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Samizdata quote of the day

The idea that an economist is an expert even in Economics is a dubious one. I would like to see two control groups shadowing every team of ‘expert’ economists – one making random predictions, the other a group of astrologers. After five years we compare their predictions for accuracy.

– Samizdata commenter Rob

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28 comments to Samizdata quote of the day

  • bobby b

    Astrologers will likely be very close to economists’ results.

    Back in June, the Economic Times informed us that a majority of astrologers was confident that Brexit would fail.

  • Mal Reynolds (Serenity)

    There are multiple confounding issues for economics that make detailed predictions essentially impossible: 1. The economy is enormously complex. 2. As in anything that touches politics, economics mixes in political/social values with attempts to engineer human behaviour hence technical expertise is never really technical nor expertise 3. As in most subjects there are many specialisations within economics. Whenever newspapers quote “x number of economists say y” they do not specify that these economists’ interests are focused specifically on the issue relevant to the article. Mostly it is equivalent to saying “x number of biologists say y about physics”. You wouldn’t expect Labour Economists to have detailed relevant knowledge on, for example, the impact of interest rates on inflation.

    Having studied Economics at uni and also generally being interested in the subject I can say that at least compared to other social “sciences” there is some appreciation of evidence. I did a few modules on Sociology throughout my degree. Having become used to reading paper after paper discussing datasets, their use, the validity of the statistical analysis conducted etc. in Economics it was odd to read highly regarded Sociology papers that consisted of “this is my opinion. Here is a statistic. Here is another opinion of mine. End”.

    I find the basics of Economics always remain useful. Demand and supply can help make adequate sense of so many other aspects of the world. It is when economists try to go beyond this that everything gets a bit dodgy

  • rxc

    As an engineer, my level of respect for the “experts” in the soft sciences is very close to zero. As Mal says, supply and demand is a good start, but even this fundamental concept falls apart in many everyday applications (gasoline, food, housing), because lots of life decisions include considerations that are more important than price.

    The rest of them should be re-labeled “social studies”. The psychology people can be useful, sometimes, but when their predictions fail, no one holds them accountable. Political studies are just a slight variation on philosophy. The field of polling has fallen into shambles this year, as political correctness has completely screwed up the will of the people to tell pollsters what they really think. We now know what they think only after they get to make a vote, in private. Which may not be a bad thing. And then there is climate “science”…

    When engineers screw up, people die, and engineers are held to account. I know of very few other professions that bear this sort of burden. Even doctors have less liability – “He/she just got sicker and died, and we don’t know how to cure him/her – here is my bill.” Lawyers get to blame the judge and jury, and still get paid. Businessmen blame the engineers for designing dangerous stuff that they sell unknowlingly. Bureaucrats (I used to be one) don’t bear any responsibility for the problems they cause or approve, unless the government (as a whole) assumes responsibility, and then it is actually the taxpayer who suffers. The police have strong unions to protect them when they shoot the wrong people.

  • Cal Ford

    “I would like to see two control groups shadowing every team of ‘expert’ economists – one making random predictions, the other a group of astrologers. After five years we compare their predictions for accuracy.”

    I would like to see this for many fields other than economics! Even a lot of supposedly hard sciences will fail this sort of test. Most scientists I know say that the majority of what is published in scientific journals will turn out to be false.

  • Regional

    Being a pleb the only thing I know is that you have to keep your shit together.

  • ragingnick

    interestingly Simon Jenkins in the Guardian compares the economists predictions over Brexit
    to the intelligence communities predictions over Iraq in 2003

    Economists have completely failed us they’re no better than mystic meg

  • NickM

    I think the thing is that whilst the “Proper Sciences” deal with things they can’t influence economics does.

    The Universe doesn’t listen to what even the most eminent professor of physics thinks but politicians will listen to eminent professors of economics therefore in the latter case they are directly interfering with the subject of study. Frequently they create rather than discover. This is not to diss economics per-se but it is not a science like chemistry. Chemistry is if you add x to y you get a milky white precipitate. Economics can be (and often is) do you want a milky white precipitate? It is engineering not science and engineering by folks you wouldn’t trust to assemble a bird house.

