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The Forum > Article Comments > The clouded crystal ball > Comments

The clouded crystal ball : Comments

By Tim Pascoe, published 13/9/2013

Economic forecasters can't hit the mark 12 months in advance. Why should we pay attention to 37 year forecasts?

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That's the one, WmTrevor.

>>... 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.
Posted by Pericles, Monday, 16 September 2013 7:20:39 AM
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Thanks, Pericles...

So basically people (as always) are the problem whichever way you look at it. Unless we factor in runner's point:

"Yep ultimately God is sovereign over economic systems and weather."

Which seems to relegate God to being the 'vagaries of chaos theory and inherently unpredictable' or a soverign currency?
Posted by WmTrevor, Monday, 16 September 2013 7:41:13 AM
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sovereign! dammit (I think God just proved my point about chaos
Posted by WmTrevor, Monday, 16 September 2013 7:44:03 AM
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A large amount of time is devoted to economic forecasts on the ABC radio news, no effort seems to be made to check what percentage of previous forecasts have been correct and so decide if economists should be given any time on the programme.
Posted by askari, Monday, 16 September 2013 4:54:46 PM
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To which, askari, the obvious response is:

"A large amount of time is devoted to weather forecasts on the ABC radio news, no effort seems to be made to check what percentage of previous forecasts have been correct and so decide if weather forecasters should be given any time on the programme."

Accuracy is really not the issue. It's about information.

Since economists don't actually control any of the levers that affect the economy - interest rates, commodity prices, taxation rates, inward investment etc. etc. - they can do no more than speculate. Critically, such speculation depends upon which particular "school" they belong to, and how they treat the (many, many) variables involved.

Would you prefer, perhaps, that we don't bother with any forecasting at all, either weather or economy related?

How dull that would be, to be sure.

(Dull, with occasional showers, WmTrevor)
Posted by Pericles, Monday, 16 September 2013 5:47:57 PM
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