Friday, October 23, 2009

The day dreams of economic "scientists"

The early morning news today was full of cackle about how Britain will later in the day be deemed to be "technically" out of the economic recession. The economists thought that the figures, when released later in the day, would show that the economy had expanded. Not by much, mind you, just 0.2%. But to the ever optimistic economists, who actually seem to know very little, this meant that we could now see light at the end of the tunnel...

But, within hours the light at the end of the tunnel turned out to be a train coming in the opposite direction!!!

For when the figures were released a few hours later, it turned out that the UK economy had "unexpectedly" shrunk by 0.4% between July and September, making this recession the longest since records began!

It says it all.

The portentous ignorance of the economists and the financial advisers is crushing. And it goes well, as ignorance commonly does, with their optimism.

Every single move, whatever its nature, is hailed as a sign of recovery. When house prices do not fall at the rate they had been falling at previously, this is a sign - to the economists - that house prices are on the rise again! When the pound gains a cent against the dollar, this is a sign - to them - that the recession is over.

And they call themselves scientists. What a joke. What I fail to understand, is why they remain so arrogant.

The BBC carried an interesting report a few months back, about how, in India, people are consulting astrologers on where to put their money. They could actually do worse. They could consult economists!

The correspondent himself went to two astrologers. If my memory serves me right, one of them told him to put his money into something when some star was equidistant from another, while another told him exactly the reverse.

Our economic scientists do not fare much better. But I bet that they charge a good deal more than the astrologers.

Apart from making fools of themselves and giving us all the occasion to laugh at them, their optimism raises a serious neurobiological point.

Alan Greenspan predicted that there will be another economic recession, because humans have an extraordinary capacity for optimism when the going is good.

But it seems that humans, or at least economists, have an extraordinary capacity for optimism, period! Regardless of whether the going is good or bad.


Unknown said...

I agree economists can be unreliable and inaccurate, but so can scientists, I recall the 'barbecue summer forecasts. There are always variables that can mess things up aren't there?

S.Z. said...

But if scientists were to reach such high levels of incompetence, and if a scientific specialty were to lose all the advantages of predictability, they would no longer be called scientists and the subject would no longer be called a science. A little like what astrology is. And economics, it seems to me, has about all the credibility that astrology has.

Unknown said...

With respect Professor, surely just because the practitioner maybe faulty doesn't necessarily mean the profession is as well! 'if a scientific specialty were to lose all its advantages of predictability...' But has it really? Vince Cable, “Dr. Doom” Nouriel Roubini et al. predicted some sort of recession. Fundamentally, is it not true that anything that is measurable can be scientifically studied and predicted? and if economics performance is measurable, surely it must be predictable.

S.Z. said...

I agree that Nouriel Roubini did predict what has come to pass, but he is in a very, very small minority. You say, "If economic performance is measurable, surely it must be predictable". That so many of the great economists, with multitude of prizes under their arms failed to predict the disaster would seem to suggest that economic performance is not measurable at present, or not measurable by the current masters of economics...which explains why they were not able to predict anything.

tk said...

I very much agree with Professor Zeki. While economics does indeed offer explanations for measurable phenomena, its predictive power diminishes as it tries to be more scientific. When I was an economics undergraduate, we learned that economies tend to experience eight- to ten-year business cycles, which seems to be a good rule of thumb that recent events support. The detailed mathematical models turned out to be the least enduring.

Economics can be fascinating for historical explanation, but economists should not imply accurate forecasts can be made. I believe in biological evolution but I couldn’t predict a platypus.

cogitoergosum said...

Alchemy failed because gold can not be produced by ordinary chemical reactions. Tough it can be produced by nuclear transformation, but the alchemists, at that time -Newton included- could not know this.
However, alchemy laid the bais to chemistry.

Par contre, Astrology made no contribution to science never.

Astrology is a pseudoscience and Alchemy can be seen as a protoscience.

From my point of view, Economy is closer to the former than to the last.

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