CapitalistMarks

Economists in retreat!

Posted on 23. Jul, 2009 by scott in Social commentary, economic daydreaming, markets, political munglings

I defy anyone to find me one, just one, economist whose predictions have been accurate through more than one business cycle.

Sure, occasionally a few will get lucky and forecast  a bubble or something like that (remember ‘irrational exuberance’?).  But once they get lucky they hang on to their ‘model’ for too long and they miss the next leg up or down (the economy and not necessarily the markets).  We all suffer but they keep their big six-digit salary and bonuses!

Why?

Economics is art as much as science.  A few decades ago economists thought it would be cool to use complex mathematics (econometrics) to create models and forecast all sorts of things . . . stock markets, trade, employment, interest rates or whatever.  The fact is there are so many models now that someone, somewhere is bound to be right at any particular moment in economic history.  Then, as soon as the press, Congress, banks and investors are patting the lucky few on the back, something odd happens.  The science turns to art and the whole picture as ‘they’ see it blurs and some bubble bursts.

Ouch, there we go again.  Whammy, a few million jobs are lost, trillions are spent by governments and central banks go bottom fishing with interest rates that we all wish would translate to our credit card accounts.  Naturally taxes go up, government grows and the middle-class gets smaller — yes, the rich to get richer and the poor get poorer in just about any economic scenario since WWII.

I’m tired of this cycle of idiocy.  Furthermore I I have a solution.

We need a Supreme Court of Economists.  Nine of them.  Each with ten years experience (at least) and preferably (but not necessarily) an advanced degree in the field.  Oh wait, at least two of the nine have to be in industry or private practice and MUST have no academic credentials (i.e. they have NOT been resident economists at ANY institution of higher learning AND have NEVER worked for ANY government agency).

These nine economic jurists must be from at least five different ’schools’ of economic thought (one Keynesian, one Smithian, one Galbraithian, one supply sider or whatever) and there can be no more than two with similar takes on economics (based on actual evidence from the past).

This Supreme Economic Court must meet monthly and issue a ‘State of the Union’ paper each month.  This paper must show a consensus (majority) and be written so that any high-school graduate can understand it (now that is going to be tricky for any economist).  If there are alternative views by two or more dissenters these must also be provided.

Now comes the good part.  EVERY banker, Congressman, and financial analyst or advisor MUST read the monthly report.  The President too.  Then each of the above must sign a statement (monthly remember) that they agree with the paper or document why not.  These statements must be notarized and filed with some central agency (the economic police!).

All of the above must be made available to EVERY citizen to read and comment on if they want.  No legislation can be even drafted that is contrary to the consensus without a public majority vote.  By the way, we can have bunches of these courts in states, counties or bigger cities.

Furthermore, NO decisions can be made by any government entity or individual UNLESS such decisions are approved, in the majority, by the Supreme Economic Court.  Again, subject only to a public referendum.

All of the above can be tweaked as time goes on, but I am willing to bet dollars to donuts that if we followed this process we would avoid any prolonged economic downturn in the future.

Oh, by the way, the leader of this ‘court’ is appointed for life and . . . I get to be that guy.  Why not?  Take it or leave it.

Thank you for your attention and cast your vote for the above as soon as the ‘credit card debt’ bubble hits in about 3 to 6 months.

I’m not retreating.

A bunch of other, more wrong than right, economists should.

thanks to flickr’s dennis defrayne for the photo

Tags: bubbles, depression, economic consensus, economics, government spending, recession