Once upon a time two famous professors from an even more famous school conducted a study to determine whether there was a relationship between a country’s debt and economic activity. The two famous professors looked in their magic books searching for two numbers: the amount of economic growth 20 specific countries had each year from 1946 to 2009 and the percentage of debt the country had to the total amount of goods and services the country generated in that year (national debt/gross national product). After getting those two numbers for the 20 countries from 1946 to 2009 they played around with the figures to see what they could see, and one of the things they thought they saw was that there was a relationship between debt and economic growth. They thought they saw when national debt/gross national product was above 90% economic growth was significantly less than when debt/gross national product was less than 90%. The two famous professors published their findings in a paper for all the world to read and they became even more famous.
Well, the people-who-like-to-think-before-they-talk said they read the famous professors' paper and loved it so much because it was what they wanted to hear, and they used the paper to stop the government from spending money, which meant people lost their jobs or didn’t get hired because the paper said that is what you do to make things better. That’s right, they thought if you fire people from their jobs that will help them get jobs. Yeah, yeah, I know it makes no sense but consider this idea came from the people-who-like-to-think-before-they-talk; they always think they are right even when their ideas are obviously silly. They don't respect reality and think they can create their own. So, some people lost their jobs, other people were never hired, people struggled to pay their bills and buy stuff they needed, and the people-who-like-to-think-before-they-talk were very happy because they got their way.
And then along came a 28-year old Prince, who wasn’t famous or even a professor. He wanted to read the famous professors’ paper so he could learn how to become a professor…maybe even a famous professor, too. So, he read the famous professors’ paper and checked to see if the famous professors’ paper was correct. The Prince tried and tried but he kept getting answers different than the famous professors' answers. So, he wrote the famous professors and asked if they could send him their research, which the famous professors sent him. Only then did the Prince find out the famous professors paper was wrong. Not a little bit wrong, not sort of wrong, not kinda wrong, but completely wrong.
The Prince found out that the famous professors had made three mistakes, which was surprising because the famous professor's paper was not very sophisticated. The first mistake was the famous professors didn’t use the computer program that added up and averaged their numbers correctly. This is a mistake high school students make and not professors, especially famous professors, but when the famous professors found out about this mistake they said “my bad”, because there was nothing else they could say. The second mistake they made was that they did not include five years of data from Australia, four years from New Zealand, and five years from Canada. The famous professors claimed they didn’t include this data because it was not available. But the Prince found the data and included it in his work, because he was willing to work extra hard so he could become a famous professor one day. The third mistake the famous professors made was they averaged the figures in an unconventional way and didn’t tell anyone. To explain what they did is hard but using baseball statistics should give you an idea.
Consider a player on a team who bats 500 times in a year and gets 250 hits. His batting average is .500. Another player on the team bats three times in a year and gets no hits. His batting average is .000. If you want to know the batting average of the two players together, you take 250 hits divided by 503 at bats and come up with an average of .499. But what the famous professors did was to effectively add up the average of the first player - .500 - and then the average of the second player – .000 - and then divide by two, which resulted in an average or .250. This is obviously wrong – the average for the two players is not .250 but rather .499 – which any 12 year old American boy who is a baseball fan could tell you, but, evidently, the two famous professors weren’t baseball fans or were sick and missed the class in high school that covered weighted averages. In short, the famous professors’ didn’t weight the averages like they were taught in high school, which made their results all wrong.
So, the Prince got help from his teachers and they wrote a paper saying that the famous professors’ paper was wrong and a country could have debt that was higher than 90% of their gross national product without any significant impact on economic growth and a shit-storm ensued. Yeah…I know shit storm isn’t a very nice thing to say but that’s what happened…so don’t tell your mother I used such foul language but it is useful in this story because in the economic community a shit-storm is what it was. The Prince and his teachers were interviewed on TV and the radio. Newspaper writers, TV show announcers, economists, businessmen, politicians all claimed to read the famous professors’ paper, which was wrong, and the Prince’s paper, which was right, and didn’t know what to think. The Prince’s paper told them things they didn’t want to believe and the question was whether it would change anyone's mind. Who knows? So far we know that the people-who-talk-before-they-think continue to talk and say that reducing government spending that lays people off of work will increase economic growth and create jobs for the people fired. They believe this even though the Prince’s paper says otherwise. Sadly, this is the world we live in. People believe what they want to believe even if what they believe is contradicted by logic or facts because don't like to admit they are wrong. We live in an age of opinion where facts, analysis, conclusions, refining conclusions, and truth are no longer respected. It reminds me of the story of the King who had no clothes. Do you want to hear that one before you go to bed, it’s my favorite?