Snakes in the grass, and other things to avoid

Brian
Brian Jones
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The thing to keep in mind about economic experts is … they’re not.

This is something to remember whenever, say, a premier or cabinet minister gives the electorate a scolding lecture about the importance and wisdom of spending your grandchildren’s money on a megaproject that will mainly benefit mining companies and Nova Scotians.

Many people already know this, of course, which is why premiers and cabinet ministers sometimes resort to hauling economics professors and other financial experts out of their dark offices to explain to the masses why, say, billions of taxpayers’ dollars should be invested in a megaproject that private companies avoided as if it were a beggar with the plague.

This is not a critique of experts, mind you. It takes expertise to blast a rocket to Mars and land a probe without having it shot out of the sky by suspicious Martians. It takes expertise to dissect a five-metre python. (Story of the week: biggest python ever captured in the Florida everglades.)

Astronomy and biology and most other sciences deal largely in facts. Economics, on the other hand, is swamped with value judgments and subjectivity. Famously known as the “dismal science,” it could also be called the “not-a-science science.”

My favourite are the economic experts who give financial advice, most often in the pages of The Globe and Mail, but also in stories distributed by various news services.

These experts, oddly, seem uniform in their belief that the average reader earns a six-figure salary.

A common plight

A typical dilemma they pose goes something like this: Bob and Barb are both professionals. He works for the federal government. She is self-employed. Their combined household income is $200,000. Their $600,000 house is paid for. They have $100,000 in RESPs for their two university-age children. Their RRSPs and other investments total $750,000. They want to know: what further steps should they take to ensure they will be able to maintain their lifestyle when they retire?

One step readers likely want to take is to throttle Bob and Barb for being such spineless worriers.

But then, worry, dread, pessimism and impending doom are essential tools of financial advisers and economic experts. They pull out these tools and put them to merciless use on one of their most brilliant creations: the portfolio.

A portfolio formerly referred to a photographer or artist’s collection of work. Once financial wizards grabbed the concept, though, almost everyone living in the suburbs and holding a decent job could have a portfolio, should have a portfolio and must have a portfolio.

Mutual funds, RRSPs, RESPs and even retirement funds (in the newly widespread defined contribution format) are all part of portfolios of millions of working STIFFs. And they generally receive the same advice: diversify, diversify, diversify. Why? Fees, fees, fees.

Shockingly, capitalism arrived in China in our lifetimes. But never mind the Orient. In the past generation, capitalism has gone where it never went before — into the personal lives of people who are of common stock. It used to be that capitalists were those rare and rich people who owned stocks. Now, just about anyone with a retirement plan or education fund is a bona fide capitalist.

This partially explains why business news has become ascendant.

It’s all perfectly clear

An Associated Press story this week was headlined, “World stocks stutter on gloomy economic outlook.”

Here’s the first paragraph: “Markets struggled for direction in light trading volumes Wednesday though waning expectations of an imminent monetary stimulus in the U.S. gave traders an incentive to book some recent gains.”

The jargon and buzzwords make that sentence incomprehensible. Consult an economic expert about it, but don’t believe a word they

say.

Brian Jones is a desk editor at  The Telegram. He can be reached by email at bjones@thetelegram.com

Organizations: Globe and Mail, Associated Press, The Telegram

Geographic location: Mars, Florida, RESPs China U.S.

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  • Economic science equates into cronyism in the province of Newfoundland and Labrador and I suspect the rest of the World
    August 17, 2012 - 11:50

    Economic science equates into cronyism, especially in the province of Newfoundland and Labrador where all of our natural resources down through the years have been shipped off to other jurisdictions in the raw state to create economies, while our province languished economically. The only ones who grew an economy in our province from such crony decisions were the politicians and the Corporations who had the influence of their ears and became the beneficiary of our natural resources for use in other jurisdictions. The politicians are quite aware of the problems that exist in Newfoundland and Labrador because of the giveaway of our natural resources, but they continue to still give away our resources. For instance the proposed Muskrat Falls project which will produce the most expensive energy on the planet but the energy is destined to be sold cheaply to the Mining Industry and to the province Nova Scotia so it can grow economically. Also we are told the Iron Ore will be shipped out in the raw state. The hydro consumers of the province of Newfoundland and Labrador will be on the hook to pay the exhorbitent monthly mortgage on the project. We have the demographic of having the oldest population in Canada with most of these people on fixed income. It is going to be catastrophic for that demographic and somebody should put their thinking cap on and change the course of that looming train wreck.

  • Jonesism
    August 17, 2012 - 08:09

    I know there have been consultants but I don't think there has been any economics professors "hauled" out by government.