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Economists are better at prediction than the weathermen

OK, so this isn’t going to be an argument about stunning accuracy in anything. But we’ve two massive chaotic systems: the weather and the economy. Chaotic systems, especially massive ones, are terribly difficult to predict. Yet people keep trying with both.

OK, so who is better?

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Posted: 4th, September 2013 | In: Money | Comment


Well of course Economists cannot predict things – it’s rock, paper scissors with graphs

THERE’S a certain loigical problem floating around about what economists can and cannot do. This idea that if they’re all so smart then why can’t they predict what is going to happen? How did we end up with the financial crash if all those clever highly paid people couldn’t see it coming: or perhaps are these people clever and why are they highly paid because they didn’t see it coming?

And the answer there is actually that in most of the things that people want economists to predict economics itself insists that economics cannot predict them.

Oh, there’s some things that are easy enough. If you tax all of the money off all of the rich people then you’re not going to have any rich people and so you’ll not collect any tax. That sort of stuff is simple enough. But if you want to know what inflation is going to be next year, or the price of oil, or the level of the stock market, well, it’s only possible to make accurate predictions about these things as long as everbody doesn’t believe the prediction:

But one of the conclusions of economics is that prediction is literally impossible.  At least public prediction.  If I publicly announce a policy of inflation, to increase growth, and people believe me, then the inflation is anticipated and the real growth effects are just about zero.

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Posted: 6th, February 2012 | In: Money | Comment