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Forecasting Is Fallible, Yet Necessary

Given that economic forecasters are so often caught out by shocks, one might reasonably ask why they bother. The short answer is that they have no choice, even when they are well aware of the imperfection of their analyses, because people simply cannot live without predictions.

AMSTERDAM – In a complex and uncertain world, making predictions is a fraught business, not least for economists, whose forecasts are notoriously inaccurate. Even worse, economic forecasts tend to let you down just when you need them most. The Nobel laureate economist Paul Samuelson once quipped that “the stock market has called nine of the last five recessions,” which seems forgivable when compared with economic forecasters who rarely predict any.