God made economists to make weather forecasters look good.
Hear enough economic forecast speeches, and you’re bound to hear this old joke. And, yes, I’m guilty of using the joke more than once.
Two recent articles put the joke in to perspective.
First the Wall Street Journal editorial board complained that the Fed has history of overly optimistic economic growth forecasts. They note that “Economic forecasting isn’t easy, but it’s striking how consistently the Fed has been wrong in a single direction.”
Remarking on the Fed’s spotty track record at forecasting first quarter growth, the WSJ snarks, “Economists always blame the cold weather, but it is not news that winters are cold.”
In another article, Ireland’s Independent newspaper, pokes at the economics profession:
At one level, it is clearly absurd for the Department of Finance to begin to predict what will happen to the economy over the next five years. After all, the department missed the last financial crisis—along with almost every other conventional forecasting organisation.
However, the paper provides some much needed context, quoting economist Tim Harford (a/k/a The Undercover Economist):
“Economists have allowed themselves to walk into a trap where we say we can forecast, but no serious economist thinks we can,” he writes. “You don’t expect dentists to be able to forecast how many teeth you’ll have when you’re 80. You expect them to give good advice and fix problems.”
Society has always craved certainty—when there is no such thing. We know forecasts can be wrong, but the question we need to ask is whether the forecasts on which we rely so much are just a comfort blanket or whether they are a dangerous delusion.
Many economists have an incentive to provide a “comfort blanket,” while others have an incentive to be wet blanket.
It’s up to an educated public to tell the difference and weigh the evidence.