Greenspan on economists
http://www.examiner.com/blogs/Yeas_and_Nays/2007/9/11/Alan-Greenspans-a-pessimist-on-economists
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Alan Greenspan’s a pessimist on economists September 11, 2:17 AM
Dollars and nonsense
When you gather together three Nobel prize winners, four former
members of the White House’s Council of Economic Advisers, a
Congressional Budget Office head and a former treasury secretary, you
sure don’t expect them to be told that, well, their life’s work has
all been for naught.
But, at a private dinner Friday held at the Washington Club to honor
Brookings Institution economist George
Perry and Yale’s Bill Brainard (both the retiring editors of the
renowned Brookings Panel on Economic Activity), former Federal
Reserve Chairman Alan Greenspan told the audience that economists
don’t really know anything.
“The one thing that struck me is that, despite the extraordinary sets
of articles, insights and analysis by the people in this room and the
other colleagues in BPEA, our ability to forecast the business cycle
has not improved one iota,” Greenspan said. “The best models don’t
work all that well.”
Ouch.
But don’t cry just yet, wonks: Greenspan was actually asked by BPEA
to discuss the inherent difficulties in economic forecasts
(economists are gluttons for punishment, don’t you know) and
Greenspan — in the type of English only he can employ — said the
uselessness of their jobs actually creates usefulness!
“It doesn’t, however, induce us to then conclude that, if the model
doesn’t forecast — which implies that it has not captured the
appropriate structure — we nonetheless tend to use the structure of
the model to do analysis and draw significant conclusions about how
the inner workings of relationships occur even though the
coefficients which we’re employing clearly don’t forecast anything
worthwhile.”
Exactly. What he said.