Kids, just say no to expert opinion.

Kids, just say no to expert opinion.

Times are tough, the people angry, scared and confused. The stock market is roiled by catastrophic loses, and the specter of 1932 haunts it. A shaken public looks to its experts for answers. When will things get better? Next year? The year after? Never? An eminent economist mounts the stage to tell his distinguished audience that, this time, not even massive government pump-priming will save us.

A sound-bite from the evening news? No, just leading economics expert Alvin Hansen delivering his president's address to the American Economic Association at its December 1938 annual meeting. (Held in Detroit. In December. Ten years later another leading economist, Joseph Schumpeter, also delivering his president's address to the Association, would make the speech of his career. In Cleveland. In December. I guess Florida hadn't been discovered yet.)

Why the grim outlook from a leading expert? Because Hansen knew that America would never again know the good times of the Roaring '20s. "We are passing...over a divide which separates the great era of growth and expansion...from an era which no man...can as yet characterize with clarity or precision."

Not that a hazy outlook would ever faze a leading expert. Hansen's pessimistic prognosis:

More than half the impetus for the historic boom America had enjoyed from the 1870s to the late 1920s, a boom that created the world's richest economy, came from population growth driven mostly by immigration. But population growth had slowed by half during the 1930s "and the best forecasts indicate a decline to a third in the decade which we are about to enter [the 1940s]". Declining population meant a vicious cycle of declining market size leading to declining business investment leading to declining consumer purchasing power leading to declining business investment leading to...
The American frontier had closed and, with it, the enormous opportunities for economic expansion it offered. At the same time, opportunities for foreign investment dwindled as well; for example, one of our earliest technology booms, railroads, had been fueled largely by English capital. "No one is likely to challenge the statement that foreign investment will in the next fifty years play an incomparably smaller role than was the case in the nineteenth century."
This country's only hope was technological innovation, but even here Hansen was pessimistic. "The growing power of trade unions and trade associations, the development of monopolistic competition, of rivalry for the market through expensive persuasion and advertising, instead of through price competition" eliminated any incentive business had to invest in more efficient equipment and processes.

So what economic future did this catastrophic and irreversible decline leave his audience to look forward to? "Secular stagnation—sick recoveries which die in their infancy and depressions which feed of themselves and leave a hard and seemingly immovable core of unemployment."

And thanks for coming. Counseling will be available in the lobby for those who need it.

Of course, the next seventy years didn't turn out quite the way leading expert Hansen predicted. Yes, we've hit a few potholes since 1938, but "no one is likely to challenge the statement" that we've had some good times as well. All Hansen missed was:

the war-time economic expansion of 1939 to 1945
the baby boom
waves of immigration, legal and otherwise
forty years of massive Cold War defense spending
declining union power
a technology explosion that changes the business world daily, whether it likes it or not
foreigners buying our debt by the boatload
global investment that internationalizes business and creates a hyper-competitive world-wide marketplace, and
the federal government finally getting the hang of this Keynesian deficit-spending thing

Aside from that, Hanson did pretty darn good. For a leading expert.

But wait, there's more! Move forward a few years, to 1944 and 1945, when leading experts again see nothing but big trouble ahead. Yes, America is winning World War II, but then what? "Back to 1938" say the experts, almost to a man (female economists are rare then) because it's obvious that the Great Depression was licked, not by the New Deal's fumbling and conflicted efforts—seventy years later, pump-priming is still more art than science—but by the all-out expansion of America's economy, first to arm western Europe and then itself.

So what happens when peace breaks out? The answer is irrefutable: millions of veterans dumped on the economy just in time to find all those good-paying defense jobs gone. Income drops dramatically and, with it, consumption and business investment and—bingo—we're back to soup kitchens and 25 percent unemployment.

Not quite. From 1948 to 1955 unemployment averages 4.3 percent, total employment rises 1.2 percent annually and personal disposable income goes up 4.6 percent per year. Leaving the leading experts thinking maybe they'd missed something. Like the wages soldiers and workers hoarded during the war because there was nothing to buy except tanks. Like the pent-up demand for consumer goods building, first during the hard times of the Great Depression, then during the rationing of World War II, consumer goods American business would produce so prolifically after the war that by 1957 liberal economist John Kenneth Galbraith would be saying "enough already".

Whoa! Who saw that coming? Not the leading experts.

How do I know this? No, I'm not a leading expert with all facts and figures at my fingertips, just someone who knows where the library is. I got most of this from Robert Lekachman's The Age of Keynes, published in 1966 and itself an example of how limited the foresight of an economist can be. Lekachman gets the impact of computers right but picks nits with economic performance we'd be waxing nostalgic about only a few years later.

Moral, if any? I'm not sure, but here's a trial version: Since at least the invention of movable type, if not the appearance of the first plausible know-it-all, expert opinion has often been fuel poured on the fires of Everyman's fears, with junior assistant arsonists faithfully fanning the flames like hot dry Santa Ana winds. The contribution of the Information Age has been to turn those Santa Anas into category five hurricanes. But despite what their worshipful followers think, leading experts are human and all too human, prey to emotion, often agenda-driven, with limited comprehension not only of the future but of the past and present.

Which doesn't stop some of us from parroting expert opinion as if it were revealed truth. I'm thinking in particular of dilettantes who load their posts with the latest economic jargon as they prove they don't know how markets work. Much like us mortals, leading experts and their disciples tend to be trapped in today and oddly comforted by the belief that tomorrow will be as bad or worse, pessimism about a dire but known future apparently preferable to anxiety about an unknown future. Certainty is what gets most of us out of bed and out the door. Leading expert opinion as Prozac for the post-industrial blues.

Few of either foresee—or, far less forgivable, admit the possibility of—the apparently random but, in hindsight, often inevitable economic reaction that seemingly comes from nowhere to right or at least change the situation. Both have surprisingly little belief in the resiliency of the object of their mad obsession: American capitalism.

So, kids, just say no to expert opinion. Uncertainty isn't all that bad, although apparently it's hard on the ego. And if, like most of us, you need certainty, then be certain that things are uncertain. Better—or at least more honest—to admit we can't see down the road than to see what's not there.