Why can’t economists agree?
Date posted: August 12, 2010
Everyone is looking for answers to today’s economic situation. Policy makers often turn to economists for advice on what to do, but economists don’t always give the same answer. N.C. State University economist Mike Walden explains why:
“You can clearly see that now in discussions about what to do about the national economy: Some economists say the government ought to spend more; other economists say the government ought to spend less. Some say tax more, some say tax less.
“And a lot of people — quite frankly, my experience has been — think, well, it’s just because economics is embedded with politics, and so you are simply going to say whatever your political leanings are.
“I don’t agree with that. I think the reason that economists disagree primarily on what we call the macroeconomy — the big economy — is because it is simply big and complicated and really hard to understand. I mean, think about trying to predict where a $14 trillion economy where million of decisions are made everyday — where that economy is going to go.
“And, in fact, what economists are forced to do in order to get some forecast for the economy is to build very simplified models of this economy and then test various policy alternatives. And those models which we test with past data maybe at best can explain 50 percent of how the economy moved.
“So I think the answer for me is, why we don’t agree (we being economists) don’t agree … simply because what we are trying to agree upon is very complicated and we still don’t understand it very well.”
Category: Economic Perspective