This is a Guest Voice column by TMV’s favorite poet, Michael Silverstein, aka Wall Street Poet, one of TMV’s most popular contributors. As you can see he is equally adept at prose commentary.
Should Economists Set Economic Policy?
by Michael Silverstein
Do economists understand what’s really going on with the American economy? And if not, should they have so many important responsibilities in shaping that economy?
Such questions might well be on the minds of many people in light of the pronouncements, analyses, and predictions made by highly placed economists in recent months. It wasn’t just that their views and prognostications seemed to change daily to reflect that day’s headlines. It was that when listened to closely, what they were talking about seemed almost irrelevant to what the majority of Americans were experiencing in their own lives.
The fact is that “the economy” measured and focused upon by economists is quite different in many critical ways from “the economy” the rest of live with on a daily basis.
Consider some basics in this regard, such as economic growth. In economist thinking, until very recently, the economy’s growth rate was quite satisfactory registering 3, 4, or even near 5 percent since 2002. During this same period, however, the typical family’s spending power continued to erode. This basic reason was that a huge share of this growth, the cream, trickled upward to the country’s richest families because of government tax policies and compensation policies prevailing in the marketplace.
Economists found such growth satisfactory and generally approved its causes. Did you? If you weren’t an economist or one of the lucky few attracting the cream, did you wake up in the morning smiling because your very own economy was doing so well even if you weren’t? I rather doubt it.
Then there’s the matter of productivity. American workers are now the world’s most productive by everyone’s measure. Part of the increases here are due to capital investment, but most, as anyone who has visited an American company in recent years knows, is because Americans are working their buns off as never before. Workers come earlier and stay later so as not to be left behind. Taking all one’s legal vacation time is passé and may even endanger your position within a company. Lunches are at desks, not chatting amicably with mates in separate areas.
Economists point with pride to America’s ever increasing productivity. Has this process made you more happy? Brought you more time with your loved ones? Given you more opportunities to get involved in non-work activities or community service? Made you feel that your life is more worth living or more of a rat race?
Last month’s job report was horrible. But even so, economists still point to a fairly healthy labor market because there are still a lot of jobs out there. What they rarely comment on is the quality of the new jobs that are replacing the older ones being lost.
Sure, anyone these days can get a job. Two jobs. No problem. But the decently paid, nicely benefited variety, while still out there, are not where the real job growth is happening today. A “healthy” job market to an economist is just a lot of jobs. To the rest of us, there’s a quality element that also should be considered.
It isn’t just the interpretation of numbers that makes economist world so often seem so other worldly. It’s some numbers themselves that economists use. Take something as apparently straight forward as inflation, which to most people is simply the increase in the cost of the same basic goods and services from month to month.
A few years back, while continuing to use this measure in the Consumer Price Index, the Fed and other economists downgraded it in favor of something called the “core rate of inflation” which excludes food and energy costs. Now, even when food and energy are playing havoc with so many budgets, economists shrug this off and cite a still under control core rate because it is “the Federal Reserve’s preferred measure.”
Where is the common sense here? Where the real life analysis? What could be more core to human survival than food and energy? And since when does any person’s or any institutions own “preferred measure” of any economic number replace a long standing measure? Adam Smith noted that consistency should trump anything else in economic discussions. His successors appear to think otherwise.
It’s not hard to demonstrate the very deficient record of professional economists in predicting economic directions. It’s also easy to find flaws in their economic gauges. Economists are human like the rest of us. They make mistakes. They sometimes use the wrong tools.
It just this: The policies these professionals have foisted off on actual policy makers over the years have not improved the economic lives of most Americans. And some of the new ones they are concocting, sometimes hourly it seems, don’t bode to improve matters any time soon.
Joe Gandelman is a former fulltime journalist who freelanced in India, Spain, Bangladesh and Cypress writing for publications such as the Christian Science Monitor and Newsweek. He also did radio reports from Madrid for NPR’s All Things Considered. He has worked on two U.S. newspapers and quit the news biz in 1990 to go into entertainment. He also has written for The Week and several online publications, did a column for Cagle Cartoons Syndicate and has appeared on CNN.