Economists and Soothsayers

March 9th, 2009

According to the dictionary, a soothsayer is a person “who claims to be able to foretell events or predict the future.”  Wikipedia defines the word as meaning “a person who…predicts the future based upon personal, political, spiritual, mental or religious beliefs rather than scientific facts.” 

So, what’s the difference between an economist and a soothsayer?  Darned if I know.  Economists lay claim to being scientific, I suppose, but it’s not like any science I’m familiar with.  Their facts change over time, different economists look at the same facts and come up with different opinions, and their work falls far short of the scientific method — hypotheses that can be tested, with the results being replicable by other investigators.

Even the folks on TV who predict the weather are more scientific, and look how often they’re right, especially more than a couple of days into the future.

That’s it, then.  Here we are relying on soothsayers with a professional jargon so dense and so replete with impenetrable data and cockamamie charts than none of us can understand what they’re talking about.  Come to think of it, maybe that’s the point.  If us average schmucks could understand it, why would we need them?

Take Paul Krugman, denizen of The New York Times op-ed pages and soothsayer extraordinaire.  He’s even got a Nobel Prize to prove it.  In his column yesterday, he criticized the Obama Administration for not handling the economic crisis very well.  He’s very concerned that they aren’t going to spend enough money, aren’t going to go far enough.  He concludes,

So here’s the picture that scares me: It’s September 2009, the unemployment rate has passed 9 percent, and despite the early round of stimulus spending it’s still headed up. Mr. Obama finally concedes that a bigger stimulus is needed.

But he can’t get his new plan through Congress because approval for his economic policies has plummeted, partly because his policies are seen to have failed, partly because job-creation policies are conflated in the public mind with deeply unpopular bank bailouts. And as a result, the recession rages on, unchecked.

O.K., that’s a warning, not a prediction. But economic policy is falling behind the curve, and there’s a real, growing danger that it will never catch up.

Well, at least he was honest enough to say he’s not making a prediction.  But here’s the thing — Krugman is a really bright guy, and he’s probably a pretty good economist.  But there are other bright economists who see things differently, sometimes exactly opposite the way Krugman sees them.  As an average person and certainly no economist, I look at the Administration’s approach to handling the economic crisis, and it leaves me with a very queasy feeling in the pit of my stomach.  And it doesn’t make me feel any better to think about the fact that everything they’re doing depends on the advice of certain economists (and not others) plus, as always, the political calculations of self-interested politicians. 

It’s no wonder that economics is often referred to as the “dismal science.”  I just wish our future didn’t depend so much on the soothsayers who practice it.

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10 Responses to “Economists and Soothsayers”

  1. Kevin |

    Tom, I largely agree. Particularly with the general gist of what you’re saying. It has long vexed me how few economists seem to agree with each other and yet most of them have very impressive credentials and seem to be respected by individuals and institutions who seem like they ought to know whether it’s bull or not.

    Here’s the thing. We’ve lived through nearly three decades of conservative economic philosophy being the dominant paradigm. Only one of our last four Presidents was a Democrat, and he was an economic centrist. You’ll get different opinions on whether he was appeasing conservatives with some of his economic agenda or whether it reflected his own convictions. But it hardly matters which.

    While I don’t claim to understand all or even most of what the opposing economists are claiming, I do know that I am convinced by the last three decades to give a different economic philosophy a chance. In particular, I’m frankly not very receptive to the economic pontifications of anyone bearing the “GOP” label. We rode their ideas off a cliff, as far as I can discern.

    What remains to be seen – and is a source of some concern to me – is whether what comes next errs as badly in the opposite direction. I’m not interesting in going from the proverbial frying pan into the fire. But I am willing to give President Obama my full support as he tries it his way. His predecessors F#@&ed it up.

    Lastly, one thing that most major economists and financial experts seem to agree on is that the recovery won’t be swift. Most also seem to agree that it could well get worse before it gets better. The take-away message I get from that is that measuring Obama’s success by comparing the state of the economy today or next week to what it was last month or last week is sheer folly. It simply isn’t going to turn around that fast even if the solutions later turn out to have been perfect.

  2. doris |

    I agree 100% with Kevin, right on, we have to wait and see. I don’t have a lot of hope, though, the GOP f#$%&^! our country into the dirt, now the democrats are left to fix it. History will probably blame the democrats, as usual, for sure Rush will!!!!

  3. Brian |

    How on earth the GOP can be blamed for this escapes me. In the last 30 years, the dems have controlled the house and senate for 22 of them. Prior to 1995, the dems had controlled house and senate since the 30s, if my memory serves.

    The problem is that we do not have truly free markets. Government regulation is so deep, so pervasive, that most people do not even notice it any more.

    Start with the banking industry, which is controlled by the Federal Reserve. The Federal Reserve has a monopoly on banking, and that monopoly was legally granted to it in 1913. How about the auto industry? As a result of CAFE standards, auto manufacturers have been REQUIRED by federal law to make cars that sell at a loss. How about business in general? Large employers (legally defined as any business with more than 25 employees) are no longer free to hire and fire at-will employees. Has your pet died recently? Most municipalities require you to get a permit to break ground for the burial. Want to have a bowel movement? You’ll be taking it on a toilet that flushes 1.6 gallons (by federal law) instead of the 4 gal toilets we had when we were growing up. Want to take a shower? You’ll be taking it at a flow rate of 2 gallons per minute (again, as mandated by federal law).

