Why are so many economists totally clueless?

AARRRGH

I don't understand this.

For example, the main headline in the UK today is the "unexpected" return to a recession.

How is it unexpected?

I don't know anything about economics but I could see the stimulus plan (i.e. temporarily pumping billions into the economy) was the reason the UK appeared to be doing well the last few months. Obviously when the stimulus spending ended things were going to return to normal, i.e. back to the recession.

All the economists had to do was write the numbers down on a piece of paper on a month by month basis, and they would have seen there was going to be months when the economy was receiving billions in stimulus spending, and months when it wasn't, hence there were going to be problems.

Has economics turned into a guessing game where people aren't using any sort of financial models, and instead just give random opinions based on faulty thinking?

I don't get it.

/End rant

Time Magazine

Think the main issue here is that the "economists" the public sees aren't really economists.

Ireland's top 5 economists are Patrick Honohan, Philip Lane, Kevin O'Rourke, Karl Whelan and Paul Devereux. You've probably heard of Honohan (new governor of CB) and Whelan (anti-NAMA man) but you almost certainly had not heard of any of them before 2008.

Why?

Because "the economists" that get media coverage are the likes of Jim Power and Austin Hughes. Neither of these have PhDs and work essentially as spokesmen for banks. They're not really economists. Don't get me started on David McWilliams or the odd successful investor.

Media coverage of economics ≠ economics.

Time Magazine

Time Magazine wrote: »

Media coverage of economics ≠ economics.

I disagree slightly, McWilliams et al are covering economics.. but in the way that Jeremy Clarkson cover cars.. entertaining to listen to but I wouldn't go and choose a car based on his recommendation.

Problem is though OP, that people don't realise who the 'enlightened' commentators are.

AARRRGH

Deleted User wrote: »

Problem is though OP, that people don't realise who the 'enlightened' commentators are.

But surely the unenlightened commentators aren't even doing the basics? I mean anyone with any sort of finance training who looked at what was happening to Ireland over the past few years should have been able to see something was seriously wrong, and the bubble was unsustainable.

For example, if they bothered to write down the growth in our property prices for a peroid of time into the future, and compared them to the growth in salaries, they would have seen the numbers make no sense, which should have set their alarm bells ringing.

It seems they didn't bother doing anything like this.

As stated, I know nothing about economics, but it seems common sense to look at the figures and examine if they will increase, decrease, or are a temporary blip.

AARRRGH

AARRRGH wrote: »

But surely the unenlightened commentators aren't even doing the basics? I mean anyone with any sort of finance training who looked at what was happening to Ireland over the past few years should have been able to see something was seriously wrong, and the bubble was unsustainable.

For example, if they bothered to write down the growth in our property prices for a peroid of time into the future, and compared them to the growth in salaries, they would have seen the numbers make no sense, which should have set their alarm bells ringing.

It seems they didn't bother doing anything like this.

As stated, I know nothing about economics, but it seems common sense to look at the figures and examine if they will increase, decrease, or are a temporary blip.

There were a lot of reasons put forward why the figures were accurate. new theories, etc. DSGE modelling was seen as the new way forward.
Ex post, things are crystal, but forecasting is ex-ante. A lot of economists, including one who trained me during my MSc, had publicly been calling warnings but they were vilified and ridiculed by other economists, both pop and proper.

Tricity Bendix

Because they are paid to be.

Also, remember when Bertie said anyone who talked down he economy should kill themselves? Guess who he was talking about?

Hasschu

I would have thought that George Lee late of RTE was not only well known but a straight shooter who took a lot of flak for being both accurate and honest.

SkepticOne

Tricity Bendix wrote: »

Because they are paid to be.

Also, remember when Bertie said anyone who talked down he economy should kill themselves? Guess who he was talking about?

Most likely the likes of David McWilliams and George Lee who apparently aren't economists.

res ipsa

Time Magazine wrote: »

Think the main issue here is that the "economists" the public sees aren't really economists.

