Thursday, February 27, 2014

Business Relearn the Value of Economists

Business hires of economists are booming.

The number of private-sector economists surged 57% to 8,680 in 2012 from 5,510 in 2009 …

The reason is that economists are pretty good at handling and understanding big data.

A lot of companies have programmers who are able to process big data," said Tom Beers, executive director of the National Association for Business Economics in Washington, a professional organization with about 2,400 members. "But to find a causality between two things and draw a conclusion really takes somebody with an economics background."

A more cynical reason is that when times are good, everyone thinks they can do forecasting.

Retired economist Frank Schott, 87 years old, said new veins of data don't guarantee accuracy in forecasts. "The data are just as recalcitrant as ever to give you answers and the multiplicity of it invites further confusion," he said. "Everybody, including corporate bosses, thinks they're their own best economist."

The thing is, about 75% of the time the economy is in good shape, so there’s a good chance for confirmation bias. During the Great Moderation (the name given to the mild economic period from 1983-2007) many companies pared down their economics staff.

"The great recession laid bare a lot of fundamental mistakes that an economist can be useful in preventing," said Mr. DeKaser, who was previously chief economist for National City Bank.

There’s more in the article entitled “Corporate Economists Are Hot Again” in the February 27 issue of The Wall Street Journal.

P.S. Oh, and, what sort of firm actually employs a Chief Economist? How about Google. Hal Varian (who wrote the Ph.D. micro text most of used in graduate school) is their guy.

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