The NAR's sunshine boys (19 Dec 2007)

Daniel Gross pointed out the obvious in this recent Slate column about the National Association of Realtors: You can't trust anything their forecasters say.

Within the fraternity of financial and fiscal forecasters, the seers at the National Association of Realtors—longtime chief economist David Lereah and his successor Lawrence Yun—may be uniquely ill-equipped to deliver sobering forecasts. They work for a trade group whose mission is to buck up the spirits of real-estate brokers. And real-estate brokers—who live to sell, promote, and market—are constitutionally disinclined to hear anything but good news.

This is apparent to anyone who follows developments in the housing industry in the business press, yet the business press continues to report their meaningless sunshiny accounts of the economy as though it constitutes news, discrediting other analysts across the board. Journalosts could get much more reputable numbers from the National Association of Home Builders, a trade association rather than a sales association, with less of an agenda in its forecasts.

Since economic analysts have such strong incentives to be optimistic -- it's what clients generally want to hear, and optimistic forecasts foment increased confidence, which tends to feed on itself -- a knee jerk pessimism is almost de rigeur for economists who wants to establish their independence. Nothing but innate contrarianism gives incentive to be negative. As a result, bearish views on the economy always seem to be more credible, regardless of the underlying economic data. Of course the data itself can be made to tell whatever story is preferred, if analysts are suitably unscrupulous and the reporters gullible enough. That's why CEPR economist Dean Baker will never run out of material for his blog, Beat the Press, which recounts examples of shoddy or biased economic reporting -- usually this is a matter of failing to give reference points for figures presented for shock value, or neglecting to adjust for inflation, or cherry-picking data, or presenting predictions as facts, or cheerleading for the Dow or the S&P 500 as though investors' fortunes were synonymous with the fortunes of the economy at large. But like the NAR, the business press has the interests of its readers at heart, and seeks to keep them cheerful and reassured.