6 ways economists are ruining the country

These guys get it wrong all the time. So why do our lawmakers put so much stock in their words?

By Kim Peterson Jul 12, 2013 1:42PM
Ben Bernanke walks in a processional to deliver the commencement speech to graduates at Princeton University in Princeton, New Jersey on Sunday, June 2, 2013 (© Michael Nagle/Bloomberg via Getty Images)We give economists too much credit and too much say over America's policies -- and the result has been a disaster. That's the gist of an argument on Salon about how Economics 101 is killing America.

The country's economic policies have led us down a dreary path littered with foreclosures, debt and joblessness. Good economists should have sounded the alarm bells well before we got to the Great Recession, no?

Can we blame the economists for this? Perhaps. But our lawmakers should have taken a more skeptical view of the over-simplified picture economists were presenting over the years instead of blindly accepting and acting upon their words.

Salon describes 10 ways economists and the basic economic principles they espoused ruined America. Here are six of them:

1. They present economics as a science. That makes lawmakers feel better about following their advice. But if economics was truly a science, asks writers Robert Atkinson and Michael Lind, why do so many economists disagree about raising the minimum wage and other policies?

2. They pursue efficiency over innovation. Economists are obsessed with making everything as efficient as possible. But rather than make the current system run in tip-top shape, why not look for better systems? That will drive prosperity.

3. They focus too much on markets. Economists focus so much on the markets that, in some ways, the economy is considered a synonym for the market, Atkinson and Lind argue. That overlooks some decidedly non-market factors shaping the economy, such as government spending and household production.

4. They think prices reflect value. When housing prices saw an incredible run-up a decade ago, economists everywhere celebrated the strong market fundamentals on display. Wrong. Rising home prices didn't signal anything strong about the market, as we all found out.

5. They think all profit is good. The economy certainly benefits from productive activities like farming, manufacturing and the like. But does it benefit from what might be considered phony gains in real estate appreciation and stock market manipulation? Economists look at all profit favorably.

6. They think low wages are good for the economy. Higher wages equal less demand for workers, which leads to more unemployment, the thinking goes. But is this true? Higher-paid employees with more skills and technology can outproduce poorly paid workers with no skills. Also, higher wages tend to push employers to cut costs with new technologies.

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69Comments
Jul 12, 2013 2:11PM
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Economists also say to produce goods where it is cheaper, therefore increasing buying power.  Unfortunately, they don't look at international/political consequences - such as quality control (lead & cadmium in toys, melamine in milk), trade imbalances (where China owns our a**), nationalistic monetary policies that value and devalue currencies on a whim, and, most important, losing the production jobs that solidify communities and create new buying power.  Service jobs don't create wealth - they spread around the same dollars.  Manufacturing and production jobs use products with resources from the earth and create new dollars and buying power. 

Jul 12, 2013 2:17PM
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Economics is a complex systems science. Unfortunately, most economists don't know what that means. They put their faith in the predictive power of linear models, but the system is nonlinear and unpredictable.
Jul 12, 2013 5:42PM
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As an economist now retired who worked in the field for 35 years, I agree with all these six critiques. 

 

I would like to add that many economists are hired and work to shill for economic interests, similar to atttorneys working for corporations.  Most economists are so imbued with promoting capitalism or working for some commercial outfit with a point of view and fail to remain objective.  Others let ideology

affect their views.

 

However, in general objective economists often get things right.  Not always, but often.  For example, many macroeconomists with applied models predicted that Obama's stimulus package would not lift the economy and substantially reduce unemployment.  Obama and his economic advisors ignored that advice, and we are today stuck in low growth and high unemployment.

 

Also, some economists forget we live in an imperfect world of "second best," and the world is far more complicated than a simple computer model.  Humility goes before the fall.

 

 

Jul 12, 2013 4:36PM
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By the way Kim, Economist aren't ruining the Country, Too Big To Fail Banks are. Big Banks aren't forced to loan to small start ups and that lack of Capital to small Businesses is stagnating Job Grow and innovation. Big Businesses are cutting Jobs and outsourcing yet they are the very ones with all the access to Big Banks and Cheap Loans. Small Businesses which are the lifeblood of America, have to deal with Loan Shark Rates if they can get them at all. That's what ruining the Country Kim.
Jul 12, 2013 4:19PM
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Economists tend to ignore that which they can't measure. They'll come up with some models that calculate the value of timber in a forest, but their models will exclude the cost of the cut down forest. In California economists can come up with all kind of models to calculate the value of the water exported from the SF Bay delta, but their models exclude the costs associated with rivers that no longer have water in them, fisheries that are decimated, and the ground pollution associated with large scale irrigation. If economics was a real science, these economists would be scoffed and laughed at.

