More serious than the Reverend Wright controversy and your San Francisco gaffe on guns and religion, was touting the endorsement of 200 economists on the merits of your position on the gas tax holiday. I'm with Hillary on this one, not on the merits of the policy, but on your voluntary guilt by association with economists. Senator Obama, in recent history when have economists gotten it right in forward-looking mode, except by accident or broken clock metaphor? Their monthly job data, economic growth, and capital spending predictions have been embarrassingly off base; providing ample evidence why economics is referred to as the dismal science. Maybe their dismal record results from the faulty data they deal with. Remember the expression "garbage in, garbage out"?

By its very methodology Economics is backward looking and invaluable at describing historical trends, knowledge of which helps prevent the repetition of mistakes. I don't dismiss the value of economists; after all, my daughter is an Economics major (from Wellesley no less). It is their foresight and predictive capabilities, especially at turning points and new paradigms, where they are relatively useless. If conclusions aren't predicated on historical data or accepted principles, they are dismissed, while ignoring current events and common sense. Given their track record one might reasonably expect a modicum of humility, but in that respect economists and their dogma have much in common with the Vatican. Here's an example from direct personal experience - outsourcing and globalization:

During the 1990s technology boom, my firm's corporate clients insisted on quality installations and software. Right after the Y2K concerns concluded, we noticed a newly found emphasis for technology - cost control. At first, and ironically given our closeness to the situation, we didn't grasp the logical consequences of our own work. As our clients increasingly outsourced work to Asia, India especially, some of our technology contact people were let go, replaced by foreign employees of third party firms on H1 visas. Overnight, tech jobs in the US, once considered in the sweet spot of the economy, became an endangered species. As the implications became obvious, my own focus heightened, and a colleague and I began to write about our concerns.

Our objective was to draw attention on the logical impact of outsourcing and globalization on the US social safety net, as terminated employees lost their employer-provided health insurance. But in early 2002, our concerns were considered alarmist, and condescendingly dismissed out of hand by all economists willing to engage. I once asked Paul Krugman, whose writing I continue to respect, about the risks posed by outsourcing. He dismissed the risks as being limited to low-end call center jobs, and in an aside I found endearing, he said it was fine, because it gave opportunities to people and markets less well off.

On another occasion, after writing an op-ed on the win-win wonders of outsourcing witnessed at an India call center, Tom Friedman pointed as proof of benefit to the US economy that workers were using HP computers and drinking Starbucks. When I pointed out to this same author of "The Lexus and the Olive Tree" that those HPs were not produced in the US, nor were the Starbucks coffee beans, his response (to my disappointed amazement) was that at least those company profits would be good for my IRA. He "got it" only a couple of years later, when he published his book "The Earth is Flat" on the challenges and dangers to the US economy imposed by globalization.

In May 2007 after the consequences could no longer be addressed with benign neglect, former Federal Reserve Vice Chairman Alan Blinder, a Princeton professor and colleague of Paul Krugman wrote in the Washington Post:

"I'm a free trader down to my toes. Always have been. Yet lately, I'm being treated as a heretic by many of my fellow economists. Why? Because I have stuck my neck out and predicted that the offshoring of service jobs from rich countries such as the United States to poor countries such as India may pose major problems for tens of millions of American workers over the coming decades. In fact, I think offshoring may be the biggest political issue in economics for a generation."

Finally; but why has it taken at least seven years? For the most part Professor Blinder is recognizing and projecting a trend, rather than making a prediction? Note too he acknowledges the economic Vatican considers his views heretical.

Senator Obama, you are the candidate whose success was largely predicated on judgment, and campaign triumph on a par with Sir Francis Drake's defeating the Spanish Armada. At this historical moment, do you really want to risk it all by closely associating yourself to economists?

Ernie Nounou
ernie@thethinktank.biz

*A graduate of Wharton, Ernie is a Founding Partner of Catalytic Group, Inc., a Technology consulting and execution firm. A former banker he enjoys writing on business topics and can be reached at ernie@catalyticgroup.com.