Monday, August 11, 2014

What business economists do (?)

Tyler Cowen linked to an article by Lydia DePillis on the Washington Post, a few days ago, about the "new business economist", the articulate professional with a nice suit, a telegenic face, and a masters or a Ph.D. degree, who can explain anything and everything to an audience of non-experts. My favorite passages:

It’s already been quite a couple months. Flying back and forth between Redfin’s Seattle headquarters and its D.C. office, Richardson takes calls from local reporters trying to place their city’s housing markets in context. She talks to Redfin agents all over the country, and helps promote new data products, like one that calculates how likely a home is to sell within a certain period of time.


The market for consumer-facing economists is certainly getting crowded. Big Internet companies have had chief economists for years now; Google’s Hal Varian is an oft-quoted exponent of his employer’s capabilities and worldview. Microsoft recently hired Yahoo’s former chief economist to push a more “data-driven culture” at the tech dinosaur.

But they’re not just looking for super-wonks. More importantly for Richardson, rival real estate sites Zillow, Trulia, and CoreLogic have offered their chief economists as media-friendly talking heads, always available to explain national trends: Stan Humphries, Jed Kolko, and Mark Fleming have essentially become their companies’ most visible employees, speaking at conferences and testifying on Capitol Hill.

That’s why’s recent listing for a chief economist includes the following in its job description: “Act as the face of the company with key journalists for both print and tv interviews with leading publications,” “work closely with our PR and branding teams,” and have “excellent stage presence.”

In a data-chic world, a chief economist is the new marketing must-have.
Now Neil Irwin at the NYT (hat tip to John Cochrane) compares business economists with academic economists:
There are the academic economists who study the forces shaping the modern economy. Their work is rigorous but often obscure. Some of them end up in important policy jobs (See: Bernanke, B.) or write books for a mass audience (Piketty, T.), but many labor in the halls of academia for decades writing carefully vetted articles for academic journals that are rigorous as can be but are read by, to a first approximation, no one.  
Then there are the economists in what can broadly be called the business forecasting community. They wear nicer suits than the academics, and are better at offering a glib, confident analysis of the latest jobs numbers delivered on CNBC or in front of a room full of executives who are their clients. They work for ratings firms like S.&P., forecasting firms like Macroeconomic Advisers and the economics research departments of all the big banks. 
The key difference, though, is that rather than trying to produce cutting-edge theory, they are trying to do the practical work of explaining to clients — companies trying to forecast future demand, investors trying to allocate assets — how the economy is likely to evolve. They’re not really driven by ideology, or by models that are rigorous enough in their theoretical underpinnings to pass academic peer review. Rather, their success or failure hinges on whether they’re successful at giving those clients an accurate picture of where the economy is heading.

And how exactly can we judge whether those economists are giving clients an "accurate picture" if their models are not rigorous (or tested, or even internally coherent)?

Is this what "business economists" are? Articulate, attractive faces who can explain things to non-economist ears? And what does "explain" mean in my previous sentence? Re-tell popular stories, or the ones that conform to the audience's views, with minimum jargon and maximum entertainment? How is the success of a business economist measured? How is his value-added measured?

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