Day By Day

Thursday, February 09, 2012

The Surprise Index

The predictions of "experts" are often wrong, sometimes disastrously so. This is particularly true of economists, whose model-based predictions seldom conform to reality. Think, for instance, of how often press stories on the economy are accompanied by the word "unexpected". Just how erroneous economists' projections actually are can be seen in a graph compiled by Citygroup called the "Economic Surprise Index". It measures the gap between expert predictions and reality and it shows that economic predictions are, in Derek Thompson's words, "almost always wrong". Check out the index for the past three years here, and remember it the next time some politician or news person tells you that he or she knows what is going to happen in the economy in the future.

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