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Deal With What Works

September 22, 1985

Economists may want to improve their declining public image, but even scholars of the stature of Lester Thurow ("Unemployment Rate Stays High Because Public Is Willing to Tolerate It," Viewpoints, July 21) seem intent on making it worse.

Consider the steps Thurow uses to formulate his opinion on why unemployment stays high:

1--He uses something that requires no economic training--simply taking historical data on unemployment and showing that 1981-84 figures were above 7%,

2--He proposes a convoluted sociological explanation, which is not only bad sociology but outside an economist's area of expertise,

3--He draws a conclusion based on an outdated and unuseable behavioral principle--that the cause of unemployment is because we "no longer care(!)"

Given this approach to what is intended to be useable economic opinion, one can understand why the "authorities" who decrease the interest rates that decrease unemployment have turned a deaf ear to economists:

- Consequential opinion isn't developed that way.

- The track record that this approach to economic opinion-making has demonstrated since 1981 is no better than flipping a coin on the opinion.

- Thus, what conservative, common sense approach should decision-makers take to treatment of the economy?

(a) Not follow economic opinion coated by free-flying psychologizing and sociologizing, and

(b) Simply keep on doing what demonstrably works, and nothing else--in this case, holding down inflation.

A more useful point of reference is 1981--when the Administration began to wean economists from practicing their theories on the U.S. economy.

That is when one begins to see not only unemployment but inflation stabilizing as well.

Thurow apparently would have "authorities" go back to letting theoretical economists practice on the economy--based on opinion-making "methods" that are demonstrably invalid and supported by almost nil predictive validity.

Less irresponsible--and costly--would seem to be for fiscal and monetary "authorities" to simply continue to deal with the economy on the basis of what works, and nothing else, and wait until the theoretical economists get their opinion-making methods and predictive validity scores in demonstrably better applied shape.


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