Economists and Money

Allen and Stein

Economists and Money

Allen and Stein

Economists and Money
An email conversation about the news of the day.
Sept. 17 1998 9:47 AM

Allen and Stein

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Well, Jodie! You asked me yesterday, "If you feel unqualified to talk about the markets and the economy, how can I, unlicensed practitioner that I am, possibly dare to opine?"

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I think you are falling into a common error, which is to think that economists know how to manage investments in the stock market, or other markets, for that matter. I was recently at a party where there was a super- star, whose name I will not mention, but who undoubtedly had a very large income. I was introduced to him as an economist, and he immediately said to me, "If you're an economist tell me why I don't have more money." I tried to comfort him.

Some economists have been good private investors. J.M. Keynes is said to have been one of them. I have heard of a few living ones who have made a lot of money by their investments. But there are also a lot of liquor storeowners and anesthesiologists who have made a lot of money by their investments. If economists, qua economist, knew how to make a lot of money there wouldn't be so many of them grading papers in obscure colleges.

I don't remember ever seeing the name of an economist on the list of the 100 richest people. David Rockefeller may have been an exception. He had a Ph.D. in economics from the University of Chicago. But that isn't how he became rich.

It is interesting that you refer to ability "to talk about the markets and the economy." But the markets and the economy are two different things. Maybe the point is that economists are not capable of talking about anybody's money but are capable, or feel themselves capable, of talking about everybody's money. Everybody's money being, of course, the subject of fiscal and monetary policy. I often wonder whether we are really capable of talking about that. But everything is relative. Economists may not be very good at talking about fiscal and monetary policy; they are just better at it than other people.

Let me say a few words about the case of the woman who demands special treatment at the bar exams because she has a reading disorder. You suggest that maybe there should be a special flag on the certificates that doctors, dentists, etc. display in their offices with a warning--"This practitioner was unable to pass the qualifying exam under normal conditions." Then you ask the question about yourself, "Or am I being too market oriented?"

No, you are being insufficiently market-oriented. The market-oriented policy would be to have no qualifying exams. Experience would demonstrate which doctors killed their patients and the market would drive them--the doctors, not the patients, who are already out of business--out of business.

Jodie T. Allen is Slate's Washington, D.C., editor. Herbert Stein, a senior fellow at the American Enterprise Institute, was chairman of the Council of Economic Advisers under Presidents Nixon and Ford. He is a member of the board of contributors at the Wall Street Journal.