Economists and Pretty Models

It's interesting to note how we are told 'the models' still work , but for those brief periods when there is crisis. Too many professional economists seem to cling to models and dogma as if stranded on a lifeboat in the Pacific. The truth is that, in the United States, the Great Moderation was a fraud of flat living standards supported by mountains of debt. And the models weren't just wrong during a brief period from 2008-2009; they have been wrong for a long time.

Once upon a time I was involved with formulating statistical models that predicted baseball players future careers based upon their past performance. And the statistics we have for a baseball player are more comprehensive and empirical than what we have for the economy.

But models were only marginally useful in detecting unseen patterns. Usually they told you that if a player was good, he would continue to be until he aged. In real life, exceptions were the rule, even when throwing out unforeseen injuries from the sample. Humans beings are difficult to predict and control, it's just life, and it's good.

Models are fun to play around with, but it's best to not view them as sacrosanct. And though lecturing amateurs can feel - well - 'really good', it doesn't mean much in the end.

As a professional musician, I deal with amateurs all the time - and learn quite a bit from them. Amateurism is a sign of health in a profession. It means people are interested. And when one's field has failed at many of its basic tasks, and basic forecasts, it always a good idea to discard dogma.