Or the Danger of Being a Professional Expert

Economists are beginning to question their jobs data. They had been focusing on the percentage of workers looking for work, and that news has gotten slightly better. But now they realize that the work force itself has been shrinking. That’s troubling and strange. It also changes their conclusions.

The “labor market economist, the Nobel laureate Peter A. Diamond, has . . . concluded that much of what he and others have written previously is misleading because the unemployment rate is no longer an accurate labor market gauge . . . . The percentage of prime-working-age Americans, those between 25 and 54, who are in the labor force fell to a 30-year low of 80.7 in July.”

Floyd Norris, the chief business reporter for The New York Times noted, somewhat acerbically: “You don’t need to be an economist to know when jobs are easy to get. The members of the Federal Open Market Committee would be better advised to watch the consumer confidence survey than to focus on the unemployment rate.”

But they don’t. Economists like many other professionals are stuck in their models, and they often look to each other before they check out reality. For many years they subscribed to the theory that people’s economic decisions are rational, based entirely on self-interest. Many of them also believed markets were “perfect,” that is they are the only reliable way to get at the true value of commodities. Taken to the extreme, that meant there could be no “bubbles,” no inflated values that are unsustainable, that would inevitably lead to busts or, worse, recessions.

Paul Krugman was scathing in his criticism of his colleagues complacency, their ‘widespread conviction . . . that such a crisis couldn’t happen. Underlying this complacency was the dominance of an idealized vision of capitalism, in which individuals are always rational and markets always function perfectly.”

But to be fair this is a fault with many professionals. They have their standard ways of gauging reality and they tend to form a strong fraternity of immovable convictions. It’s not so much that they are stubborn, as that it never occurs to them that the world operates in ways that deviate from what they, their mentors and colleagues have come to believe.

This true of all of us, to some degree, but it is more of a problem with professionals, those who are trained to use their judgment to navigate complex problems and to help people make decisions where much is at stake. Curiously, esoteric knowledge in specialized fields often goes hand in hand with this kind of intransigence. But why?

One reason is that they are subject to enormous pressure as so much attention is directed to their conclusions. We turn to them, as “experts,” for the truth behind the facts, the meaning of events, and that is a very seductive place to be. Any tendency to be self-important will be amplified by that attention. People in that position come to believe that they really know the truth.

Moreover, their own belief in their expertise is based on the consensus they establish among themselves, the certainty that comes from all subscribing to the same beliefs. That consensus requires courage and extraordinary conviction to challenge, and very few are up to that task. No doubt, Professor Diamond thought long and hard before he advanced his challenge to the conventional model.

But, obviously, we need such thinking outside the box if we are not to go on believing what’s obviously true – and wrong.