Ok, so there were a couple of comments in the previous post that I think I need to discuss in order to explain why macroforecasters have value.
First, from Eric Crampton:
I think both Falkenberg and Cowen are going after the ones selling themselves as having crystal balls, not the folks who are providing specialized reports for specific clients on how the likely macro environment, which everybody knows about, is likely to affect those clients in particular (bolding by me).
The thing is, no-one knows about the macro environment – this is the gigantic kicker. It isn’t necessarily about theory, or about have the information around, it is about framing the information and making it useful. Firms have a great idea about their own firm, they have a relatively good understanding of the specifics of their industry, but they are most uncertain about the macro environment.
And that is one of the key things macroforecasters provide, they provide a service that brings together information, describes the economic situation given that situation, and then discusses risks heading forward – for some reason there is this impression that either:
- This is a useless service or
- This is an unnecessary service
But I think all you have to do is look around economists, and see how much they debate each other about “what has happened” let alone what is going to happen. In such a case, having someone you can trust to give you a consistent and open explanation of such events probably has a bit of value right.
Just because all the bits are available doesn’t mean there isn’t value in a service that puts it into something workable and useful – I would have assumed that people would have at least recognised this point.
Also, Paul Walker stated:
That’s only because macro is witchcraft while micro is actual economics!!!!!
If there is a micro question I would trust a microeconomist more than I would if there was a macro questions and I had an answer from a macroeconomist.
However, part of the reason for this is that the questions are so very different. If a microeconomist thinks they can build a better macro model then they should really just do it or STFU.
Why do I say this? I was initially trained with micro, I have a slight understanding of how micro models work. And trying to apply that level of detail to an aggregate economy would be nigh on impossible.
Macroeconomists are forced to use more imperfect tools because of the way their questions work – not because they are necessarily inferior.
Update: Anti-Dismal comments here. He suggests you read his comments and Eric’s – and you should. But in that case don’t forget to read my comments.
I’m sticking to my guns here that a lot of the criticism falls in these two camps:
- Macroforecasting isn’t being compared to an appropriate counterfactual,
- The service value of the product appears to be virtually completely ignored – which is a pain given that this is the primary purpose of it.