Stephen Hill has a post on this website criticising the use of the youth unemployment rate as a measure of the extent that joblessness amongst young people is an economic and social problem.
Unfortunately he goes way over the top in a number of regards, notably the claim that: “Economists don’t know how to measure youth joblessness”
Stephen is right that the use of the unemployment rate – which is defined as the unemployed divided by the sum of those in work plus those actively looking for work – can be misleading. Many young people are neither unemployed nor in work, they are in education. So even if a small proportion of all young people in an economy is unemployed, the youth unemployment rate can be high if few youngsters are in work while most are still in education. As he says this can distort international comparisons.
While Stephen Hill may have recently stumbled over this fact, he is wrong to claim that “economists’ (who apparently are all the same) are not well aware of this issue. For example in a recent post on unemployment in Europe I pointed out that the figure for Spanish youth unemployment referred only to those not in education).
In fact there are a whole lot of related measurement ‘issues’ that require careful interpretation and comparison: for instance the definition of ‘employed’ is having worked just one hour during the week prior to the survey. Labour market economists and to some extent also macroeconomists are aware of these issues and use a whole range of indicators to assess the state of labour markets (e.g. employment rates, full-time equivalents, broader measures of labour underutilisation). Each of these measures has its value, but must be interpreted the right way.
It is not helpful to jump on one imperfect indicator and then trumpet that all ‘economists’ are dumb. I make this point not to bash Stephen Hill, who has written much that is worth reading on the crisis and on European integration. I am getting tired of these blanket accusations that a whole professional group is some mix of blind and stupid, and of the repeated erection of straw men by people who don’t take the time to find out what others are actually saying. I was at a conference recently where this appears to have become a sort of sport. (I accept that the pre-crisis arrogance of some economists vis-a-vis other social scientists constitutes a mitigating factor.)
Two prominent examples (which are also mentioned in Stephen Hill’s column) are the GDP/welfare debate and ‘economists didn’t see the economic crisis coming’ routine. But (most) economists know what GDP is (the sum of goods and services produced in a period in a geographical region) and what it is not (an aggregate measure of human welfare or ‘happiness’). And leading economists (such as Sen and Stiglitz) and oft-maligned economic institutions (such as the OECD) have been exploring these measurement issues.
And predicting crises is hard. Political scientists, as a group, didn’t see the collapse of the Soviet Bloc or the Arab Spring coming, but that doesn’t mean they are all idiots. If everyone predicts a crisis it probably won’t actually happen, because counter measures would be taken, and so the prediction would be ‘wrong’. (This is the opposite of what happened to Marx, who deduced the inevitability of system-transforming crises – correctly in terms of the economic institutions at the time – but did not see that measures would be taken to stabilise the system, not least as a consequence of his own predictions.) A severe crisis is, in short, not predicted almost by definition.
Just to be clear, I have long held the the view – espoused in the current debate perhaps most effectively by Paul Krugman – that economics, as practiced in recent decades by most academic economists, is deeply flawed in many ways. But Krugman knows academic economics inside out. I have written a lot about the sort of rethinking in economics that I believe is necessary in the light of the crisis (e.g. here, pdf). But it takes more than straw men and unoriginal critiques to make that point. And it requires some differentiation between different economic paradigms.
It is good that economists are no longer seen as natural scientists with a well-functioning and reliable ‘model’ of the way our economies and societies actually work (and implicitly how they should be made to work). But that does not make them (all) fools.
Update: See comments for a response from Stephen and my answer, plus a number of other interesting comments from readers.