Day By Day

Monday, March 30, 2009

An Uncomfortable Truth

Writing in the New York Times, Yale economist Robert Schiller discusses an approach to understanding the behavior of markets based in social psychology, a perspective favored by Larry Summers, Clinton's Treasury Secretary, former President of Harvard, and now top economic advisor to Barak Obama. In the course of that article Schiller makes a remarkable admission:

Of course, forecasts based on a theory of mind are subject to egregious error. They cannot accurately predict the future. But the uncomfortable truth has to be that such forecasts need to be respected alongside econometric forecasts, which cannot reliably predict the future, either.
In other words, we're flying blind and don't have a clue as to either the short or long-term consequences of present economic policies. Yet such is the impenetrable arrogance of the current administration that they are willing to make wild gambles with our nation's future based upon admittedly inadequate predictive models.

Read the article here.

Be afraid..., be very afraid!