keynes in our policy prescriptions for the current economic situation we are in- did you have your nose in a book, possibly more radical and bumped into a phrase such as: “each according to his means, each according to his needs”?-

    go get ‘em franklin- the longer you stay in school the less you’ll know about the real world.

  21. to the query of the post, most ‘Economists’ fall into this A: By Richard Cook

    24 April, 2009
    Richardccook.com

    The level of public ignorance on the topic of the U.S. and world monetary system is astonishing. This is part of the plan, of course, because the monetary elite control not only the financial system but also the news media, the publishing industry, and the educational system. The blueprint for control was put together over a century ago by Cecil Rhodes and his friends, including British financier Nathan Rothschild, as documented by Professor Carroll Quigley.

    During the 20th Century the power shifted to the U.S., with the Rockefellers playing the dominant role as they continue to do today. It is no accident that J.P. Morgan Chase—the Rockefeller family bank—dominates the U.S. derivatives market; nor that Exxon-Mobil, the Rockefellers’ oil company, is the most profitable corporation in history.

    The basic plan was to place all of mankind in a state of permanent mental and emotional siege so that in the end we would trade all our liberties to the controllers in return for protection; even freedom of thought would be traded for physical safety. That plan is well advanced. The sheeple have been prepared for the final shearing…Starting in the 1970s, functionaries like Kissinger, Brzezinski, and Volcker carried out David Rockefeller’s plan to outsource manufacturing to China and eliminate the U.S. as the world’s greatest industrial democracy, replacing it with a financier oligarchy.

    Barack Obama obviously works mainly for the financiers, as did Bill Clinton before him. The job of the Democrats is to keep the sheeple quiet by now and then implementing some “reforms”; the Republicans were a more blatant gang of looters…”
    http://www.countercurrents.org/cook240409.htm

    franklin,
    put the blinders down, see the big picture..

  22. franklin411 says:

    @Ahab:
    Nice straw man, but the question was not “What are we doing now?” The question was “why are economists blind when it comes to economics?”

    http://www.ritholtz.com/blog/2008/12/chicago-repudiation/

  23. snapshot says:

    http://www.prospect.org/cs/articles?article=the_unlikely_revolutionary

    Unlikely Revolutionary – Simon Johnson

    Maybe they didn’t know enough about power, politics, and oligarchies.

    “Unfortunately, Johnson posits, the economic specialty that deals with business cycles and recessions – short-term macroeconomics – hasn’t yet acquired the tools to assess the influence of political interests on their policy proposals. Perhaps, unsurprisingly, finance specialists have.”

    “If you walk into a finance seminar with data pertaining to power and influence, the kinds of things we’re talking about, they will take you very seriously,” Johnson says. The short-term macro people, not so much.”

  24. Onlooker from Troy says:

    call me ahab Says:
    April 25th, 2009 at 5:48 pm

    What good is BusinessWeek anyway? « Stocks Go Up. Stocks Go Down. Says:
    April 25th, 2009 at 5:11 pm
    [...] good is BusinessWeek anyway? Jump to Comments Same question for “business” and financial journalists: Economists mostly failed to predict the worst economic crisis since the 1930s. Now they can’t [...]

    what is this exactly? I see a lot of these on this blog all of a sudden- saw some Cyrillic stuff too- what gives?<<<<<<<<

    ahab

    I do believe it’s the price of greater popularity and exposure in the mainstream. These are links to other blogs. I don’t really know how it works specifically but I’ve seen it across the blogosphere.

    Traffic will pick up here I’m sure but hopefully the discourse won’t go downhill consequently. I don’t know how much policing of posts Barry and crew do, but I really wouldn’t want it to turn into the comments section at many others like CR, Mish’s site, etc. Bunch of crazies.

  25. Mannwich says:

    It seems to me the problem is treating economic like it’s a science because then it gives economists carte blanche to believe their theories are absolute scientfic fact that is not to be challenged. And like Summers, Geithner, Greenspan, et al (and, yes, the Chicago boys), they are all wedded to their own theories as scientific fact. These are concepts that have been learned and reinforced their whole lives, so they will never admit they are wrong even in the face of a mountain of evidence. It’s all about ideology with them too. That’s the biggest problem.

  26. Mannwich says:

    On another note, old habits die hard on Wall Street, it seems. Looks like the plan is to move along and act like none of this debacle ever happened. This is mind boggling to me….

    http://www.nytimes.com/2009/04/26/business/26pay.html?hp

  27. PrahaPartizan says:

    “…You can read it in the MSM, or you can read it here first — in some cases, 4 years ago!”

    Yes, you can. It also accounts for the reason that I’m letting my subscription to BW lapse after staying with them for twenty some odd years. I just can’t stand the incompetence and CEO adulation which the publication has fallen into. It’s been really sad, but I guess McGraw-Hill has to do something to protect its failed ratings business by pretending everything’s all OK. Mark to magic, indeed.

  28. Onlooker from Troy says:

    Mannwich Says:
    April 25th, 2009 at 8:17 pm

    On another note, old habits die hard on Wall Street, it seems. Looks like the plan is to move along and act like none of this debacle ever happened. This is mind boggling to me….

    http://www.nytimes.com/2009/04/26/business/26pay.html?hp<<<<<<<<<<<<<<<<<<<<&lt;

    Unbelievable arrogance, isn’t it? They’re printing money due to the yield curve, the Fed’s efforts, and of course due to the bail out of their irresponsible actions. And they have the temerity to skim off the top of that while their balance sheet erodes and will undoubtedly need more taxpayer capital. Sickening. I mean really.

  29. Mannwich says:

    This is an amazing post on the coming CRE debacle, although you wouldn’t know that this bomb was ahead of us the way the market has been acting…….

    http://zerohedge.blogspot.com/2009/04/one-trillion-commercial-real-estate.html

  30. mikaeel says:

    My uncle once told me about ten years agothat real estate prices in the U.S. always go up. I knew he was wrong. Even if I had never read about housing prices bottoming out in the U.S. in our lifetime, common sense tells me that things have to go bad eventually. This is Earth not heaven.

    The economist like much of the upper middle class (my uncle’s upper middle class) seemed to be ignoring one thing. The average American’s income wasn’t rising as fast as the economy, housing prices the DOW JONES or the price of bread. As far as they were concerned there’s always opportunity in America. The problem is, there’s more people than opportunity.

    It’s hard telling people who are making lots of money that times are bad. They look at you like you’re chicken little and you’re saying the sky is falling. And if you’re an economist they call you a doomsdayer or however you spell that. And people wont listen to you. I heard and read about ten years ago the housing market was going to crash. This mostly came from people on the fringe. They got the dates wrong but eventually the ‘crazies’ were right.

    I watched people in my ‘hood turn garages into $1200 a month apartments so they could get help paying the mortgage on their one family home and still not be able to afford it. Ray Charles could have seen this coming.

  31. dead hobo says:

    BR pondered

    What Good Are Economists Anyway?

    reply:
    —————–
    It depends what you want them for.

  32. VoiceFromTheWilderness says:

    I am so excruciatingly bored of ‘news’ that purports to tell me ‘why’ xyz happened — but invariably comes up with a string of excuses purporting to be an explanation’ — and then (always) tells me ‘why’ nothing should change.

    It is beyond astonishing to me that there exists a market for what amounts to a ‘there there little boy’ attempt to vigorously maintain the status quo. It is astonishing how much of the media’s output is dedicated to reassuring us all that everything is fine and it’s safe to go back to sleep. It is more astonishing that people need this so badly that they don’t even notice anymore that it is what they are being fed.

  33. [...] Update: Barry says what I’m thinking better than I did. [...]

  34. WaveCatcher says:

    That’s why I keep coming back.

    In the marketplace of ideas, BR is a prime broker.

    Often early but rarely wrong.

  35. dwkunkel says:

    mikaeel:
    “Ray Charles could have seen this coming” sums it up well.

  36. DL says:

    dwkunkel @ 1:04

    Maybe so. However,

    “to know and not to act is not to know”.

    – Yukio Mishima