Free Republic
Browse · Search
News/Activism
Topics · Post Article

To: Sunnyflorida
well it does not help the image that the ‘experts’ on the economy are surprised every time economic stats are released - i am wondering how experts are always wrong but retain their title of expert
75 posted on 11/20/2008 9:32:44 AM PST by sloop (pfc in the quiet civil war)
[ Post Reply | Private Reply | To 69 | View Replies ]


To: sloop

“i am wondering how experts are always wrong but retain their title of expert “

It is the concept of false precision. I had this job doing IT research and put in one of my first reports that some product should get 40% market share. One of the veterans at the firm told me to, “never do that, even if you are guessing or some survey comes back at exactly 40% say ‘39.7%’ it sounds more precise.” I think that is what most economists are doing. They have an idea but to present the statisical uncertainty is just too hard for most people to grasp. Instead they put out a number even though getting to that level of precision is impossible. When I used to forecast earnings for a living I knew that being wrong by a penny would mean a stock could go up or down 5-10%. Meanwhile there are ALWAYS so many variables such that if you can get within 10% you are amazing and lucky. Crazy.

It is like the weather. If you live in Florida and all weekend it is in the 70s and you forecast 70 for Tuesday and it turns out it goes down to 44 you are an idiot. But if you forecast 43 or 45 or maybe even 42 or 48 you are pretty good - acceptable. But for an economist or analyst to pretend to be more precise is nutty but that is what people want. So they do it. People that out stock in false precision are fools. People that get buy with it are rich.


89 posted on 11/20/2008 9:44:59 AM PST by Sunnyflorida (Unless you are nice and thoughtful you will be ignored. Write in Thomas Sowell.)
[ Post Reply | Private Reply | To 75 | View Replies ]

Free Republic
Browse · Search
News/Activism
Topics · Post Article


FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson