Economic RESEARCH FOR Normal PEOPLE

Credit: Ravi Jagannathan and Zhenyu Wang

A quick glance at an excerpt from an economics publication and... BAM! Of course! It all makes sense! How could I have not known! (See picture)

There is a serious disconnect between economists and normal people. I once had an econ professor suggest that economists purposefully use multiple words of a common definition precisely to maintain their allure of being the only people who know what's going on, and so maintain their own importance and job security. Another of my former professors recently posted to social media that the nature of finance research is simple 'rent-seeking' - the idea that one creates the necessity of payments to his/herself without actually creating any value.

Another defect of the general public's understanding of economics is that many "educated" college graduates have taken one, or two, or three economics courses and they think they REALLY know economics, making all sorts of claims based purely upon the content of their coursework. Equally as detrimental are those with the same coursework experience who see a world where none of the simplistic models in Econ 201 hold and decide that economics as a discipline is wholly worthless. For the record, the idea of supply and demand equilibrium was conceived over 300 years ago, and the theory of convergence given a certain elasticity (your typical supply and demand curves) was new research 128 years ago. Modern economic research is much more complicated and attempts to get at all those little things that just don't work very well conceptually with rudimentary methods from sophomore microeconomics (or senior microeconomics for that matter).

I plan to write a book. I plan to write a number of books. I've begun writing a number of books (and I really have no idea where the drafts have gone...). In any case, one book I plan to write is a guide for normal people to understand modern economic research, notably economic analysis pertinent to policy. Voters and politicians alike struggle with the ins and outs of economic analysis, and all sorts of ridiculous claims are made for and against every angle and perspective.

Here are a few tidbits I expect my book to cover more thoroughly:

1. Big Picture. Think about everything that's happening to the event at hand. The question isn't IF there are other factors, but rather WHAT ARE the other factors, because there are always many other factors. How do the other factors play for or against the claim?
2. Data Problems. Once again, the question isn't IF there's a problem with the data, but WHAT ARE the problems with the data, because there are always problems with the data. Consider whether the shortcomings of the data are such that any inference from the data is useless, or if the data can tell you a lot despite its imperfections. Decide if there's important information missing from the data.
3. Methodology. This is a tough one for people who don't really like the subject of statistics, but frankly many smart, famous people can get by using statistical analysis very poorly, thus producing what I would term "unreasonable garbage". Be skeptical of how people come to their conclusion. If you feel up to it, see what methods they use. Sometimes people use statistics that are much too simple, while other times they try to use extremely complicated methods so they can look cool, yet the method is poorly applied.
4. Representation. The world is complicated (if you don't know that you should probably see a psychologist). If there is a cute little chart or graph or meme that seems overwhelmingly simple and straightforward, it's probably too simple and likely misleading. Good research brings up criticism and addresses it.

---