Ireland's top 5 economists are Patrick Honohan, Philip Lane, Kevin O'Rourke, Karl Whelan and Paul Devereux. You've probably heard of Honohan (new governor of CB) and Whelan (anti-NAMA man) but you almost certainly had not heard of any of them before 2008.

Morgan Kelly is "unlucky" no. 13, had to chuckle at that...

Dannyboy83

Well, to answer the original question, in theory the 'stimulus plan' was supposed to do just that. Stimulate the economy. Get it moving.
So it was 'expected' that the economy would be stimulated and no longer contracting at the least.

It now appears that this hasn't worked.
I guess with the magnitude of the problems the UK is facing, it needs more time. Besides this, many core industries are supposed to have been devastated, as the money didn't go where it needed to.
Similar to what is happening in Ireland with the banks not lending to SMEs.
So its possible that the stimulus plan may have actually made things worse in the UK. For the moment at least.
I'm not an economics expert, but this is fairly textbook stuff as far as I understand it. Therefore it was unexpected.

Now that America is supposed to be recovering, and parts of the EU are recovering, the UK stands to benefit as it ramps up exports, so the situation might change.

I agree with your general point tho, economics has always been a bit of a guessing game, but it seems to have become blind at this stage.

10000maniacs

McWilliams has being saying that the bubble was going to burst for the last 10 years. He was bound to be right eventually. Even a stopped clock is right twice a day.
He is the Derrel Brown of Irish economics. Backfired on him big time this week though.

nesf

SkepticOne wrote: »

Most likely the likes of David McWilliams and George Lee who apparently aren't economists.

Neither have PhDs in the topic and neither are currently doing research on the topic. By that definition neither are. Doesn't mean they shouldn't be listened to or their opinions given careful consideration but they aren't professional economists so it's as false to call them that as to call a heath journalist a doctor or nurse if they aren't practicing as either simply because they report on and discuss healthcare related issues.

volvilla

That analogy is completely flawed as a health journalist most likely didnt study medicine whereas the likes of George Lee and Jim Power would have studied Economics to Masters level...

But I agree that the likes of Honohan, Devereux, Morgan Kelly etc are completely different economists to the media whores but that doesnt mean the media whores are not economists - Would you say a football player in Division 3 is not a footballer because he is not playing at the same level as the Premiership boys??

I am in the process of completing a degree in law, does that make me a lawyer?

I have undergrad and masters degrees in the economics, however I'm not working as one and I haven't any full time work as an economist. Therefore, am I an economist?

greendom

Just like anyone else you can't expect economists to predict the future, can you?

Thye're very good at reporting how things are currently and absolutely brilliant at explaning the past

west101

I was working for one of the countrys biggest developers in 2006 and I remenber one of the directors telling me what was going to happen to the housing market and needless to say he was right, but nobody was willing to listen to him at the time and he is now unemployed.

SkepticOne

greendom wrote: »

Just like anyone else you can't expect economists to predict the future, can you?

If they are to advise on policy then they have to be able predict the future. They have to be able to say "If you do this then this will happen".

volvilla

Deleted User wrote: »

I am in the process of completing a degree in law, does that make me a lawyer?

I have undergrad and masters degrees in the economics, however I'm not working as one and I haven't any full time work as an economist. Therefore, am I an economist?

You're obviously not a lawyer as you've yet to graduate yet alone find employment as one which will prove very difficult in the current climate...

& if you could find employment in the economics field in the meantime then yes, you would pass as an economist! The quality of the profession should have been the focus of the debate, not the title.

