Malcolm Berko asserted that Economics was a useless profession in his recent column piece “Economists Stink.” As an Economics department chair and professor for forty-nine years I feel qualified to respond to Mr. Berko’s allegation.
First, having considered Mr. Berko’s advice over the years and tested some of his recommendations. I’ve concluded that we have something in common. Neither of us puts much faith in the other’s analysis.
Second, Mr. Berko states: “Most (economists) drive Volvos, can’t make eye contact and have serious anti-social tendencies. Their handshakes feel like gripping a glove filled with Jell-O, and their shoes squeak even when standing still. These people are the only professionals who can be wrong 99 percent of the time and still collect a full paycheck.”
I guess I must not be like most economists. I’ve never been in Volvo, from first day of class a professor’s best teaching tool is maintaining eye contact and interacting with his or her students. OH yes, my shoes don’t squeak. If I’m teaching ‘wrong economics” then someone should tell the over 25,000 alumni that have I have taught and gone on to be CEO’s, CFO’s, President of Universities, and the like that the knowledge they are using is wrong.
Let’ see how Mr. Berko explains the Federal Reserve and governments around the world acted on economists advise to counteract Osama Bin Laden’s 9/11 attack on the world’s financial system. Within two weeks after the attack all the economic measures were back to pre-9/11 status. Every business and government economically trained person involved in the markets acted immediately and accurately to overcome the damage. Some economically trained students that I had in class including the Chief Operating Officer of the Board of Trade, major officials of the largest brokerage houses in the United States, and others did a magnificent job in the time of crisis with a basic economic training from Lewis University. Surely Mr. Berko remembers that 80% of the largest Bond trading company in the world were lost in the Twin Towers. Despite that fundamentally trained economists acted on those principles to right the ship.
I’d like to ask Mr. Berko how he explains the unprecedented twenty years of growth from the Reagan through the Clinton administrations occurred. Considering on average the economy goes through the business cycle every eight years (Deflation, creeping inflation, hyperinflation, and recession). I think all objective observers would note that wasn’t an aberration. It was a result of good economic policy supplied by economists.
Exactly how does he explain that there are over six million more jobs created during the Obama administration? How exactly does he explain that the consumer price index hovering around two-percent? That’s no accident. It’s the result of sound economic policy.
Mr. Berko conveniently mentions Dr. Gerald Friedman (who appears to be very well credentialed but I’ve never heard of him) and Alan Greenspan (who has admitted he should have pursued a different economic policy). He omits the work of Ben Bernanke during the liquidity crisis of the 2008, and the unprecedented economic policies that avoided another great depression carried out by the Federal Reserve and the Obama administration. He overlooks the turn-around from huge job losses that occurred late in George W. Bush era to the creation of over 6 million jobs in the Obama administration.
How does Mr. Berko explain the economic models that guide the automatic trading on the stock market today. Those models are calculated to predict penny changes in stocks and are essential to most institutional investors? How does he explain the predictive accuracy of the huge economic models by the congressional budget office and Federal Reserve?
When I first entered a classroom in the fall of 1968 the only computer on campus took up a third of a building and had 150K in memory. Today economists can almost instantly check a theory’s accuracy on their laptop, running very sophisticated models at the touch of a finger. Those models are judged on the basis of their predictive accuracy, which is generally right on.
Third, one has to remember that the basic economic maxim is: Political considerations always win out over economic considerations. If it’s good economically but bad politically, you don’t get the economic result. If it’s bad economically but good politically, you get the political results. Given the quality of some of our politicians I think the average citizen won’t have trouble believing that the economics provides very valuable tools for the modern economy but they are constrained by the lack of implementation.
In sum, Mr. Berko’s view of the economics profession is plain wrong. Economists have proven over and over that they are amazingly accurate and the basic theories are valid. I would suggest he reevaluate his opinion and improve the accuracy of his recommendations.