Economists: Are 50 Worth More Than 1?
At the world economic forum in 2009 one leading economist told me he was perplexed. Why would an economist be perplexed as the world economy teetered on the brink you ask? Well it had nothing to do with the state of the global economy and everything to do with supply and demand.
“What I do not understand is that nearly all economists where wrong on the financial crisis and now we are in greater demand than ever,” said the economist with a grin on his face as the stock market headed south.
The reason this comment came back to me this weekend is that economists remain very much in demand. As the world attempts to find a route back to sustainable growth, many of the world’s economists are teaming up to make a point, and getting drawn into the political debate as a result.
On Sunday 50 economists wrote an open letter to the UK’s Observer newspaper calling for Chancellor George Osborne to consider a Plan B on austerity as the data worsens.
In response to the letter in the left-wing Observer, the center right Telegraph hit back by talking to 5 economists who backed the UK government’s stance on austerity.
Whatever the merits of either side of the argument, it appears that having lots of economists say something trumps the thoughts of a single economist.
I am not sure if this is good news or bad news for economists. On the plus side it means an economist can find a group of like-minded followers of the dismal science, agree with them and then team up to make a point. If 50 say "go with plan B", how can anyone believe 5 others arguing against? Economics is a numbers game after all.
The same rules would apply to politicians — If 350 believe taxes should be cut in parliament and the government wants to cut taxes, then numbers will win out and legislation will be enacted.
In other walks of life, numbers like this just do not add up. Whilst we might not trust an estate agent’s opinion on a house price, we certainly would not want to canvas 50 of them before putting a house on the market.
If a pipe broke and water was pouring all over the kitchen floor we would probably take the first plumber who arrived and get him to fix the problem as long as his quote was not extortionate.
Or if you wanted to hire a new staff member, 50 references would not be needed. Instead you would call 3 or 4 to make sure the basis of your new hire's CV was at least 80 percent truth.
But in economics it appears size does matter, particularly if you are trying to make a political point. George Osborne cannot go in front of parliament and say: "One economist told me I am right". He can though stand up and say 100 economists say I am right. He could of course still be wrong as there is no guarantee that multiple economists will trump a single view, as we found out when the financial crisis was missed by 99 percent of those practicing the dismal science.