Hasschu

The model is as follows. While the fiddlers arer fiddling (literally and metaphorically) we all keep dancing. When the music stops we try to salvage the situation. The word begrudgery came into common use a decade ago and was used to describe any one that questioned why Ireland had a higher per capita income than the Germans, French, Americans. God forbid that you would suggest this is a house of cards and will collapse in the first stiff breeze. We were invincible due to our intelligence, cunning, superior education, hard work and great government. All the economists in the world could not have saved us from ourselves. Sure boysheen bawn houses have never declined in price in Dublin, never mind that we have not had a booming property market since the 18th century. We are different from the Brits, Americans, Australians, Canadians we can have a property boom lasting for centuries. Caution was for losers who lacked confidence in Ireland. Reality is a hard taskmaster but lessons are being learned. We are guaranteed two generations of sound and responsible behaviour now. We might even start to think about what we are voting for within the next three years as unemployment and misery lingers on.

buck65

So who are the economists that we should listen to? I don't really know where to look for balanced reporting etc.
Ireland and Worldwide.

Time Magazine

In approximate order of recommendation:

(Almost) anyone on irisheconomy.ie
Marginal Revolution.com
Nouriel Roubini
Joe Stiglitz
Paul Krugman

nesf

irisheconomy.ie is about as close to having a chat with academic Irish economists as you'll get on topical issues. Some of the NAMA debate on there was particularly interesting and politically neutral for the most part.

fergalr

AARRRGH wrote: »

But surely the unenlightened commentators aren't even doing the basics? I mean anyone with any sort of finance training who looked at what was happening to Ireland over the past few years should have been able to see something was seriously wrong, and the bubble was unsustainable.

They should have made a fortune shorting the market, if it was obvious and predictable.

AARRRGH wrote: »

For example, if they bothered to write down the growth in our property prices for a peroid of time into the future, and compared them to the growth in salaries, they would have seen the numbers make no sense, which should have set their alarm bells ringing.

It seems they didn't bother doing anything like this.

As stated, I know nothing about economics, but it seems common sense to look at the figures and examine if they will increase, decrease, or are a temporary blip.

If it was as easy as that to do reliably, you could make a lot of money betting on whether the figures increase, decrease or are a temporary blip.


I don't know a lot about economics either, but I know its a complex system, and its not easy to predict. Its not reasonable to ask people to make accurate predictions about specific details, either.

Economists can talk about general trends, whether something is overvalued etc, but probably not that its the top or bottom of the market, or that the crash will be in 2004, 2005, 2006 etc. with any accuracy ahead of time.

You've to be awfully careful looking backwards too - everything looks easily predictable in retrospect, we've a big bias in that area.

nesf

fergalr wrote: »

I don't know a lot about economics either, but I know its a complex system, and its not easy to predict.

Nail on head. Bonus points if you call it a non-linear system.

Tricity Bendix

fergalr wrote: »

Economists can talk about general trends, whether something is overvalued etc, but probably not that its the top or bottom of the market, or that the crash will be in 2004, 2005, 2006 etc. with any accuracy ahead of time.

Exactly. I remember having a chat with a friend a number of years ago who was doing his masters thesis on the overvalued housing market. I said to him "sure, everyones been saying there's a bubble, and that its just about to burst, for years. So when do you think it'll burst?"

His reply was "in the short-to-medium term."

procure11

Time Magazine wrote: »

In approximate order of recommendation:

(Almost) anyone on irisheconomy.ie
Marginal Revolution.com
Nouriel Roubini
Joe Stiglitz
Paul Krugman

I think the more people listen to Paul and his sense of reason,the better for the world. Understandbly, I am not a fan of the free market hypothesis and its inherent utopia world deviod of regulation and that would make me a neo-keynesian.
The current global economic instability and financial contagion have expressly shown ( as if we dont know already) that business and economic activities cant be left to the devices of the market: There is need for government intervention and regulation.

We have had arguements that countries ( especially the Anglo saxon party!) that operate under the free market enterprise have over the years experienced exponential growth relative to more controlled economies,but economists (well most of them) have been trained to look at performance in the medium and most importantly the long run rather the short run.That would explain why Norway and Finland have not suffered from the global uncertainty relative to for eg the US or UK,despite the rubbish about the propensity of the scandavian model stiffling innovation and productivity( The current Global competitiveness report have all scandinavian economies in the top 12 ,while the Uk and Ireland have dropped down the rankings)...

