Economists had a dreadful 2023
grown by an above-trend 3%—about the same as in boomy 2005. Adding to the impression of befuddlement, most analysts were caught out on December 13th by a doveish turn by the Federal Reserve, which sent them scrambling to rewrite their outlooks for the new year. It is not just forecasters who have had a bad year.
Economists who deal in sober empirical work have also had their conclusions challenged. Consider research on inequality. Perhaps the most famous economic studies of the past 20 years have been those by Thomas Piketty and his co-authors, who have found a rising gap between rich and poor.
But in November a paper finding that after taxes and transfers American incomes are barely less equal than in the 1960s was accepted for publication by one of the discipline’s top journals. Now Mr Piketty’s faction is on the defensive, accusing its critics of “inequality denial". Economists have long agreed that America would be richer if it allowed more homes to be built around popular cities.
There is lots of evidence to that effect. But the best-known estimate of the costs of restricting construction has been called into question. Chang-Tai Hsieh of the University of Chicago and Enrico Moretti of the University of California, Berkeley, found that easing building rules in New York, San Francisco and San Jose would have boosted American GDP in 2009 by 3.7%.
Now Brian Greaney of the University of Washington claims that after correcting for mistakes the true estimated effect is just 0.02%. If builders disagreed as wildly about roof measurements, the house would collapse. Think social mobility in America is lower than it was in the freewheeling 19th century, when young men could go West? Think again, according to research by Zachary
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