Economists quite literally ascribe to themselves an ability to forecast the global economy. Any doubts about the previous assertion can be found by placing “global recession” into the search bar of your engine of choice.
The arrogance of such a presumption is astounding. As is written here with some frequency, the mere notion of measuring the street one lives on is beyond comprehension. Even one’s own house is a bridge too far. Think about it. After measuring the consumption inside 1234 Maple Street, the more modest of us might stop and contemplate the infinite actions taking place outside 1234 Maple (and around the world) that profoundly inform that consumption.
Economies are just people, and so much of what people do and how much they can do of it is a function of what people and machines do (and don’t do) far from them. Measuring an “economy” is so pointless, and then when the deep in thought operate under the pretense of an ability to measure the world…
Unfortunately, it gets worse. If there’s a justification for what’s unjustifiable (and also wildly unrealistic), it can perhaps be that these monuments to misleading (think GDP) presume an economy in a stationary state. Of course, the latter itself speaks to dimwitted nature of it all. An economy that’s stationary naturally rejects capital and is soon enough not stationary thanks to rapid shrinkage. Which is kind of the point.
The here and now of an economy not only can’t be reasonably measured (see above and the challenges of measuring 1234 Maple Street), but if it’s growing there’s no realistic way to forecast the growth. As Oklahoma State professor Steve Trost puts it, economic forecasts are a fallacy. So true.
That is so simply because what propels us out of the stationary state is surprise. Economic growth doesn’t spring from consumption (think GDP) that can only occur after the actual production (growth) that enabled it, rather it’s about increases in production that are logical consequences of infinite global discoveries of how to do things better than previously done.
In other words, entrepreneurial advance is what drives most advance. The problem is that it can’t be forecast. By definition.
More realistically, if it could be forecast it wouldn’t be entrepreneurial. And it wouldn’t be simply because markets are reasonably efficient. What’s a known, or what’s accepted as a driver of economic advance is what’s already being done. Just as a $20 bill lying on the street doesn’t go long before being picked up, neither does a good idea sit unused. There’s too much money to be made from it.
Which speaks to the genius of entrepreneurs. They’re that way not because they did the expected, but because against all odds and in the face of enormous ridicule, they inserted into the proverbial economic bloodstream an all-new way of doing things. Entrepreneurs by their very description introduce surprise that propels us out of the stationary state.
About these leaps, it doesn’t insult economists one iota to point out that they’re unable to divine the upside surprises that power growth. By extension, it similarly insults economists not one iota that they can’t foretell the commercial concepts that will vanish amid all the growth-boosting surprise.
What insults economists is the forecasts themselves, and that presume an ability to foresee the surprises and shocks (business decline) that are the source of economic advance. At least stopped clocks are right twice a day. The same can’t reasonably be said of any fallacious economic forecast (a triple redundancy), no matter how “accurate.”
