Economists See Things One Way. 'Ordinary' People See Them Another.

[elleng]

((For fun! I'm NOT an economist.))


Peter Coy
OPINION

April 6, 2022, 3:30 p.m. ET

By Peter Coy

Opinion Writer

Expectations matter in economics. If people think inflation will rise, they will behave in ways that will help make it rise (e.g., asking for bigger raises). If they think the economy is about to grow robustly, they will get more confident, spend more and help create the future they anticipate.

But what happens if people’s expectations are based on an unorthodox view of how the economy works? That’s a question raised by a fascinating paper released in January that finds big gaps between how most economists view the world and how ordinary people think things work.

In textbook economic theory, for example, raising interest rates makes borrowing more expensive, which cools off economic growth and causes inflation to fall. But in a survey of 6,500 U.S. households, the researchers found that 57 percent of respondents thought that a rise in the federal funds rate, the short-term interest rate the Federal Reserve controls, would lead to a rise in inflation. That’s nearly twice as many as the 30 percent who thought it would lead to a fall in inflation.

Likewise, while 80 percent of the 1,500 economists surveyed for the paper thought that a rise in government spending would lead to a decline in the unemployment rate, only 43 percent of the general public agreed, and 39 percent thought higher spending would actually make unemployment worse.'>>>

https://www.nytimes.com/2022/04/06/opinion/economics-public-opinion.html

[spooky3]

1. Economists have empirical evidence supporting these hypotheses. The problem here

is inadequate education of the public.

[bucolic_frolic]

2. Economists are front men for the political agendas behind them

In Europe, economics is known as political economy. Over here, that translates to socialist/communist. Economic forecasting is a complex mathematical discipline. There are time lags, many variables, multiple assumptions. Change one part, and it all adjusts. So you could prove A and not A at the same time if you wanted, or if different schools of economics show up.

And the general public knows far less than the economists, partly because the public view is built upon multiple schools of economic thought from differing political parties. I am very pessimistic that economics as a basis for understanding or voting behavior will ever lead to sane, logical, predictable outcomes.