I try to follow the advice “Never pick a fight with people who buy ink by the barrel full,” but every now and again, I simply cannot help myself.
Today is one such an instance.
Like all human beings, I am wrong on a regular basis (my wife can read you chapter and verse). However, I would like to think that I am more right than wrong, especially on the big picture issues. That is, IMO, because I try to eschew rigid ideology, focus on the actual data, put it into context, and work from that point. Start with data, then reach a conclusion. It is a pragmatic, mathematically based approach, and it has served me well throughout my career.
There are many others who do not seem to care much for the numbers. Their approach is to define a conclusion first, than seek out data or anecdotes that support that conclusion. This is the province of the economic ideologue. As you might suppose, these data-free ideologies are frequently wrong, occasionally spectacularly so.
I bring this up because this week’s Barron’s has a list of book recommendations from Gene Epstein. I suggest skipping the column, and not reading the books. This is based upon Epstein’s track record as an economic columnist. If his book recommendations are anywhere near as good as his economic commentary about the economy, then they will be utterly horrible.
As you might imagine, this is a collection of mostly ideological tomes (plus a pair of Updike novels), with little or no correlation to reality. Call it the clueless free marketers guide to the crisis.
I have not read all of the 6 books recommended, but started two of them:
I started reading Thomas Sowell’s The Housing Boom and Bust. Once I ran into the same tired old political talking points — CRA/Fannie Mae caused everything, government is the root of all evil — I put the book down and moved on to more reality based works. If you want to see the genesis of every false meme, every political talking point, then this is the book for you.
Sowell is actually intriguing, because he mixes in just enough reality to keep you wondering. The problem I found is the reality-based work is filler, there only to legitimize the political talking points.
Of all the people who have looked at and written about the crisis, Sowell is the one I would like to debate the most.
Thomas Woods’ Meltdown blames the Fed for much of what occurred, and on that point we are in agreement. We also concur that the bailouts were an absurd transfer of wealth from taxpayers to inept companies. However, Woods’ exonerates “deregulation” and “unfettered free markets” as playing a role in the crisis. He is int he Phil Gramm camp. As you would expect from a senior fellow at the Ludwig von Mises Institute, Austrian ideology is a front and center throughout much of the book.
Now, I mention the ideological bend of Epstein not as an ad hominem attack, but to contextualize his track record.
Of all the observers of the economic crisis of the past year, few have gotten it wronger than Barron’s Gene Epstein. This is directly due, in my opinion, to Epstein’s political ideology. He may or may not be a good economist, but we have no idea as to whether that is so, as his economic views are so dominated by his ideological rigidity and political perspective.
I would expect as much from Al Franken or Rush Limbaugh, but one hopes for more from the economics reporter from one of the nation’s pre-emiment weekly journals. One would be disappointed.
Let’s take just a brief look at his greatest hits:
GDP Prospects Flash Green (MARCH 5, 2007) The author forecast: “The economy should grow nicely this year and next.” Only not so much.
Why Recession Is Remote (OCTOBER 8, 2007) This was precisely at the peak of the last expansion — we now know Real Wholesale-Retail trade sales peaked in September 2007, and Real Income hit its cyclical high in October ‘07. (Employment was December 07, and Industrial Production was January 08). The recession was two months from beginning.
Housing Isn’t Clobbering GDP (OCTOBER 22, 2007) Good thing Housing didn’t impact the economy much . . .
Look for Joblessness to Hit 5.2% in Late ‘08 (DECEMBER 10, 2007) Wildly too optimistic — the Unemployment Rate rate was 6.1% in September 2008, and as I noted at the same time “its likely to rise.” Its now over 9%.
Outside of Housing, Things Are Humming (NOVEMBER 5, 2007) The credit crisis was already 4 months old when this insightful column came out. Aside from GDP being negative, relying on a dirt cheap dollar raises the question of what happens when that dollar rises — like it has this past quarter.
Slowdown, Not Recession (FEBRUARY 4, 2008) The irony is that NBER marked the
recession starting in December 2007 — 3 months prior.
Even Money on Recession (MARCH 10, 2008) That’s a small change from the column the month before. 5 months into to a horrific recession, the call was a coin toss. Awful.
The Great American Savings Myth (MAY 28, 2007) Facts have proven this to be clueless nonsense. “Household net worth — assets minus debt — has never been higher.” As we warned at the time, asset prices can go down, while debt doesn’t — exactly what happened. One of the truly horrific, embarrassing, columns of all time.This is why ideology loses investor’s money. foolishness
Why GDP Will Keep Growing (SEPTEMBER 29, 2008) Thanks to high Imported Oil prices, GDP looks better than it is (high imported Oil makes the deflator artificially raise GDP. But beyond that technical explanation, this is simply embarrassing nonsense. If you worked at any P&L driven buy side firm, writing stuff like this is how you get fired.
if this writer cannot identify the worst recession since the Great Depression in REAL TIME, just imagine what his book recommendations are like: Rigid, ideological, and for the most part, not worth your time.
I understand that this post will likely cost me a Barron’s review of Bailout Nation — but I am compelled to call them as I seem them, consequences be damned . . .
Worth Mulling: A Late-Summer Reading List
Barron’s AUGUST 17, 2009