• The kind of man who wants the government to adopt and enforce his ideas is always the kind of man whose ideas are idiotic. – H.L Mencken

Economists can't predict

Posted by Sukrit Sabhlok on 11th May 2011 5:50pm

The failure of economic modelling has become painfully obvious. Terry McCrann makes the point well ("Treasury is no longer a bastion of reason, The Australian):

[L]ook at the accuracy of Treasury’s modelling of the budget and the economy.

In the 2007 budget, it projected the economy would grow 4.25 per cent in the 2007-08 year. It grew by 2.7 per cent. It projected a budget surplus of less than $11 billion, it came in (adjusted) at $27 billion. Indeed, it was still $3 billion out in the 2008 budget, when the year was already almost over!

It can’t get within cooee of the year ahead, yet it expects us to believe that it can “accurately’ project growth out to 2050. Assuming a whole series of complex behaviours in the entire world!

That economists can't predict accurately was explained many years ago by Ludwig von Mises in his "Epistemological Problems of Economics".