folly of econ forecast


Interesting discussion on one of my favorite subjects — The Folly Of Forecasts — on NPR with Chicago/Austrian economist Russ Roberts, now at George Mason University.


Apprenticed Investor: The Folly of Forecasting
Barry Ritholtz, June 07, 2005

The Folly Of Economic Forecasts
NPR, December 7, 2009

Category: Analysts, Economy, Really, really bad calls

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5 Responses to “The Folly Of Economic Forecasts”

  1. Charles Maley says:

    It is tough to make predictions, especially about the future. – YOGI BERRA

    I think we love predictions because if we make predictions, and/or concoct explanations for those events we predicted wrong, then we won’t feel like victims of randomness. We feel more in control. But are we more in control or just intoxicated by some illusion of control?

    Why are we such suckers for prediction?

  2. Machiavelli999 says:

    Here is a thought for Mr. Austrian economist. If he is like most Austrian economists, he is a free market absolutist and the market can do no wrong. Well, if by his own opinion, economic forecasting is pointless AND the market can do no wrong, why does there exist an entire industry around economic forecasting???

    He must either admit that he is wrong that the free market can do no wrong or he must admit that economic forecasting has a purpose.

  3. Climategate says:

    Here’s the must watch clip from Daily Show

  4. Graphite says:

    He must either admit that he is wrong that the free market can do no wrong or he must admit that economic forecasting has a purpose.

    This is exceedingly easy to answer if you’ve ever actually read any Austrian economics. The free market is simply best at delivering consumers what they want, in a subjective value sense. It can provide no guarantees that what they desire is actually in their self-interest, or morally salutary, or what-have-you. (Neither can politicians, but that’s a whole separate debate.) For example, astrology may be absolute bunk, but it appears to be the case that many consumers desire to have their fortunes read from the stars.

    With regard to economic forecasting, many members of the thundering herd known as “investors” desire some kind of logical justification or rationalization for their investing decisions. The state of the economy is one of the most significant sources of uncertainty in modern life. Forecasters provide some measure of relief (justified or not) from that uncertainty.

    It’s a straw man to say that Austrian economics believes that “the market can do no wrong.” This is a school of thought which describes depressions as caused by a “cluster of errors” after all, and not all of them attributable to public policy. However, it is certainly the case that, if left truly unfettered (free to visit rewards upon the prudent and foresighted and disasters upon the reckless) the market will, in very near 100% of cases, do less wrong than government intervention.

  5. tradeking13 says:

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