Why Humans Hate Economists: Part 2, The Right Reasons

This week, I wrote that there are many reasons economists are about as popular as parking inspectors, and how much of the dislike is really not fair. The same is true for parking inspectors, who, by the way, are just doing their job.
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Recently, I wrote that there are many reasons economists are about as popular as parking inspectors, and how much of the dislike is really not fair. The same is true for parking inspectors, who, by the way, are just doing their job.

But there are legitimate reasons the economics profession can be disliked. I know I am on dangerous territory, given I'm here at the World Economic Forum in Davos, a conference where economics is in the title, and there's a football team-sized collection of the profession's aristocracy.

I argued that the fact that they are among society's smartest is not a good reason to dislike them: It's not their fault that we frequently dislike the brightest because they make us feel inadequate.

That they speak with excessive assurance about financial crashes after the fact isn't their fault either. It was we who did not listen enough before and listen too much afterwards.

The key reason to dislike economists is that they practice economics. Of course, when I speak of economists, I don't mean every economist alive or ever to have lived. There are some legendary socially-aware economists -- Muhammad Yunus, who attended Davos this week, is one who was deservedly awarded a Nobel Peace Prize for his work in pioneering micro-financing -- but few can escape guilt by association.

That economists have ended up in that profession is not their fault. At university, the subjects certainly look easier than applied mathematics, and there's no chance that it will be as awkwardly touchy-feely as the social sciences.

For at least 150 years, economics has been called the dismal science; but it need not be dismal, and it is only a science if you hold your nose and close your eyes to the wonky nature of reality. Rational, we people are not, and predictable, the world ain't.

Sure, if you remove uncertainty, human actions, weakness, values, love, then you can have a science explaining how humans live, work and organize society.

In a desire to prove that they are not a dismal science, economists tried to get the science bit right, with an addiction to mathematics, rather than focus on the dismal bit. As one economist just told me: "Few, if any, economists even bother with the actual world now. They hide within their 'experiments' and synthetic worlds that can never exist."

The core fallacy of economics is its belief that it is possible to explain the behavior of humans, and therefore set policies and regulations by considering us to be rational beings.

Economists deal with the science of things that can be counted. These are the things that can be objectively tallied, stored as data and results upon, which you can run a regression analysis. The things you can't count, the joy of your children's smiles, the excitement we get from whizzing around a corner on a bicycle, or the number of days per year spent without a care in the world, are left out of the analysis.

To paraphrase Robert F. Kennedy, economics counts everything except what is important to humans. GDP actually goes up from increased military spending, production of handguns and pharmaceutical sales to address depression.

Listen to how one of the high priests of the profession defends it.

Robert Shiller, Nobel laureate, recently wrote a defense of the profession, and his article served to show exactly why economists -- including him -- are in the situation they are.

First he quoted from a new book, Trillion Dollar Economists, that the profession has "created trillions of dollars of income and wealth for the United States and the rest of the world."

He said per professor, of which there are 20,000 members of the American Economic Association (of which he is president-elect), they have each created about $100 million of value for society.

What Shiller misses, and most economists do, in his general summation of the impact of economists is what the "benefit" is and where that it goes.

If economists create $2 trillion of value and most of it goes to two guys in Bermuda, it isn't going to make economists any more admired. That's why economists don't get it. They add up the total, divide by society's population and reach a conclusion.

Increasingly the issue here is inequality, the growing gap of income, wealth and opportunity. It's a divide that is as large at any time in recorded history, and it's accelerating. Our chance of social cohesion is running away from us.

All while the overwhelming majority of the economics profession has tied itself to the argument that the water level is rising, so we should all be happy.

But, herein is the profession's greatest chance for redemption. The issue of our time, as I see it, is this large, growing and accelerating inequality. It's a threat to our security, a threat to capitalism itself. And if any profession is qualified to provide answers, it is economics.

To do that, economists will have to deal with the intangibles of human emotions and, worst case scenario, humans themselves. Let's hope they do so, because, come the revolution, on my detailed analysis, I reckon they will be the first to go.

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