Wednesday, June 8, 2016
The certainty of uncertainty...............
Despite the repeated inability of economic forecasting models to predict accurately, there is a persistent belief that there is, if only we could find it, a "model" of the economy that will produce forecasts that are exactly right. When giving evidence to the Treasury Select Committee in the House of Commons, I would sometimes respond to questions by saying, "I don't know, I don't have a crystal ball." Such an answer outraged many Members of Parliament. They thought it was my job to have an official crystal ball in order to tell them what the future held. Any attempt to explain that not only could I not forecast the future, but neither could they, and nor for that matter could anyone else, was regarded with disbelief. Down the ages, quack doctors selling patent medicines and astrologers selling predictions have been in strong demand. Added to their number today are economists selling forecasts, reflecting a desire for certainty that is as irrational as it is understandable.
-Mervyn King, The End of Alchemy: Money, Banking, and the Future of the Global Economy