Friday, July 03, 2009

Modeling absurdity

This graph has been making its way around the internet after the release of yesterday's unemployment figures. While it presents an obvious temptation to blast the Obama Administration for deceit, I think the bigger lesson is to pay little attention to such prognostications. The idea that economists are akin to high priests capable of divining the future movements of the economy with any degree of precision -- such as unemployment rates to the tenth of a percent -- is preposterous.

Anyone who claims the ability to know with a high degree of certitude what the unemployment, GDP growth, etc. will be from month to month is either a fool or a liar. While models have their uses, the notion that economists can take a model, plug in some numbers and arrive at a highly accurate prediction of the future movements of something as vast and complicated as the U.S. economy is really rather ridiculous.

1 comment:

Anonymous said...

Why then is the Obama administration doing a ten-year budget forecast? Is it that once you control the entire economy, you can do a much more accurate economic forecast, ala USSR?