Post by jeffolie on Sept 6, 2009 14:40:39 GMT -6
Why are economists often so wrong?
I think it has a lot to do with their inflexibility caused by them trying to please those who provide them with income. Follow the money. Supply siders don't change their point of view because they get paid to consistently sell their message to those who pay for their books and seminars. The same for leftist economists. The same for those who call for doom or for boom. Each has a paying audience that will not tolerate a discortant note in their message. Overwhelmingly Brokers sell 'buy orders' not "sell orders" so brokers are almost all finding 'selective' buys.
I think that some negative bias economists by be genetically hardwired to be unhappy and critical. Identical twin studies have proven the impact of genetics on personality. My reading has lead me to believe that as much as 60% of one's personality is from nature's genetics as opposed to nurturing and learning.
Reading economic history shows that lengthy periods of economic trends stay in place such as 5 to 25 years. That is long enough to have economists of one particular bias to gain popularity while exploiting that trend. These forcasters are correct and gain a following representing the correct bias thus gaining financial support. Follow the money.
==================================================================
Why Economists Missed the Crises (January 2009)
www.ritholtz.com/blog/2009/01/why-economists-suck/
That piece included my top 10 indictments as to why the economics profession missed the crises until it was way too late:
1. An inherent upward bias is built into ALL Wall Street research — including economic research;
2. Ideological rigidity prevented creative thinking;
3. Non-critical acceptance of official data from BEA, BLS, Commerce led to only a passing familiarity with reality;
4. Institutional rejection of negative analyses remains endemic;
5. Traditional (non-behavioral) economic analysis seems to have difficulty with human irrationality;
6. Political Bias; (Right wing during GOP Presidencies; Left Wing during DEM Presidencies);
7. Corporate bias — Stock option compensation — skewed views too optimistic;
8. “Timing” is very different from Analysis;
9. Factoring in excessive leverage and liquidity is exceedingly difficult from a traditional economic perspective (Derivatives especially);
10. Herding instinct is powerful;
While Krugman drills deep into a few issues, notably, de-emphasis of behavioral economics and an anti-Kensyeian bias, his piece missed many of the causations.
This wasn’t the first time I pointed out the failures of economists as a whole. Back in 2005, I wrote the following for TheStreet.com:
The Mystery of the Awful Economists
Real Money, 3/2/2005 3:42 PM EST
www.cdn.thestreet.com/p/rmoney/barryritholtz/10211333.html
www.ritholtz.com/blog/
I think it has a lot to do with their inflexibility caused by them trying to please those who provide them with income. Follow the money. Supply siders don't change their point of view because they get paid to consistently sell their message to those who pay for their books and seminars. The same for leftist economists. The same for those who call for doom or for boom. Each has a paying audience that will not tolerate a discortant note in their message. Overwhelmingly Brokers sell 'buy orders' not "sell orders" so brokers are almost all finding 'selective' buys.
I think that some negative bias economists by be genetically hardwired to be unhappy and critical. Identical twin studies have proven the impact of genetics on personality. My reading has lead me to believe that as much as 60% of one's personality is from nature's genetics as opposed to nurturing and learning.
Reading economic history shows that lengthy periods of economic trends stay in place such as 5 to 25 years. That is long enough to have economists of one particular bias to gain popularity while exploiting that trend. These forcasters are correct and gain a following representing the correct bias thus gaining financial support. Follow the money.
==================================================================
Why Economists Missed the Crises (January 2009)
www.ritholtz.com/blog/2009/01/why-economists-suck/
That piece included my top 10 indictments as to why the economics profession missed the crises until it was way too late:
1. An inherent upward bias is built into ALL Wall Street research — including economic research;
2. Ideological rigidity prevented creative thinking;
3. Non-critical acceptance of official data from BEA, BLS, Commerce led to only a passing familiarity with reality;
4. Institutional rejection of negative analyses remains endemic;
5. Traditional (non-behavioral) economic analysis seems to have difficulty with human irrationality;
6. Political Bias; (Right wing during GOP Presidencies; Left Wing during DEM Presidencies);
7. Corporate bias — Stock option compensation — skewed views too optimistic;
8. “Timing” is very different from Analysis;
9. Factoring in excessive leverage and liquidity is exceedingly difficult from a traditional economic perspective (Derivatives especially);
10. Herding instinct is powerful;
While Krugman drills deep into a few issues, notably, de-emphasis of behavioral economics and an anti-Kensyeian bias, his piece missed many of the causations.
This wasn’t the first time I pointed out the failures of economists as a whole. Back in 2005, I wrote the following for TheStreet.com:
The Mystery of the Awful Economists
Real Money, 3/2/2005 3:42 PM EST
www.cdn.thestreet.com/p/rmoney/barryritholtz/10211333.html
www.ritholtz.com/blog/