Are economists rational?

25 May, 2013 at 15:48 | Posted in Economics | 1 Comment

nate silverNow consider what happened in November 2007. It was just one month before the Great Recession officially began …

Economists in the Survey of Professional Forecasters, a quarterly poll put out by the Federal Reserve Bank of Philadelphia, nevertheless foresaw a recession as relatively unlikely. Intead, they expected the economy to grow at a just slightly below average rate of 2.4 percent in 2008 … This was a very bad forecast: GDP actually shrank by 3.3 percent once the financial crisis hit. What may be worse is that the economists were extremely confident in their prediction. They assigned only a 3 percent chance to the economy’s shrinking by any margin over the whole of 2008 …

Indeed, economists have for a long time been much to confident in their ability to predict the direction of the economy … Their predictions have not just been overconfident but also quite poor in a real-world sense … Economic forecasters get more feedback than people in most other professions, but they haven’t chosen to correct for their bias toward overconfidence.

Advertisements

1 Comment

  1. I think that the Point is not to be rational (we are not anyway) but ethic.


Sorry, the comment form is closed at this time.

Blog at WordPress.com.
Entries and comments feeds.