25 Aug 2008

Anonymous Surveys Worse than Free Advice

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“The U.S. economy may have avoided a recession but will grow below trend for some time as firms face higher prices for a range of goods that will cut into profits, according to a panel of economists surveyed,” we learn in a CNBC article this morning. As Nassim Taleb demonstrates in his book The Black Swan, the record of “professional forecasters” in these matters indicates a dismal science indeed.

What really bugs me about these forecasts–which never really give you new information, they’re always adjusting the forecasts in light of news that everyone in the market already knows about–is that we have no quality control on the survey respondents. For example, this particular news story is referring to “101 NABE members.” Well how accurate have these 101 people been in the past? Just because they have a PhD–do we even know if they all have PhDs to be called “economists”?–doesn’t mean they are good at predicting economic growth six months from now. I would much rather hear the forecasts from, say, “10 economists who predicted the financial sector was in real trouble by late 2006.”

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