Why Being Wrong in Economics Just Doesn’t Matter

I really enjoyed this new piece by Barry Ritholtz at Bloomberg View discussing why economists can often make egregiously erroneous forecasts about the future and get away without any sort of negative repercussions.  Barry concludes:

“Why does this happen, and why are there no penalties for being so inaccurate?

This isn’t about economics, it’s about politics. Unfortunately, the dismal science has become the vehicle of choice for those who seek to further their own political agenda.”

This is a point I make all too often.  Economics has been captured by politics.  Now, I hate to paint with a broad brush because there are very good economists out there doing objective work, but these economists are vastly outnumbered by the ones spreading their political message.  And sadly, that’s what economics has become to a large degree – politics masquerading as science.

The problem is when you’re little more than a hired shill for a certain political group or a think tank then your value is high so long as you tow the party line and can keep the crowds coming.  Most high profile economists have been captured by particular entities who want them to promote a certain view and so their economic thinking, no matter how objective it might be, gets skewed by the hand that feeds them.   So, what we have here is a multi-faceted problem:

• Economists are often captured by certain institutions with a specific political bias which makes the economist unlikely to remain independently objective.
• Those economists are valuable as long as their audience keeps coming back and the political message can be disseminated.
• The audience likely doesn’t fully understand the scope and complexity of the economic argument and so is biased towards believing just about anything this pundit says so long as it rings true to their preconceived political views.

Add this all together and what you get is a hot mess where being wrong just doesn’t matter as much as having an audience that will continue to listen to you.