Economic Forecasting? Why Not Better Data Analysis?

June 9, 2010 10:30am by Barry Ritholtz

One of the things I find perplexing is the seeming obsession with economic forecasting. Especially, when one considers, who poor economists are as a profession at forecasting the economy.

Real Time Economics looked at this yesterday evening. As a whole, economists are “striving to be better forecasters.

Perhaps that is the wrong goal. I believe the profession would be much better served if they were better interpreters of the current data. As we have noted previously, Forecasting is folly, and the sooner the dismal set figures this out, the better we all will be.

ISI and ECRI are two of the few firms that seem to get things a lot more right than wrong. They each try to put economic data into the context of the cycle — rather than take a snapshot, they look at the whole movie.

Meantime, with the Fed and other banking sectors suck in the old paradigm of forecasting (miss) forecasting (miss), we should not expect much int he way of improvement anytime soon.

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UPDATE:

Jim Bianco points to this track record of Economist forecasting: Inflation good, Interest rate bad:

click for larger table:

Previously:
The Mystery of the Awful Economists (March 2nd, 2005)

Why Economists Missed the Crises (January 5th, 2009)

Source:
Economists Strive For Better Forecasting Regime
Real Time Economics
June 8, 2010, 5:06 PM
http://blogs.wsj.com/economics/2010/06/08/economists-strive-for-better-forecasting-regime/

More related posts after the jump

Apprenticed Investor: The Folly of Forecasting
Barry Ritholtz
TheStreet.com 06/07/05
http://www.thestreet.com/story/10226887/apprenticed-investor-the-folly-of-forecasting.html

The Mystery of the Awful Economists (March 2nd, 2005)
Part II
Part III

Mathematicians – Not Economists – Should Run the Fed (May 4th, 2010, )

How Economists Got It Wrong (September 6th, 2009)

RIP Chicago School of Economics: 1976-2008 (December 23rd, 2008)

The Illusory World of Economic Forecasting (September 19th, 2006)

Read It Here First: “What Good Are Economists?” (April 25th, 2009)

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