Wednesday, July 7, 2010

How Can You Tell Economists Have a Sense of Humor?

Catherine Campbell writes:
They use decimal points.

I kid, I kid. (Besides, that’s an old joke, folks.) But some forecasts for the chances of a double-dip recession have been startlingly precise.

A few days ago, Joseph G. Haubrich and Kent Cherny of the Cleveland Fed wrote that “the expected chance of the economy being in a recession next June rises to 12.4 percent, up from May’s 9.9 percent and April’s 7.1 percent.” Then Andrew Tilton of Goldman Sachs sent a client note last night about his own recession forecasting model, which “has a very low probability (1.6 percent) that the economy will be in recession six months from now.”
Of course, the real problem is that economics is a qualitative science and not a quantitative science. Any probability forecasts in economics are absurd. See Ludwig von Mises on the difference between case probability and class probability.

As Hayek might say, if he weren't so damn polite, "These economists have decimal point preciseness envy." It's probably more of a disorder than selective eating.

My prescription for "economists" suffering from this disorder: Laughing gas, administered three times daily.

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