Month: April 2025

Micro vs. Macro Economics and Predictions

Theodore A. Gebhard

In a Wall Street Journal op-ed, regular Journal contributor, Joseph Epstein, compares modern day economists with ancient augurs. Mr. Epstein points out that there has been an infusion of politics in economics as exhibited by the fact that prominent economists who frequently appear in the media seemingly interpret economic data and make predictions in accordance with their respective political leanings. With a good deal of ridicule, Mr. Epstein notes that, in the end, these predictions, regardless of political preference, prove more often than not to be inaccurate. Is there really an “economic science,” therefore, or are economists simply mystics?

To me it is indeed lamentable that the public’s perception of economists is framed by those few media-savvy “economists” who know how to present themselves in a way that makes for “good” TV and newspaper quotes. What’s more, this perception arises almost exclusively from observation of macroeconomists whose forecasts are grounded in highly aggregated data. Rarely does one see microeconomists in the general media. I maintain that, if the public knew more about this older branch of economics and its scientific richness, the perception of economists would be quite more favorable.

To make this point, I submitted the following “Letter to the Editor” to the WSJ in response to Mr. Epstein’s narrow focus on macroeconomic forecasters.

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As someone who has spent a career teaching and practicing applied microeconomics, it dismays me that the public’s image of economists is largely formed by TV-savvy macroeconomic forecasters claiming to be able to look at highly aggregated data and predict where the economy or various economic measures will be in X amount time.  As Joseph Epstein points out (Is that an Augur, or a Mere Economist? op-ed April 23), not only are such forecasters often all over the board about the likely efficacy or lack thereof of a given policy, but considerably more often than not their predictions, regardless of initial side, turn out to be way off base.  All this, of course, provides grist for the kind of ridicule that Mr. Epstein exhibits. 

By contrast, microeconomics has a far better record.  Indeed, in comparison to macroeconomists, microeconomists are far more likely to agree in their analyses of microeconomic policies (i.e. market-specific regulations and interventions) as well as their predictions of the consequences of such policies.  This near unanimity derives from the fact that microeconomics rests on well-developed theory that has stood the test of time and consistently lives up to empirical verification. Regrettably, the absence of controversy does not make for good television, and the public rarely is exposed to this major branch of economics and its practitioners.

Theodore A. Gebhard

How Does the Debt Stack Up?

Theodore A. Gebhard

According to some estimates, the present value of the cost of Social Security and Medicare’s unfunded promises now stands at more than $175 trillion.  Add $36 trillion more in federal debt ($26 trillion held by the public) and the total is well over $200 trillion.  Even with historical economic growth and productivity increases, there is no way that these obligations can ever be met out of real resources so long as they continue to increase.  What’s worse is that the nation cannot count on growth and productivity maintaining historical trends, as growing debt service and entitlement payments increasingly crowd out private capital investment.  This ever larger burden on the private economy threatens the entire free market system.

So that citizens can get a handle on just how large a trillion is, the Wall Street Journal published three Letters to the Editor this week providing illustrations of a trillion dollars. Hugh F. Wynn’s letter can be viewed here (The Painful Parade of Zeros, Letters, April 7), and William F. Meurs’ letter can be viewed here (A Quiz Question on the Debt, Letters, April 8).  The third letter is from me, which the Journal published today (print edition).  The published version, edited by the Journal for space, can be viewed here (How Does the Debt Stack Up?, Letters, April 11).

Below is my original, unedited submission.

William F. Meurs’ hypothetical of a person spending a trillion dollars a day for 2740 years to illustrate how enormous a trillion dollars is (A Quiz Question on the Debt, Letters, April 8) improves on Hugh F. Wynn’s string of zeros (The Painful Parade of Zeros, Letters, April 7), but still falls short of most people’s real world experience.  How many of us have ever spent a million dollars in a day?  Nearly everyone, however, has walked a mile.  A better question therefore is how high would a stack of a trillion dollar bills (new and crisp, not rumpled) reach?  The answer is 67860 miles, more than a quarter of the way to the moon.  Of course, were it hundred dollar bills, the stack would be merely 679 miles, just one long day’s drive.