Wednesday, January 18, 2012

Why Are Economists in Charge?

Good question, and one that a lot of demographers are asking themselves these days. After watching budget surplus turn into deficit, the housing bubble inflate and explode, and the Great Recession unfold and persist, one has to wonder why anyone listens to economists anymore.

This was the last straw: the release of the 2006 transcript of a Federal Reserve Board meeting, where a roomful of clueless economists dismissed the looming housing crisis and chortled over the excesses in the mortgage market, all while fawning over former Fed chairman Alan Greenspan. It was just so high school. Yes, it really makes you wonder why demographers are relegated to the bowels of the Census Bureau while economists are high-fiving it with the rich and powerful. 

Here's the problem: Economists are not very good at assessing the present or predicting the future with any kind of accuracy. Their profession is flawed because it ignores the elephant in the room--us, society, a group of people with complex relationships and common interests. Society is the economy's engine. Like an auto mechanic mesmerized by the paint job on a car, economists never bother to pop the hood. Demographers, on the other hand, are elbow deep in engine grease. They are experts on society and how it works. Trouble is, most of them are mired in the minutia of academia or trapped in the bureaucratic basements of government, high school nerds all grown up and still ignored.

Demographers could have predicted that budget surplus would turn to deficit as the massive baby-boom generation retired. Demographers could have predicted that the housing bubble would burst because housing prices were out of whack with household incomes. Demographers could have predicted that the housing market--and thus the economy--would be slow to recover as high rates of unemployment, stagnant wages, and the burden of student loans prevented young adults from establishing independent households. But if any demographer poked his head out of his cubicle to make these predictions, no one paid any attention because demographers are not the cool kids. Economists are.

No comments: