Abandoning Economic Models

I’m currently reading Nassim Taleb’s latest book “Antifragility: Things That Gain From Disorder“. He doesn’t pull any punches with his dislike for economists. He thinks they’re charlatans who suffer from physics envy and calls their platonified knowledge the symbol of “Soviet-Harvard” intellectualism.

Let’s go back to square one.

Forecasting is impossible.

Taleb argues that we can however recognise things that are fragile (big banks, dictatorships etc.) and make some prediction that they’ll collapse eventually to some external shock.

On the other hand, many economists live in a magical unicorn fairy world – Taleb calls them “fragilistas” or “interventionistas”.

They think the problem with their predictions is that they don’t have enough data.

Ignoring Occam’s Razor, these charlatans are everywhere in our economy and in our institutions.

Would it really be so hard for economists to admit that they are full of it?

The most honest thing economists can do is explain likely consequences of different policies with a huge caveat – there could be stuff we didn’t think about that might make this entire document null and void.

All of this forecasting business is ridiculous.

The idea that a central bank or Treasury economist can be all knowing is hilariously close to Soviet “5 Year Plans”.

We all know how those worked out. And we all know that “Top Predictions For 2013!” never bear out.

Just look at Treasury and the Reserve Bank’s forecasting since the Global Financial Crisis.

They really need to stop embarrassing themselves and just give up.

Focus on reducing fragility in the system – that means elimination of big banks and deficit spending.

Please share your thoughts below. Why do economists keep forecasting when they are always wrong? Do they have substantial ego investments in their predictions so large they ignore sunk costs?