If there is one faction that should have been discredited as much as Wall Street in the last year, it should be the so-called financial experts. Like the old joke that the stock market has predicted nine of the last five recessions, experts have failed to see major trends, offered contradictory advice on spending, taxes and regulation, and generally did not separate themselves from those offering lay opinions; yet the media treats their predictions as facts while ignoring both their bias and the lack of accurate knowledge.
Economic experts have essentially adopted a platform of "we don't know what is going on, but we need to do something." Venture capitalist Bill Frezza attacked current macroeconomics in an article on Realclearpolitics.com, pointing out how their science is blinded by partisanship and arbitrary numbers. He went on to point out that one of the great insights into economics was that there are too many things going on to actually know what is going on. Too many economists work with government and allow their judgment to be clouded by political leanings. That is why you can have a liberal economist calling for more regulation and increased government oversight while a conservative economist advocates the opposite. Another questionable aspect of political economic expertise is the arbitrariness.
Why was the bank bailout $700 billion? It was simply an arbitrary number that was large enough to rebuild confidence. I could appreciate the hilarity if it wasn't tons of taxpayers' dollars being thrown around to experiment with. It brings to mind Franklin Roosevelt's statement about his desire to raise the price of gold by 21 cents… because it was a lucky number.
Biased and unfounded expertise was offered on oil prices as well. It's still hard to believe that just six months ago gas was $4 a gallon, oil was closing in on $150 a barrel, and every pundit said that cheap gas was a thing of the past. Countries such as Venezuela and Russia counted on oil staying above $70 or $90 a barrel in order to fund their various geopolitical projects and internal expenses. Car companies closed SUV plants to restructure and adapt to a future of expensive gas. Goldman Sachs was predicting oil to hit $175 a barrel last March, with many pundits calling for $200+ prices. And as quick as the prices went up, they collapsed. Now many see oil hovering around $50 a barrel throughout next year, because of the economic slowdown. Who knows what could actually happen.
Of course there are experts who know more, just as there are laws of economics, such as supply and demand. The problem is that valid information is abused, twisted or extrapolated until its worth is non-existent. The media offers countless unfounded predictions that are reported as facts, especially if they fit into a compelling narrative. This leads to a herd mentality of predictable and often inaccurate "expertise."
Jack Millman is a junior in political science and economics. He can be reached at millman.5@osu.edu.
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