"The most significant threat to our national security is our debt," Admiral Michael Mullen, Chairman, Joint Chiefs of Staff, August 27,2010


Monday, May 7, 2012

Economists - The Dismal Scientists

The theme of today’s essay is – be careful to whom you trust your economy.   We will explain later.

This essayist attended business school many, many years ago.  Back then, may still be the case today, one needed to apply to business school.  Many applied; some were chosen.  If you applied and were not chosen, what did you do?  Well, in our experience, those who were not chosen stayed in the liberal arts college and studied “economics.”

Why study economics you may ask?  Well, the sense back then was that you could still try to get a job in business and pass yourself off as having studied a “business related” curriculum.  But if you were in business school the word was out – economics was easier - not as disciplined; theoretical - not as disciplined and rather out of touch with the case study based curriculum in the business school.

So, what is with this case study based curriculum in the business school?  Well, Harvard had the original franchise on it but places like the University of Michigan refined and improved it.  The idea with this teaching approach was taking a set of real life facts and situations (the case) and studying the case and analyzing the facts and situations to come up with proposals for moving forward – solving the situation and, at the end of the exercise, examining the student’s solutions with the actual resolution in the market place.  In other words, testing theoretical solutions with real solutions and applying measurement metrics against results.

This was deemed to be a vigorous and healthy disciplined process.  Not the undisciplined theoretical nonsense of the economics department in the liberal arts schools. 

So, what has this to do with the mess we are in? 

·         Alan Greenspan –  B.S., M.A., Ph.D. Economics - New York University

·         Ben Bernanke –  B.A. Economics – Harvard; Ph.D. Economics – MIT

·         Peter Orszag –  A.B. Economics – Princeton; M.Sc., Ph.D. Economics – London School of Economics

·         Larry Summers –  S.B. Economics – MIT; Ph.D. Economics – Harvard

·         Alan Krueger – Ph.D. Economics -  Harvard

·         Timothy Geithner –  A.B. Gov’t. Studies - Princeton; M.A. Int’l. Economics – John Hopkins

·         Christina Romer –   Ph.D. Economics – MIT

And, our favorite of all time -- Paul Krugman  -- B.A. Economics - Yale; Ph.D. Economics  -  MIT.  BTW, Paul supported John Edwards for President.

In July of last year, the white house council of economic advisers issued a report on the success of the Obama recovery act (2009) which cost the US taxpayers $666 Billion when the report was issued with another $106 Billion committed but not yet spent for a total of $772 Billion which looks like this is dollars and cents:

$772,000,000,000.00
The report said the spending created at least 2.4 million jobs and maybe as many as 3.6 million – “As of the first quarter of 2011, the report estimates that the Recovery Act raised employment by 2.4 to 3.6 million jobs relative to what it otherwise would have been.”  Source:  http://www.whitehouse.gov/sites/default/files/cea_7th_arra_report.pdf

That’s not bad, huh?  2.4 million at least; heck, maybe as many as 3.6 million and it only cost $772 Billion.  So why are we writing about these dismal scientists, these Keynesian economists?  Well, if they had only learned basic math in their studies they would have divided the 2.4 million jobs “estimate” into the $772 Billion spent or committed and calculated the cost per job at….drum roll please –


$321,666.67 per job

You do the math if you think for a minute that their 3.6 million estimate is even worthy of calculation.

These well “educated”  economists are only lacking three things:

1.    Real life experience
2.    Real life experience
3.    Real life experience

Be careful to whom you trust your economy. 

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