  • NickM

    Cal Ford,
    Yes, that is the case. But it is (usually) honestly false. As my PhD supervisor once said to me, “That is why they call it research.” There is a difference between having a punt at the answer and it being wrong and latter found to be wrong (or perhaps just inadequate due to further discoveries) and promulgating “THE TRUTH”.

  • PersonFromPorlock

    Having a not-so-amateur astrologer for a wife, I am struck by the amount of hard data and methodical calculation she goes through to cast a horoscope. The effort and discipline involved is not unlike what’s involved in ‘technical’ economic forecasting. I have never quite dared to ask her about the accuracy of the results.

  • Mr Ed

    There is economics,which von Mises called ‘the science of human action’, how people behave, given the universal possession of the human mind, and the rejection of polylogism, and then there is the observation of how prices, money supplies and interest rates change, businesses perform and tax revenue varies, which is what is portrayed as ‘economics”, by and large in the media.

    The latter has been a monumental, and hugely succesful, ‘bait and switch’. Those who disparage economics as not ‘science’ have fallen for it.

  • Laird

    Mr Ed, I don’t claim that economics isn’t a “science”, I argue that it is a social science, not a hard one. And as such it is not, and cannot be, rigidly quantifiable. Formulas and mathematical models help to illustrate economic concepts, but that is the limit of their utility in all but the most “micro” of applications. They have explanatory but not predictive value. And that is the inherent flaw in most 20th century economics: the attempt to convert what is merely applied human psychology into a rigorous mathematical discipline. The effort is doomed to failure, as is proven by mainstream economists’ utter inability to explain (let alone forecast) national economies or to prescribe efficacious governmental policies. Most economists are self-deluded witch doctors, and their forecasts no better than haruspicy or augury. Which wouldn’t matter except that the rest of us suffer for their conceit.

  • Mr Ed

    Laird, I agree, the intorduction of maths is a fraud. Economics is about how people respond to incentives and disincentives in commercial interactions, it may show tendencies but it cannot predict. Will Verizon buy Yahoo despite its ballistic trajectory? Perhaps yes, but is it less likely to? Certainly, as the value falls, the deal is less and less attractive, but the valuation of the deal is for Verizon to evaluate, not me.

  • bobby b

    Do we recognize here that there isn’t just “economics”, but maybe “microeconomics” and “macroeconomics” and probably several other fields by now, and that micro, specifically, uses quantitative inputs to produce reproducible and predictable quantitative outputs, without resort to such phrases as “society should . . . ” or “government should . . . ” or even ” . . . is good for people of color and women”?

    I always thought that micro was like predicting the weather tomorrow here in my neighborhood, while macro was more like the current state of “climate science”, with political rather than calculated results.

    Point is, there IS a science of “economics” if you consider math to be a science, but it’s boring and we never talk about it.

    (Explanatory ETA: read the two preceding comments after I typed this one. In my definition, micro is pretty much intra-corp decision-making stuff that has predictive value regarding corporate money supply/allocation decisions. Has good predictive value, and produces new tested predictive models regularly, so something beyond accounting.)

  • Runcie Balspune

    Has anyone heard of The Good Judgment Project, it attempts to identify “superforecasters” who, despite having little or no expertise in the their predictive analysis, manage to get a fair amount correct.

    (website seems to be down).

  • Richard Thomas

    Runcie, sounds like a great way to demonstrate survivorship bias to me.

  • Eric

    Having studied Economics at uni and also generally being interested in the subject I can say that at least compared to other social “sciences” there is some appreciation of evidence.

    I agree with this, though I dislike the fact economics seems to rely so heavily on unfalsifiable models. An unfalsifiable model isn’t evidence; it’s just a sort of educated guess. It’s a useful tool when the “educated” part is based on reason and experience, but often wishful thinking and ideology are dominant.

    Also, very well known economists like Krugman and Piketty aren’t doing the field’s reputation any favors.

