When an analyst is "shocked", is that usually a good sign?

[Gustaf]

The economy cannot be predicted, pretty much by definition. There is nothing wrong with economists who predict things wrongly.

[Gustaf]

The economy cannot be predicted, pretty much by definition. There is nothing wrong with economists who predict things wrongly.

If, by definition, something cannot be predicted, why would somebody try to predict it?

Perhaps I should have qualified my statement. Some things can of course be predicted. Like, I can predict that China's GDP per capita relative to that of the US will be higher in 20 years than it is now. Or I can predict that the US debt will be higher next year because there will still be a deficit this year. Stuff like that.

But things that one makes money out of can't be predicted. Which is why few real economists do that. Of course, if someone pays you to make up predictions there is every incentive to do so. But thoe guys who make a living out of doing that on tv typically don't know as much as they pretend to.

[Gustaf]

The economy cannot be predicted, pretty much by definition. There is nothing wrong with economists who predict things wrongly.

If, by definition, something cannot be predicted, why would somebody try to predict it?

Perhaps I should have qualified my statement. Some things can of course be predicted. Like, I can predict that China's GDP per capita relative to that of the US will be higher in 20 years than it is now. Or I can predict that the US debt will be higher next year because there will still be a deficit this year. Stuff like that.

But things that one makes money out of can't be predicted. Which is why few real economists do that. Of course, if someone pays you to make up predictions there is every incentive to do so. But thoe guys who make a living out of doing that on tv typically don't know as much as they pretend to.

That's actually the Austrian position you just took, y'know...

Eh...how so?

[Gustaf]

Eh...how so?

That it's impossible to create an accurate economic model because the economy is far too complex and has too many variables to model with any degree of certainty.

(This is apparently an outrageous proposition to some folks, even though it's essentially chaos theory).

Oh. That's just because they don't really understand modern economics.

I haven't studied Austrian economics that much (I have better things to do) but I think what they claim is very different from what I claim.

My claim is simply that future movements of things like stock prices are based on everyone's predictions. Predicting stock prices is predicting what others will predict that others will predict...that can by definition not really be done accurately.

Economic theory is hardly tautological, since a lot of people don't accept even basic concepts of it. Still, a lot of it has considerable empirical support.