Can We Trust Academic Economists to Give Us Reliable Scientific Opinions Favoring Obama?

It has become the greatest issue of the election but yet still it remains the most elusive in understanding.  The United States has long believed one of the major tenets of our prosperity is our particular form of economic structure most commonly referred to as “capitalism”.  How do we define American capitalism? Guy Sorman in the City Journal stated that it is generally recognized that our economic success is best assured when the following propositions are present:

1. The market economy is the most efficient of all economic systems. …
2. Free trade helps economic development. …
3. Good institutions help development. …
4. The best measure of a good economy is its growth. …
5. Creative destruction is the engine of economic growth. …
6. Monetary stability, too, is necessary for growth; inflation is always harmful. …
7. Unemployment among unskilled workers is largely determined by how much labor costs. ….
8. While the welfare state is necessary in some form, it isn’t always effective. …
9. The creation of complex financial markets has brought about economic progress.
10. Competition is usually desirable. …

But even within these propositions there exists a great latitude to which government can or should intervene.  To determine when and if intervention is necessary requires taking measurements of input data and output data which can lead academicians to formulate theories on how the economy functions specifically.  One of the great questions of our time is whether economics is really a science. There is a great ability now to collect information about markets, employment, consumption but collecting this data no matter how meticulously in which it is done does not mean that a good theory will result.

Theories in economics are not mathematical calculations. More often than not they are attempts at relating a set of pre-existing circumstances to a subsequent event hoping that all the variables are correctly identified and how they interacted to cause the final result.  Herein lies the weakness of economics that also lies in other scientific observations. Our ability to understand what we observe is always “prejudiced” by our pre-existent beliefs.  The hardest thing to be in science, is a blind, impartial, and unbiased observer.

Although many reported the potential problems of the mortgage derivative driven stock market for years almost no one predicted the severity or depth of the current crisis.  I have no doubt that some who knew it was severe concealed it for their own benefit or to avoid personal responsibility. At the same time there was also likely a bias because many believed that championing housing for many who could not otherwise afford to buy a house was a noble cause.  It is reminiscent of medical research where patients may show temporary improvement with a drug but later on die of delayed complications which no one recognized initially because all they saw was the initial improvement.

The Economist recently asked 683 research associates of the National Bureau of Economic Research, America’s premier association of applied academic economists to evaluate the economic plans of Senator Barack Obama and Senator John McCain. These college professors overwhelmingly favored the Obama plan over the the McCain plan however there was some interesting paradoxes. The Economist noted

There is an apparent contradiction between most economists’ support for free trade, low taxes and less intervention in the market and the low marks many give to Mr McCain…

The objectiveness of these economists clearly comes into play when you realize that they often had a personal bias against John McCain because

“John McCain has professed disdain for ‘so-called economists’, and for some the feeling has become mutual,” says Erik Brynjolfsson, a professor at the Massachusetts Institute of Technology Sloan School of Management. “Obama’s team is mainstream and non-ideological but extremely talented.”

Only 10% of the economists labeled themselves as Republicans even though they literally all agreed that the Republic ideals were appropriate.

On the other hand when conservative economists such as Richard W. Rahn, a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth, have evaluated the economic plans he came to following conclusion

Mr. Obama’s fiscal plan is totally implausible. He has, according to the National Taxpayer Union (NTU), already promised to increase spending on a variety of government programs by more than $344 billion per year. He intends to pay for it by increasing taxes on the “wealthy” (the top 1 percent of taxpayers already pay 39percent of the income tax).

Many other economists are pointing out that Mr. Obama’s recent statements about American corporate income taxes being the lowest in the world are absolutely wrong, instead the correct rank would be at 38th which is below Europe, Asia, and even China.

When I was a young man, my father once gave some advice about listening to others about handling money which I have always remembered. He said “Never take advice from someone who is going to make more money off of you than you are going to make or take advice from someone who themselves have not been very successful in making money”.  If we follow that advice we know we should not trust current and former Wall Street executives ( who gave Obama record amounts of contributions) but also and maybe even more importantly we have to be careful about following what disgruntled biased academic economists may advise. Their monday morning quarterbacking for the previous sunday’s game does not mean they know how to win the next game. They were not speaking out before the game when their advice would have mattered most.

In this election the voters can choose to trust a 200 year experience with American capitalism or they can choose to abandon it.

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This entry was posted on 7. October 2008 at 23:15 and is filed under politics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

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