Economic Experts: Insightful, Biased

Be wary of advice and forecasts from economic ‘experts’, says economist Zachary Karabell—not because they are trying to sell their services or because they are lying, but because they truly believe their (unintentionally) skewed opinions.

Being wrong in the past is not much of a liability as long as one is right in the present. […]

There may be “experts” who knowingly skew their analysis to serve their own bottom line. But I believe they are rare. The issue is less the integrity of those selling their wares than the market forces that choose them. When times are good and people feel confident, experts who support that view find more traction—and more demand—than those who don’t. When times turn troubled, as they most certainly are now, those whose perspective rhymes with the prevailing gloom appear wiser than those who do not.

Prominent experts, therefore, are often simply those whose voices are in harmony with today’s mood and who have an easier time selling their stories. That doesn’t mean that the analysis is inherently flawed—only that it is inherently market-driven.

Obvious, but it’s good to have this reiterated every now and again.