    And I haven’t even really gotten started on what’s going on in banking. All of these “toxic” mortgages are a result of federal requirements to banks to elevate the percentage of minority home ownership. While it was a GOP congress that allowed it to happen, it was the Clinton administration that pushed it to happen.

    The real enemy of the creation of wealth is government itself, and our founders knew this. Look around the world, today and into antiquity. Powerful governments deny the ability to accumulate wealth, unless you are connected in some way to that powerful government. Examples abound – Soviet Europe (which was really just a renaissance of feudal Europe), Feudal Europe, Feudal Japan and China, ancient Egypt, ad infinitum, ad nauseum. Our entire history is one of powerful government control. The United States was the first government in nearly 2 millenia that recognized this.

    At the very base, there are only two forms of government – republics and oligarchies. In republics, we have representatives acting on behalf, and at the direction, of their bosses, the people. All power resides with the sovereign individual. In oligarchies (you can call it what you want – democracy, communism, theocracy, monarchy, fascism, socialism, et al), all power resides in the hands of those doing the governing. You must ask yourself if we now live in a republic, or do we live under an oligarchy?

    Unfortunately, we seem to have gotten the powerful government that enough of the electorate has wanted to get in place, brought to us by people who have conned enough of the electorate into believing that you really can get something for nothing.

    Democracy is the theory that the common people know what they want, and deserve to get it good and hard. — H.L. Mencken.

  4. rob |

    Tom, I am not an economist, that’s for sure, but I remember what a true economist, Eliot Janeway, once said:

    “Political economy is not a science, it’s a clinical art, like medicine.”

    And like shamanism, I would dare to add—no offence meant, of course, after all sometimes shamans get it right …

  5. duggy |

    Bravo Brian
    I’m also of the opinion that neither Bush or the GOP are 100% to blame for what has happened to our economy. If such was the case the Democrats would have been been pointing it out long ago. Being conspiracy minded, I tend to think that all of this was no accident. You have to admit that the economy and all the so called “Soothsayers” are creating the perfect diversion. A smoke screen to blind us from whats really happening.
    To echo something said by someone else.I hope Obama fails to realize his form of government.

  6. Kevin |

    Thanks, Brian, for stepping up and giving an example of why I deeply distrust conservative idealogues… er… economists.

    Regulations are to “the market” as civil/criminal law is to the citizenry. People of goodwill can disagree on both the scope and the particulars of each. Indeed, the fact that we imprison a higher percentage of our own citizens than any other nation on the planet argues for the need of just such a healthy debate. But the notion that “the market” would behave any better without ANY regulation than the citizenry would without ANY civil or criminal standards of behavior is sheer lunacy.

    Without the humans involved there would be no “market” to be freed. Which means that the regulations are there for the EXACT same reasons that we have civil and criminal codes.

  7. Brian |

    Kevin, what sophistry.

    It will be of little avail to the people, that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man, who knows what the law is today, can guess what it will be tomorrow. Law is defined to be a rule of action; but how can that be a rule, which is little known, and less fixed? — James Madison

    Have you ever gone down to your local public library and just taken a gander at Title 26 USC (the Internal Revenue Code)? It’s a stack of books taller than I am (I’m 6’6″). Never mind Chapter 26 of the Code of Federal Regulations (the “teeth” of Title 26) which is nearly as thick as Title 26.

    For the record, I am a libertarian.

    The free market is much better suited to solving its own problems than government regulators are. Businesses have a motive to remain efficient – they’ll have to close their doors if they aren’t. The more government involvement there is in business, the less efficient business is. Lower efficiency across the board may level the playing field for businesses (it doesn’t really, but that’s the prevailing socialist/Marxist theory anyway), but it always ends up costing us more for little or no appreciable benefit.

    By the way, I ran across another interesting Madison quote.

    Each State, in ratifying the Constitution, is considered as a sovereign body, independent of all others, and only to be bound by its own voluntary act. In this relation, then, the new Constitution will, if established, be a FEDERAL, and not a NATIONAL constitution — James Madison (emphasis added).

  8. Economists and Soothsayers - [CollegeTimes] |

    […] article was also posted at Opinion Forum.) […]

  9. Kevin |

    The free market is much better suited to solving its own problems than government regulators are.

    Yes, I’m familiar with the fantasy, having heard it asserted endlessly by the reality-challenged.

    Back in the real world, Canada is the only industrialized nation to not have a single bank failure during this crisis. Canada has also declined to deregulate it’s banks.

    You can argue that it’s coincidence or sophistry or whatever else makes it easier for you to rationalize away reality. But at the end of the day those two facts will remain.

  10. doris |

    From my understanding, this banking problem was caused by deregulation? Right? What you are proposing, Brian, how much worse can it get? Complete collapse? HMMMMMM, doesn’t sound too good. A country with no laws is for the lawless. Complete chaos, big stick wins.

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