As my first manager used to tell me “forecasting is difficult because it concerns the future”. The difficulty of getting economic forecasts right is reflected in the long list of jokes about economists and their forecasts. Here are some gems:
- Three economists went target shooting. The first missed by a metre to the right, the second missed by a metre to the left and the third exclaimed “we got it”.
- Economists were invented to make weather forecasters and astrologers look good.
- An economist is a trained professional paid to guess wrong about the economy.
- An economist will know tomorrow why the things she or he predicted yesterday didn’t happen.
- Economic forecasting is like driving a car blindfolded and getting instruction from a person looking out the rear window.
- Economics is the only field in which two people can share a Nobel Prize for saying the complete opposite.
- For every economist there exists an equal and opposite economist.
- Economists have predicted six of the last two recessions.
- There are two classes of forecasters: those who don’t know and those who don’t know they don’t know (J.K. Galbraith).
The perils of forecasting and the need for a disciplined investment process
In my full report here, I expand on the perils of forecasting and the need for a disciplined investment process.