I’m not an economist but if I were one I would be royally upset and rightfully annoyed if my longterm forecasts or short-to-longterm forecasts came true. It would mean nobody paid attention to the forecasts or that nothing had changed in the economy, and in either case would indicate that I am not a good economist.
Economic Forecasts Should Always be Wrong
Whether the direction of the forecast was correct or not is what should be noted, not the accuracy of the exact figures.
1% growth.. well, I think we might prefer 2% if 2% is what we get despite the forecasts.
3% shrink.. I’d be happy for 1% if 3% were forecast. I’d prefer a drizzle to a storm.
A Fact Economists Like to Hide
As reported in the Financial Times, Prakash Loungani, an economist with the International Monetary Fund, better known as the IMF, investigated the accuracy of economic forecasts by the IMF, Central Banks and other respected forecasters of economic outlook. He concluded economic forecasts are usually wrong:
[As of 2009] There were 77 countries under consideration, and 49 of them were in recession in 2009. Economists – as reflected in the averages published in a report called Consensus Forecasts – had not called a single one of these recessions by April 2008. – Financial Times
Also from the same article:
More astonishing still, when Loungani extends the deadline for forecasting a recession to September 2008, the consensus remained that not a single economy would fall into recession in 2009.
Economic forecasts are the epitome of failure unless we consider failure to predict an accurate economic outlook to be the model of an economist’s success.
Failure is Success
Economists are the only people who are consistently wrong yet who are still heaped with praise and reward for their failures and who government’s and point-scorers love to quote in debates because the ‘facts’ and figures of economists, though consistently wrong, support their arguments and easily scare people into towing-the-line of the speaker.
Economic forecasts are the nooses that never kill, even when the trap is pulled.
To add icing to the cake, the Financial Times is a pro-IMf newspaper.
Need More Proof of Economic Forecast Failure?
Look no further than Google:
Now the weather forecast… That we hope weather experts can predict with some measurable accuracy. I prefer my barometer, if that gives you an indication of my faith in experts.