All the above are tangential to the topic of the thread,but as someone who has a primary degree in economics,I have found out that like any other science ,we have divergent views and see things differently....which is what makes it interesting anyway.....
I honestly cannot recall any economist that didnt call for caution at the atrousious and abysmal level of government spending and massive dependence on investment from the housing sector in the "Celtic Tiger Era".
Economists are professionals and not magicians ....and they are usually trained not to shout at the top of their voice when making projections or communicating policy advise.It is quite surprising that there is only one (1) economist in the department of finance....that suggest that the government doesnt really like listening to the truth......but then economists are blamed when the inevitable ( which..essentially means forewarned) occurs...

nesf

procure11 wrote: »

I think the more people listen to Paul and his sense of reason,the better for the world. Understandbly, I am not a fan of the free market hypothesis and its inherent utopia world deviod of regulation and that would make me a neo-keynesian.

Dear God no! There's more to the economic world than the neo-classical/neo-Keynesian divide!

fergalr

procure11 wrote: »

I think the more people listen to Paul and his sense of reason,the better for the world. Understandbly, I am not a fan of the free market hypothesis and its inherent utopia world deviod of regulation and that would make me a neo-keynesian.
The current global economic instability and financial contagion have expressly shown ( as if we dont know already) that business and economic activities cant be left to the devices of the market: There is need for government intervention and regulation.

Hey, I'm not an economist, but I'd query this statement a little bit.

So, there's one example of a particular mix of regulation and free-market policies, (which leaned fairly heavily on the free-market side, as our normal definition of the spectrum goes) and it had a crisis.
But does that really show the free-market doesn't work?
Isn't that a bit like arguing against all forms and brands of communism because the USSR didn't work out so well?
Or saying something even more generic, such as that money is a bad idea, because the system based on money had a crisis?

Couldn't someone argue that if there had been even less regulation, it might have worked better, or that if the crisis had been left to run its course, repeatedly, with no bailouts and interventions, and associated moral hazard, things might have fixed themselves - in the long run?

Not trying to argue for laissez faire capitalist economics here or anything, just wondering if the one crisis really proves conclusively that they don't work?

procure11 wrote: »

We have had arguements that countries ( especially the Anglo saxon party!) that operate under the free market enterprise have over the years experienced exponential growth relative to more controlled economies,but economists (well most of them) have been trained to look at performance in the medium and most importantly the long run rather the short run.That would explain why Norway and Finland have not suffered from the global uncertainty relative to for eg the US or UK,despite the rubbish about the propensity of the scandavian model stiffling innovation and productivity( The current Global competitiveness report have all scandinavian economies in the top 12 ,while the Uk and Ireland have dropped down the rankings)...

All the above are tangential to the topic of the thread,but as someone who has a primary degree in economics,I have found out that like any other science ,we have divergent views and see things differently....which is what makes it interesting anyway.....

I think a large part of the problem is that unlike many other sciences, you are studying (outside microeconomics) large complex systems that are probably inherently unpredictable; and also its very hard to conduct large numbers of controlled experiments because there's really only one world economy and it has a lot of changing variables. I think that's part of the reason why there's so much opinion and belief in the discipline?

procure11 wrote: »

I honestly cannot recall any economist that didnt call for caution at the atrousious and abysmal level of government spending and massive dependence on investment from the housing sector in the "Celtic Tiger Era".
Economists are professionals and not magicians ....and they are usually trained not to shout at the top of their voice when making projections or communicating policy advise.It is quite surprising that there is only one (1) economist in the department of finance....

Just wondering, what definition of economist do you use here? I thought there was a few more than that? Is that by job title? Would you include people who did degrees in economics that are working on economic policy, analysis, etc?

procure11 wrote: »

that suggest that the government doesnt really like listening to the truth......but then economists are blamed when the inevitable ( which..essentially means forewarned) occurs...