Glawe: Partisan bias leads to cloudy economic forecasts

Paul Samuelson, a Nobel Prize winner in economics once said, Wall Street indexes predicted nine out of the last five recessions! And its mistakes were beauties.

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Paul Samuelson, a Nobel Prize winner in economics once said, “Wall Street indexes predicted nine out of the last five recessions! And its mistakes were beauties.”

Michael Glawe

During my years as an undergraduate student at Iowa State University, I majored in economics, an aggravatingly misunderstood science. At least that’s how I think of the study of economics — as a science.

It is a field striving for objectivity and perpetually in search of fundamental laws. In that sense, one feels it is much like physics or chemistry. But as Nobel Prize winner Robert Schiller, an economist at Yale University, muses, the field of economics tends to be judged on its policy prescriptions (in that sense, it sounds more like engineering).

The problem is that economics is far too often susceptible to partisanship — though, this comes as no surprise in a world where scientists are considered the wing of a partisan agenda. While encouraging our peers to “leave the science to the scientists” would likely conclude any debate between nonscientists, many, political hacks especially, don’t leave the science to the scientists.

As an economics major, this sort of hucksterism is irritating. Whenever I hear someone talk about national debt and compare it to balancing one’s checkbook or paying off a mortgage, I become utterly incapable of restraining myself from calling out those claims. While it may seem that the field of economics only asks for your common sense, it actually requires a great deal of schooling and a higher level of understanding.

Most economic claims by non-economists are, simply put, obtuse. When you hear a real economist making predictions about market stability or the effects of high debt levels, the claims are always hedged. The rhetoric is never concrete, instead it’s always propped by a “it’s possible” or “this is unlikely.” That doesn’t mean a particular economist is dodging the question or argument, or even that this person doesn’t have confidence in their claim. This sort of rhetoric indicates objectivity and fairness — economics is a field where broad claims should always be scrutinized.

Paul Samuelson, another Nobel Prize winner in economics, famously said, “Wall Street indexes predicted nine out of the last five recessions! And its mistakes were beauties.” Samuelson correctly highlights how difficult it is to make predictions in economics, and the predictions forged out of pure hysteria or hucksterism (trying to get you to invest in gold) are the one’s most in need of objective scrutiny.

Predicting a crash is difficult, but the field of economics, even in its most fledgling state, has had its data to reinforce its claims. Perhaps then it comes down to an interpretation of the data. However, we know that stimulus, and the right amount of stimulus, is vitally important to recovery from a crash. So economists can give prescriptions to the problem, like a doctor. Yet, since economics hinges on the interactions between humans, who are so volatile and unpredictable a species, fundamental laws can be hard to come by.

A non-economists — correction, a nonscientist — should always be careful when reading one financial analyst’s prediction of economic apocalypse. Consensus in economics is as important as it is in physics. Unfortunately, in economics, some economists have become “merchants of doubt,” and have surrendered objectivity to money and fame. Partisan bias in economic forecasts is rampant.

For instance, one Wall Street Journal writer, advocating for the then Republican presidential candidate Mitt Romney, predicted a massive recession after the 2012 election due to “uncertainty” in the markets (as a result of President Obama’s administration). Here we are in 2015 and no such “double-dip” has occurred.

Before the 2014 midterms, the economy was booming once again, and one non-economist, Republican Mitch McConnell, made the same sort of brushstroke remark after the election. In early January, McConnell said, “The uptick appears to coincide with the biggest political change of the Obama administration’s long tenure in Washington: the expectation of a new Republican Congress.”

McConnell claimed that the economy was growing because the market was anticipating a Republican Congress — this is the sort of peddling infuriates economists. Democrats pull these tricks too, and we get nowhere in terms of objectivity.

The debates in this upcoming election will focus on income inequality, wage stagnation, debt levels, unemployment and social welfare programs. It is in the best interest not only for the economic profession but also for the public at large to sort through the rubble of partisanship and rid itself of the absurdities.