Jul 14, 2013 4:00PM
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America and American companies wanted 5-for-$10 tee-shirts and a million other "made-in-slaveland" items.  They got it.  The gov't has wanted massive, unchecked immigration from 3rd world countries.  They got it.  Now the chickens have come home to roost.  You can't "beat the system"......and have full U.S. employment at a comfortable wage, while importing every last item we buy, from the slave countries, then allow a tidal wave of uneducated immigrant service workers who displace all our young people and lower end workers' jobs, and then print trillions and fist-pump about "the recovery".  You can't have it all.  We've been tricked into thinking we could, since we've been bouncing on bubbles for a decade or 2.
Jul 12, 2013 6:41PM
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The main reason economists are so bad is they are almost always funded by think tanks or foundations that are funded by big business. This leads them to always present theory's like if you cut everyone's pay dramatically and outsourced everything you could to China, cut corporate taxes to zero and gave the CEO's millions more in bonuses the economy would work perfect. The truth is they are just shills for corporate interests, and short term interests I might add.
Jul 16, 2013 10:47AM
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The outsourcing of American manufacturing jobs to Communist China and other third world countries is the primary and main reason for the decay and downfall of this country.

Corporate greed and avarice a long with Wall Streets lust for unbridled profits in conjunction with outsourcing of jobs is sending this country into decay.

Jul 12, 2013 5:23PM
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I've argued for years that there are so many variables involved in economics that any economist or market analyst who claims to know what's going to happen in the next year is a despicable liar.

Obviously, long-term theories that have prevented a repeat of the Great Depression are worth building-on, but not for short-term predictions.

Jul 12, 2013 4:27PM
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I know for a FACT that all Economist don't think that low wages are good for the economy. Therefore I dismiss this article as nothing more than BS assumptions by the writer. Fact, Lawmakers put stock in anything that supports their agenda, period. Has very little to do with lawmakers beliefs in what they are stating and everything to do with if they think You will believe what they say and further they own agenda.

They problem with all forecasts is that the other side, after the Fact,  can always say their plan was better. The problem is you can never prove that statement. It's impossible to rewind the clock and try out your economic plan. Maybe your plan would have worker and maybe your plan would have caused a Great Depression.

Home prices rising wasn't per se the problem. Creating 500-700 Trillion in Scam Derivatives based on homes values however was. It's the problem that will literally never go away. It's the reason the Global FEDS keep printing. It's the Problem of the Century that most folks never talk about. Not even most famed economists.

Jul 12, 2013 4:22PM
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"Economics is a complex systems science."

Andrew Dickson White was the youngest Professor ever at the University of Michigan in the mid-1800's. He attended lectures at the Sorbonne by survivors of the French Revolution. When America faced it's first recession, he read his lecture: Fiat Money Inflation in France to members of both parties in Congress. The book version has about 108 larger print pages and a magnificent time line of events as they unfolded in that era France. He later founded Cornell University and was an integral Economist until his death. A TRUE Economist provides the pertinent facts, not theories of wild guess philosophy by the likes of Keynes. Our leaders would be best if they were at street level with us. That's our fault today. We have an election period approaching. We need to shun ANY candidate backed by money and listen intently for the ones who can recite historic relevance and propose controlled moves with STOP buttons just in case they run amok. Come on, America... Bernanke took advantage of a rare opportunity to make a notoriety experiment and FAILED. We owe TRILLIONS for nothing and have to rebuild the nation completely. He has to go and Obama with the full backing of a unanimous Congress is required. Cooperation or impeachment, for once. 
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I think every economic advisory board should have one or more "Real people" sitting in to speak for us average Joes. So when the top dog economists make their point about low wages being good for the economy, some of "Our " people can interject and paint a picture of how those decisions would affect real life for most Americans.

Was Bernanke elected by the people? No.

Jul 12, 2013 4:43PM
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Economists do not think all profit is good. Economists see profit and loss as equally important factors in the economy. Just as motivating as profit is, loss is just as important for the same reason. Without the threat of loss, innovation is hindered and the value of risk is removed. 

