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The clouded crystal ball : Comments
By Tim Pascoe, published 13/9/2013Economic forecasters can't hit the mark 12 months in advance. Why should we pay attention to 37 year forecasts?
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>>... is economics a system (like weather) subject to the vagaries of chaos theory and inherently unpredictable?<<
Economic theory essentially needs the system to be stable - or at least, part of the system to be stable at any point in time - for its forecasting to have any meaning. This is difficult to achieve in a short timeframe, since we humans are involved at some point. The supply side is driven by ambition and greed (that's them banker folk), and the demand side by a need to be noticed (bigger car, newer TV). Hence the day-to-day system is inherently unstable and prone to chaos.
Once you have eliminated this "noise", however, there are some basic truths that allow you to predict quite accurately a longer-term picture, of whether an economy will thrive or dive.
Same with the weather. Short term, will it rain next Friday. Long-term, which direction is the climate heading.
This is a good point too.
>>If weather forecasters were also a causal factor and helped create the 'conditions and environment' for the weather and still got it very wrong...<<
Neither weather forecasters nor economists' predictions have the slightest impact on either the rain or the recession.
We may - or economists may - like to believe that important decisions are made as a result of their pontifications, but look what actually happens. On any day, the government will have a dozen economic forecasts to choose from. They will select the one that is most politically expedient - i.e., they take the decisions they would have made anyway, in the absence of any forecast at all.