Tuesday, August 18, 2009

I'm seeing this more and more

Economists report that the drop in wholesale goods prices is three times that which was expected. Now apart from the wonderful news that prices are dropping (this is the first deflation our nation has had since 1955 or so), there is the interesting reality that more and more often, the actual shifts in our economy are quite different than what economists are predicting.

Now I don't know what the actual statistical significance is here, or whether the econometrics gurus have even come up with a method of calculating confidence ranges. It's not an easy task. However, what I do know is that our nation is using their calculations to set monetary, fiscal, and other policy. It scares me that we're apparently using models that can't reasonably predict results out a month or so to set policies whose effects will be felt for decades.

Time for them (and all of us) to read some Bastiat, I guess, and come up to speed on "that which is not seen."

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