 

What economists do not like is the use of government to prevent losses.

Jul 16, 2013 7:11AM
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my thoughts only  we don't teach common sense in collage  or schools. most of these  people  have no idea of what is really happing  in america they are living in a bubble. where we the tax  payers  pick  up there expenses . so  how  could they  know  what is  going  on when they  don't  pay for the average  stuff like we do
Jul 12, 2013 2:34PM
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Economists have to say something when they`re on TV.Imagine if they were asked what

the market is going to do and they said "I don`t know".They only remember when they`re

right.

Jul 16, 2013 9:28AM
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I disagree a bit.  The problem isn't necessarily the economists themselves.  Most of what is said in this article is really a Financial Analyst role not an economist role, but the fact is that the economists we have today in high public profile roles are only there to support the views of the people that put them there.  The President (all presidents) always hires economists who will support his view, so are they really economists or are they just bought and paid for supporters to give them credibility.  There are true economists out there, but they just aren't selected for these roles.
Jul 13, 2013 10:56AM
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Truely the entire cadre of economic achedemics need to be purged.  All we have are dinosuars on our campuses filling the heads of students with thier decayed, backward, hackneyed, proven to be wrong over and over and over, economic theories.  And note how, in order to push their deluded understanding of economics they have to start with a fantasy: "people in a village all farm by hand until one day one of them makes a shovel.....", childish crap.  If you want to gain some understanding of economics read " the origin of wealth" by Beinhocker, or better, "the genius of the beast" by bloom.
Our current bunch of economists in the media are nothing more than confidence men pushing their delusional view of how the world works, ignoring, completely, the fact that reality has shown again and again they have nearly no ability to predict anything!  Fools!

Jul 12, 2013 4:18PM
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Why? For the same reason astrology has a following. It, however, unlike economics, dare not speak its name in business and government circles where there's smart talk and witty repartee.

 

If someone cannot forecast correctly more than 50% of the time (at LEAST), and cannot speak of that forecast in plain and unequivocal words, you know you're dealing with a Pseudo.

Jul 12, 2013 4:12PM
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I've often wondered the same thing. It seems like it's nearly every day that Mark Zandi is quoted saying one thing or another (that is most often wrong, and at times ridiculous).
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There is a lot to be said for these views, and a lot to be said for the way the media kowtows to them and their views. The media will do ANYTHING to keep certain stories from 'dying'. Their venue seems to be to startle, to create anxiety and pressure, to make the general public read, listen, view as much 'bad' publicity as possible.

 

The media has slipped away from 'informing' to 'inducing' panic and action. The media believes that they are more important than truth, and the scramble up the ladder of success has turned into a bloodbath for those who WANT to be responsible journalists and reporters.

 

At the bottom of this is the age-old lust to be 'known', to have one's opinion count more than common sense. It's all about the 'me' and 'who' I am; how 'important' I have become in the world at large. How many people will flock to listen to my viewpoint, MY opinion.

 

I'm a writer, and this is one reason I became so disenchanted with the 'news' world at large, and my urge to share my 'opinions' have waned. I do not have a blog, nor do I want one. There are too many voices out there willing to share their lives, their opinions and offer their options.

 

Granted, there are many who are on target, who see the reality of the world, but these are so far and few between. Most of all we see in the news, and all that ever brought down civilizations is doom and gloom. Projections of failure, seers who forecast nothing but the disintegration of civilization.\

 

It seems to be a sad part of human nature to look for the worst, and make it come true. We are victims of our own negative thinking, because mankind loves failure, not success. The only success we pay attention to is that of the marketplace, and how much we can get from it. Thus the media follows that trend, hoping to cash in before the final crash.

 

If we, individually, can take a breath, pause before accepting what the media tells us is truth, then maybe we can overcome the doom and gloom and do SOMETHING positive in our little worlds, the ones that surround us DAILY. IF enough people did this, perhaps the media, perhaps the economists would not have such a hold on our minds, our spirits, our consciousness.

 

Just my opinion. This is probably the only time I will ever share it too, at least publicly. Right now I use my writing skills to produce books. I read media every day, and choose to ignore the doom and gloom by focusing on the good that people do for each other, to each other. I sure hope there are others out there like me, who are not as reclusive and who are willing to lead people of the same ilk. We need you.

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