28 – A Stormy Conversation

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Meteorologist: “Ah, I see your name tag there. Nice to meet you. What brings you to the party?”

Economist: “Oh, well my wife is a friend of the family. I’m just tagging along.” 

M: “Me too! So, what do you do for a living?” 

E: “I’m an economist.” 

M: “Ah, we’re in similar professions. I’m a meteorologist.” 

E: “Hmm. Not sure that our fields are that much alike. While we’re both in the prediction business, my goals are considerably more ambitious.” 

M: “Oh, how so?”

E: “Well, we economists are in charge of fine-tuning the levers of public policy to ensure a smooth-running financial system.”

M: “Ah, I see. Well, unless I start seeding more rain clouds with iodide, I guess I’m stuck just making predictions.” 

E: “Indeed.”

M: “Since you’re able to control things so effectively, I’m guessing that your predictions about the economy are pretty accurate?” 

E: “Ah, well, ah, it’s a bit more complicated than that.” 

M: “Uh huh. Well, you are the one who mentioned something about ‘fine-tuning’ the economy. That would imply a certain level of precision, wouldn’t it? And as far as things being complicated, my weather systems are pretty complex too. You also have an additional factor working in your favor. In some instances, your predictions may become self-fulfilling. If people really believe your prognostications, then the financial markets may move in the direction you predicted. Which would seem to open up the potential for economists to abuse their position by manipulating public perception, rather than dispassionately making predictions based on the data. Unfortunately, the weather doesn’t cooperate that way. Mother Nature has her own ideas. So, how exactly is your track record predicting the future path of the economy?” 

E: “Well, as I said, it’s very complicated due to the extremely large number of factors involved. All of which interact in complex ways, with feedback loops and such. Very challenging to predict.” 

M: “How about something simple? Like the price of oil? I recently read a news article about the track record of economists, oil traders, and other experts who predicted the future price of oil in exactly one year. The results were pretty awful. Not much better than mere chance. You might as well have flipped a coin.” 

E: “Ah, well we use more sophisticated methods now. We employ artificial intelligence embedded in complex mathematical models.”

M: “Well, it said in the article that every other method examined was worse than using one simple strategy. Financial models, statistical models, and surveys of experts were all considerably worse than the simple strategy. And even the simple strategy was pretty bad.”

E: “Oh, and what was this amazingly simple strategy?” 

M: “To predict that the price of oil tomorrow will be the same as it is today. My five year old could do that. And his weekly allowance is only fifty cents. I wonder how much economists and oil experts get paid?” 

E: “I see. Well, that sounds a lot like your hurricane tracking method. Wherever the hurricane is currently going, just predict that it will keep moving in the same direction!” 

M: “Well, not exactly. Our research shows that we can do much better than that.”

E: “Like Tropical Storm Fay in 2008? It made landfall in Florida four times as it zig-zagged around the state. Spawned 81 tornadoes and killed 36 people. How was your track record on that one? And regarding predictions about the price of oil one year from now, how about you meteorologists telling me if it is going to rain on my daughter’s birthday party next week?

M: “Hey, is it my imagination or did you just change the subject? Your overall track record seems pretty bad. And I’m not the one claiming the ability to control the weather. Why do you economists think you’re entitled to manipulate the levers of a complex, dynamic, nonlinear, and chaotic system like the economy? What hope do you have of coming even remotely close to achieving your goals? If you really can fine-tune the dials as you claim, then shouldn’t your predictions be more accurate than mine? After all, Mother Nature calls the shots in my field. I thought you were in charge of yours.” 

E: “Well, not exactly. It is true that we pull the levers, but we’re just following orders.” 

M: “Orders? From who?”

E: “Our overseers.” 

M: “And who might they be?”

E: “Well, in sophisticated circles, they are reverently called the ‘political class’. To be honest, though, that’s a bit of a misnomer.” 

M: “Why is that?”

E: “Well, they can be pretty dictatorial at times. Always making veiled threats that if we don’t do as they say in order to get them re-elected, then we’ll be out of a job.” 

M: “Haha. We had a president once who re-drew our hurricane maps.” 

E: “Why can’t these politicians leave us alone?”

M: “I dunno. We meteorologists are usually left alone to follow the science.” 

E: “Well, not us. We’re never left alone. And to make matters worse, some of us prostitute the profession by saying whatever the politicians want to hear. Of course, they get all the plum jobs. The only way to really hear the truth is to listen to the economists who are not working for the government.”

M: “Really? I’m not too sure about that. Corporate economists also seem to follow whatever their employers want them to say. And Wall Street economists do the same. Even academic economists always seem to be pushing a particular agenda. They’re constantly looking for data to support their preferred narrative. Seems pretty subjective.” 

E: “Yes, well life is complicated. Hard to be objective when human behavior is involved.” 

M: “Well, if you ask me, things look pretty bleak in your profession. By the way, do you work for the government?”

E: “Yes indeed.”

M: “Then I should ignore whatever you say↑?” 

E: “Of course not! I don’t engage in that sort of sycophantic behavior. I’m a professional with rigorous standards!” 

M: “Hey, isn’t that Senator Walter Windbag over there? Wow, this is a pretty impressive party, huh? A United States Senator! One of those revered politicians you were talking about.”

E: “Ah, excuse me, but did you say Senator Windbag is here?

M: “Yes, he’s across the room over there, surrounded by those sycophants you were referring to.”

E: “Ah, yes indeed. Well, I’m sorry my dear, but I really must be going now. It’s been a pleasure speaking with you.”

M: “The pleasure was mine. Good luck with your future predictions!”

E: “Why, thank you. And you as well. Good day. Ah, greetings, Senator! How are you this evening? Such a pleasure to see you again!”

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