More defence
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.
Archive for year: 2010
Careful throwing stones: The employment rate
No Right Turn suggests that John Key is “intellectually shallow” (the Standard makes the same claim) for calling the employment rate the percentage of the working age population employed (ht CPW). I was surprised with this, as that is also the definition I use. Furthermore, it is the definition the OECD uses.
NRT’s belief that the employment rate = 1- UR is wrong, and it would be a relatively pointless statistic to release. However, just because he got it wrong does not lead me to the conclusion that he is “intellectually shallow”. In fact, I will appreciate his posts with the same amount of interest that I usually do. I just suspect that he should be a little more careful before throwing around stones attacking other peoples intelligence.
However, there is one place where I disagree with NRT AND John Key – “catching Australia” is a managerial consultants view of policy, and doesn’t make sense on either economic or social policy grounds. (Comments here, here, and here).
Update: Anti-Dismal agrees that this goal is weird.
Hold up: In defence of macroforecasters
Hold up a second here. My two favourite bloggers have consecutively posted suggesting that macroforecasters are essentially a waste of space (Offsetting Behaviour and Marginal Revolution). As a macroforecaster I am inherently biased, but I think that such forecasters can add value. Let me discuss why.
As I have said in the past, if a forecaster thinks his value comes from the accuracy of predicitons, and sells himself as such, he won’t be adding value. The economic environment is too uncertain, and our forecasting methods too imperfect, to simply rely on forecasting accuracy per see. But given that we can’t provide a perfect version of the future – we must offer something else.
As I have also said in the past, we provide a description of what has happened, a service on the sort of things going on, and a point of view regarding the risks around the economic situation.
I have asked a number of clients what they find useful, and what they want from us, and I generally get told that they like to have information condensed and described in a clear, consistent fashion. Having someone available who is keeping up with the news, and is willing to discuss it at any point has value – and as economists we can also paint risks around the situation, and indicate what “general economic” issues people should keep an eye out for.
The value stems from this service – a service that most private sector macroeconomists are blatantly honest about. Essentially we would never say “this IS going to happen” we would always say “given this set of information, we see this set of potential outcomes, and have this set of probabilities on them – as new information is released we will tell you what this indicates about the general economic situation”. We definitely aren’t there to tell people how to run their business – we are just there to provide information regarding the general environment this business activity is taking place within.
Sure the information may disparately be floating around in places, but we tie it together and use the economic method to interpret it in a clear concise fashion. It is a service, a service people are willing to pay for, and so I would suggest it must have value.
Government fail(ure)
Seriously, why the hell did we ban pseudoephedrine in New Zealand? Has it had any impact on the “external costs of P”?
I know it has had a serious impact on me during this years flu season – given that all the alternatives suck. And I know a lot of people who feel the same.
Dumb policy with a very obvious and high cost and pretty much no benefit. What is this! How does this rubbish get passed.
Links for today
In praise of clear targets for monetary policy: Money Illusion.
Trade-off between gaining knowledge and creating knowledge, at the margin: Worthwhile Canadian Initiative.
These are both excellent posts that I agree with.
Drink heavily tonight
Because it makes you smarter:
(Source Marginal Revolution)
Note: I am joking, this is not causality. For one we don’t have a quantity measure of drinking, and the impact of drinking on intelligence is no doubt non-linear. In fact, you could make the argument that “smarter” people know how control their own alcohol consumption, and so do not face the severe negative impacts of drinking – in a way smart people are more likely to find ways to control, or are not subject to, time inconsistency problems in liqour.
However, I think we should also use this as a reminder that it the link between the consumption of a drug and the drugs impact can be very poorly estimated if we aren’t very careful to control for these sorts of issues – hence why I do not trust a lot of studies out there, especially the ones made by interest groups where all they do is draw lines (95% of studies according to my casual observation).
Update: CPW sent me the link to the full set of graphs with alcohol involved – it is beautiful.