Bridge over ocean
1 May 2013 CFA Institute Journal Review

Room with a View (Digest Summary)

  1. Marc L. Ross, CFA

The author explores how disagreement among economists may lead to reputational damage with the public.

What’s Inside?

The degree to which economists agree on a particular issue appears to be inversely correlated with public opinion on that issue. The author discusses the reasons behind public skepticism of the profession.

How Is This Article Useful to Practitioners?

Economists’ opinions may vary depending on the topic under consideration. For example, if a lack of research exists on a particular subject, the disagreement is more prevalent, such as whether lower energy costs from technology-enhanced natural gas extraction translate into export advantages. The level of disagreement (or agreement) among economists is drawn from articles about the results of a weekly survey of 41 leading economists from seven well-respected university departments. The survey series has been conducted by the University of Chicago since September 2011. The results seem to indicate that economists tend to agree more than most people realize.

But Justin Wolfers at the University of Michigan questions the validity of the poll because it focuses only on the views of a highly select audience. Consensus may forestall bad ideas from being implemented (e.g., a return to the gold standard) but may also stifle divergent points of view. Such divergence would have been welcome in questioning the complacency in the profession before the 2007–09 economic crisis.

The public questions the relevance of economists’ views when they appear quite certain on a particular subject. Economists agree that the individual investor cannot beat the market, but only 55% of the public agrees with this view. People in the United States perceive economists as being detached from reality, which was highlighted by the widespread reticence during the fiscal cliff mess.

The perception of economists’ relevance seems to always be under attack. Academics, policymakers, pundits, and even economists should consider the implications of this perception.

Abstractor’s Viewpoint

Economics suffers from a public relations problem. Certainty among its practitioners regarding select topics seems to be met with widespread public disagreement. The documented inability of economists to forecast the Great Recession and the public’s disenchantment with a lack of policy traction in Washington, DC, only reinforce this perception. The challenge for the economic profession is to explain how its research is relevant in an increasingly complex world.

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