When the room turns round, on my fate you give no guarantees. There’s no promise i can keep. I can’t stand. I can’t see my way. I feel blind, on my feet. I can’t stay too long. Am I wrong? These lyrics end the song Am I Wrong, by the band Love Spit Love, an alternative rock band that was a spin-off of the Psychedelic Furs. The song was written by Richard Butler and Timothy George Butler and came out on the band’s 1994 self-titled album.
One thing that I believe is very wrong with my profession is that it is very doctrinal and dominated by a small priesthood of orthodox economists that all think exactly alike. I actually find the old adage that if you put three economists in a room you will get six opinions to be completely incorrect. Generally, if you put three economists in a room they will all agree with each other and will all mirror what the senior member is saying. This is terribly bad for the profession and for the businesses and government agencies that rely on economic advice.
Doctrine implies truth. But truth is never certain. An article published a few years ago in Reason Magazine suggested that facts (or the current embodiment of truth) have a half-life of about 45 years. In other words, half of what I learned in elementary school is probably wrong. As Reason points out, Pluto is no longer a planet, dinosaurs were likely not cold-blooded, and saccharine does not cause cancer. The problem with economists is that most base their truths on 90 year old theories that were developed to describe a certain situation or period of time. Just like Marx provides a wonderful description of 1860s capitalism, Keynes provides a wonderful explanation of markets in the 1920s. Both doctrines contain excellent truths that have stood the test of time, but taken as a whole they cannot be applied to economic conditions in a different place at a different time.
But economists stick to these theories and they never seem to be able to admit when they are wrong. Sure they will take credit when they somehow get a projection or a forecast generally right, but you never hear a mea culpa when they are completely off track.
Personally, I think it is crazy for anyone to think that they are right all of the time or for that matter even most of the time. I know that I make mistakes, and by making mistakes I can learn and grow. I can also fix them. This is one reason why I hate to write reports, term papers or books. I know that there will eventually be something that I have to change or fix. I think every client that I have ever worked for has experienced a revision to a project.
So today, I make another mea culpa. I often harp on these pages about television economic pundits. Honestly, I really believe that few of them (both on the left and the right) make much sense, and think that most are simply hawking a book, or shilling a particular policy or investment. I don’t think that they do a whole lot of research (at least not anymore) and are pretty disconnected to reality. I reported that I thought it was particularly crazy when the President appointed a television personality (Larry Kudlow) as his chief economic adviser. Heck, Kudlow is not even an economist – he has a BA in history. His claim to fame is that he worked in the Reagan Administration but he was really a fairly junior analyst at the OMB.
But earlier this month, I caught a fairly lengthy interview with Mr. Kudlow on Mornings With Maria, and I have to say, he kind of schooled the economic elites. He discussed how some orthodox economic views (things that probably everyone else working as an economist for the Administration hold as fact) were completely crazy. And he did so in a clear and reasoned way that maybe only a television personality can do.
While the orthodox economists worry about how wage increases will stoke inflation, Kudlow simply explained that wages are payment for hard work, and policies should encourage hard work and growth.
While orthodox economists insist that the economy somehow has a speed-limit, Kudlow suggested that there is nothing to stop the economy growing by 5 percent or more over the short term without causing inflation.
While orthodox economists insist that job growth cannot continue because there are simply no more people to employ, Kudlow clearly explained that the labor force participation rate is so low that there are millions of unemployed Americans, and that incentives (like higher wages) will encourage them to work. He pointed out – against what I have been saying myself – that the current recovery was so stilted that the economy is $2 to $3 trillion smaller than it should be at this point, and that there is nothing to suggest that the recovery cannot continue.
I am not an orthodox economist. I believe that you can’t honestly answer difficult questions without an open mind and without a lot of research. But I think I might have been wrong to disregard Mr. Kudlow out of hand simply because he is a pundit. Mea culpa on me for that. I wish him well and good luck in this position.