January 29, 2012

Can Economists Pick Winners in the Stock Market?

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Suzy Khimm points us to the latest survey of economists and the general public sponsored by Northwestern University. She highlights their finding that while economists all agree that raising tax rates by one percentage point on the rich would bring in more revenue, only 66% of the public believes this. That’s a big victory for Rush Limbaugh and Fox News. But I actually find this result more disturbing:

Survey respondents appear more confident than economic experts about one’s ability to predict the stock market. In response to the statement, “Very few investors, if any, can consistently make accurate predictions about whether the price of an individual stock will rise or fall on a given day,” 64 percent of economists strongly agreed whereas only 54 percent of the Index sample agreed. [Emphasis mine.]

More accurately, I might find this result disturbing, because it suggests that 36% of professional economists think that lots of investors can consistently and accurately predict the price of a specific stock on a specific day. Oddly, though, the 64% figure for economists is for those who “strongly agree,” while the 54% figure for the general public is for all those who merely “agree.” So perhaps 64% of economists strongly agree with this statement and 36% merely agree. That would be OK. But then again, maybe 36% of economists don’t agree at all. That would be a travesty.

I’m curious to know which it is. But I’m even more curious to know why this survey project reports its results in such an ambiguous fashion and doesn’t make the raw results available. What’s up with that?

UPDATE: Thanks to Twitter, I have my answer. If I had only realized that the raw data was available at an entirely different website, based on a poll done three months ago, I would have gone straight here and discovered that, in fact, 100% of economists agreed with this statement. The only distinction is that 64% strongly agreed and the other 36% agreed.

So the relevant comparison, I think, is that 100% of economists agree with this statement but only 54% of the general public agree with it. It’s not clear to me why the Northwestern folks seem to have rather egregiously fudged that.

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