The Patriot Post® · In Brief: Economic-Development Agencies Make Promises They Can't Keep
The work of prognosticating broad economic trends is more the stuff of an educated guessing game than simply plugging in numbers and calculating the outcomes. As Wesley Davenport, economist and research fellow at the Center for Economic Accountability, explains, “Economic analysis is about broad trends, not specific details.”
Sure, economists have models, and those models give us insight into what is likely to happen — within limits. But those models cannot predict economic indicators and outcomes to the nth decimal point. An economist may suggest that the inflation rate will increase if the Federal Reserve prints more money, but he can’t reliably predict by how much inflation will increase.
Large companies hire teams of economists to help them attempt to predict consumer trends and respond to them. And Davenport notes that economists “are great at providing a sense of the current state of affairs and where we might be heading, but detailed predictions fail more often than they are proved true.”
You’d never know this from the constant stream of press releases by economic-development agencies that claim that a particular taxpayer-funded subsidy will, say, “create 2,450 jobs.” Not only is it impossible for economists to be this specific, economic-development agencies also lack any alternative to compare these projections to.
Yet economic-development agencies do play this game of predicting the exact impact of economic trends on a given market.
Whatever it is those economic-development agencies are doing to come up with their numbers, it’s not economics. It’s marketing for a public-policy decision that has already been made, and if truth-in-advertising laws applied to the government, they’d be in trouble for it. The future of the economy is unpredictable because “the economy” is what happens when every person goes about their daily life, making decisions and dealing with expected and unexpected situations.
In other words, what these economic-development agencies are really engaged in is more politics than economics. As Davenport concludes:
America’s economic-development agencies cannot predict, let alone manage, the future — not because they lack expertise but because it can’t be done. Yet they continue to try, and they use your tax dollars to do it. American communities would be better off if these agencies cut the pseudoscience and stepped aside.