So I was digging into the discipline of economics recently, as I had gained more interest in the past few weeks and wanted to increase my understanding more, when something popped out – which I’m sure I’d noticed back in college but this time it hit me a bit differently.
Economists of all kinds try to make predictions by simplifying ‘entities’ into mathematical equations. This applies to both micro and macro economics. On the micro scale, of course they can’t quite get people’s/businesses emotions, philosophies, habits, values, and more into the equations. So there is no context applied to those mathematical equations used to predict future outcomes. The same goes for the macro scale, which is even worse because these equations are used in policy changes and large scale decisions that affect everyone, yet are still missing so much context when you remember that humanity is a major part of the equation and still missing from it.
You see economists on the news all the time making their predictions and playing dice with the future. Surprise, they are nearly always wrong – or only right by accident.
What happens when these analysts make their predictions? Well, people get scared or feel secure and ares subsequently burned later for either/or. Another outcome is people hear the predictions and do nothing, remaining neutral (and who can blame them). We may as well invite tarot card readers to help us predict future markets on micro and macro scales.
The point I’m making is these predictions do nothing for anyone save those who are smart enough to consider all possible outcomes and prepare for each.
This is not to say that predictions are not useful, in fact, I’d go so far as to say they are necessary in order to actually prepare. However, with such predictions (especially those on a more grandiose scale) which affect the welfare of some many lives comes a responsibility to manage how it is communicated.
So what should economists be doing instead? When invited as analysts to speak with the different news stations, they should provide sound advice on what to do in the different possible situations that may arise in the future based on all the multiple predictions that exist, including their own. Providing more advice for preparation than predictions.
Now I’m no economist expert in any sense of the word. I’d say I’m probably below average in my understanding to be honest, but I was irked when I noticed there is hardly any advice given by these analysts.
So what do you think? Do you think economists provide enough useful advice to the populace or do you think they simply stir the pot for the sake of ratings?