  • Mr Ed

    How would you describe someone who makes a living off bookies? Lucky, or skilled? That’s forecasting.

  • Paul Marks

    Economics is indeed NOT about predictions – it is not a physical science. That does not mean it is not a “body of knowledge” (the old definition of a “science”), but the methods of the physical sciences are not correct for economics.

    However, some economists do make important and correct predictions – but they are ignored (even afterwards).

    For example Ludwig Von Mises, F.A. Hayek and the American Frank Fetter all predicted that the Credit Money expansion of the late 1920s (the Benjamin Strong expand the money supply to keep the “price level stable” bubble) would end in disaster – although they could not predict the year it would collapse (just that, logically, it must collapse).

    “Mainstream” economics today ignores the people who got it right (Mises, Hayek and Frank Fetter) and follows the people who got it wrong.

    Ditto with 2008.

    The Credit Bubble “Nobel” Prize winners Krugman and Stiglitz are treated as “great economists” – more (not less) government spending and so on is the doctrine of these “economists” (really astrologers).

  • TomJ

    People may be interested in Paul Romero’s take on the state of modern macro. Drawing parallels with the state of climate science is not difficult.

  • James G.

    Add to this that Stiglitz was part of an audit of Fannie Mae in 2005 which said there was a zero percent chance of failure leading to systemic issues. Witch doctors.

  • Richard Thomas

    Mr Ed, typically, that’s known as “The House” 🙂

  • Regional

    Mister Ed,
    Robbing Bookies can have consequences. The Kray Bothers were big girl blouses.

  • Rob

    I was mostly referring to Macroeconomics.

    Has anyone heard of The Good Judgment Project, it attempts to identify “superforecasters” who, despite having little or no expertise in the their predictive analysis, manage to get a fair amount correct.

    It sounds like an excellent demonstration of “regression to the mean”, or at least those who soon will.

  • The Laughing Cavalier

    As J.K. Galbraith once said “The only function of economic forecasting is to make astrology look respectable”.

  • NickM

    PFP,
    I got into a bit of astrology. This was just before I started my astrophysics MSc. I was (and am) interested in the history of science and how we got from things rising in Uranus to Voyager. It is very complicated and possibly a system of classifying personality types (when you take the whole system with Houses and all and all) much more complex and subtle than anything from Sigmund Freud.

  • NickM

    Mr Ed,
    I am not a betting man (I have other vices) but I once went to the dog track in Belle Vue, Manchester. I had a couple of pints and ignored the pies (which were probs made from the one that finished last a week back). I finished “up” on the night (that’s including the refreshments) notably because I put a fiver on “Dog Rough” (for that was his name) and the little sod romped home at 5-1. I know nothing about the hounds. I just thought the name was funny.

  • Fraser Orr

    Paul Marks
    > Economics is indeed NOT about predictions

    I don’t really understand what that means. If economics isn’t about making predictions what purpose does it serve? In a sense the purpose of all science is building models of the universe in such a way that they can make accurate predictions of the future. So if economics doesn’t make predictions, and if we don’t test the reliability of those predictions exactly what purpose does it serve? Astrology also is a large body of knowledge, and it is at least a little comical and not taken seriously by politicians.

    I also wanted to say what might be obvious, namely that micro and macro economics are almost different disciplines. Microeconomics is an excellent model for making predictions about the economy. Macro is horrible at this (granting the exceptions you offered.) Its worst offense to science is that it is largely unfalsifiable (which puts a fly in the ointment of the OP’s suggestion.)

    To give an example, here in the US we have suffered the flattest growth in a very long time since Obama came to power. When we try to suggest that it was Obama’s economic policy we are met with the objection that “it would have been much worse if he hadn’t saved us.” There is no easy response to that except perhaps derisive laughter. Its complexity gives no end of excuses for being totally wrong.

  • Julie near Chicago

    Regional, the Internet objects to the lack of the colon. S/b

    https://en.wikipedia.org/wiki/Great_Bookie_robbery