"What a great site! I'm impressed by the great stuff you've pulled together. It merely confirms my long-held belief that economics CAN be interesting....
All the best"-
Charlie Wheelan,
aka The Naked Economist
This is just another example that shows that no matter how far society and technology advance, we still can't predict the economy's future. If an ex-Fed chairman was completely wrong about the future economic state, that doesn't give the rest of us much hope. This is the reason why the Fed has to survey the current state of the economy so thoroughly when determining interest rates for the future. No one actually knows whether raising, lowering, or not changing the interest rate is best for the economy. Economics is all about inference and working with what you do know.
The accuracy of predictions of recessions is very low as shown in this article. As one professor of economics put it, they "have successfully predicted nine of the last five recessions." Yes it is probably very hard to predict recessions since there is no recessional cycle, but they should try a little harder to make them more accurate. That is what theyre getting paid for. The last recession in 2001 wasnt even supposed to happen according to economists, so are we to believe that there will be one in the later months or 2007; or just ignore their "predictions." Their unreliability is leading to mistrust and that probably isnt good for the economy either.
It is so hard to predict the ups and downs of the economy, especially the downs, because it is simply hard to predict the future. Economics is not a pure science where formulas and theorems work perfectly for classifiable specimen, it is the study of human behavior, and human behavior is far from predictable. Also many unforeseeable events can negatively affect the economy at a moments notice, so how can economists ever hope to be accurate in predicting recessions? One thing I did notice is that when a prominent economist like Greenspan predicts a recession, the economy automatically falters. So wouldn’t it be better to always predict progress and growth, keeping people happy and confident, because economics seems to be a game of psychology. Then when the economy does actually have a downturn for a more concrete reason than confidence, the economists can become realists, and try to find out why it did so and how to fix it.
In this ever changing economy that we live in it is very difficult to make perdictions about future happenings. There are so many factors that determine what will happen that it makes it very unlikely one will be correct. Still the graphs and analsysts are still useful even if they are not always correct 100 percent of the time they can give good data and help people make better decisions for the future.
its scary to think that with all the technology and knowledge that we have today,we still cannot predict how rocky the market can sometimes be, and i agree with scott that this is probably causing people distrust in the market which is the last thing we need right now. but it just goes to show you, that although we may try, even the most highly educated and experienced cant control/predict everything.
5 comments:
This is just another example that shows that no matter how far society and technology advance, we still can't predict the economy's future. If an ex-Fed chairman was completely wrong about the future economic state, that doesn't give the rest of us much hope. This is the reason why the Fed has to survey the current state of the economy so thoroughly when determining interest rates for the future. No one actually knows whether raising, lowering, or not changing the interest rate is best for the economy. Economics is all about inference and working with what you do know.
The accuracy of predictions of recessions is very low as shown in this article. As one professor of economics put it, they "have successfully predicted nine of the last five recessions." Yes it is probably very hard to predict recessions since there is no recessional cycle, but they should try a little harder to make them more accurate. That is what theyre getting paid for. The last recession in 2001 wasnt even supposed to happen according to economists, so are we to believe that there will be one in the later months or 2007; or just ignore their "predictions." Their unreliability is leading to mistrust and that probably isnt good for the economy either.
It is so hard to predict the ups and downs of the economy, especially the downs, because it is simply hard to predict the future. Economics is not a pure science where formulas and theorems work perfectly for classifiable specimen, it is the study of human behavior, and human behavior is far from predictable. Also many unforeseeable events can negatively affect the economy at a moments notice, so how can economists ever hope to be accurate in predicting recessions? One thing I did notice is that when a prominent economist like Greenspan predicts a recession, the economy automatically falters. So wouldn’t it be better to always predict progress and growth, keeping people happy and confident, because economics seems to be a game of psychology. Then when the economy does actually have a downturn for a more concrete reason than confidence, the economists can become realists, and try to find out why it did so and how to fix it.
In this ever changing economy that we live in it is very difficult to make perdictions about future happenings. There are so many factors that determine what will happen that it makes it very unlikely one will be correct. Still the graphs and analsysts are still useful even if they are not always correct 100 percent of the time they can give good data and help people make better decisions for the future.
its scary to think that with all the technology and knowledge that we have today,we still cannot predict how rocky the market can sometimes be, and i agree with scott that this is probably causing people distrust in the market which is the last thing we need right now. but it just goes to show you, that although we may try, even the most highly educated and experienced cant control/predict everything.
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