All forecasts of postwar deflation turned out to be entirely wrong, as was to be expected. Almost immediately after the end of hostilities a postwar boom began. But the forecasters, in no way discouraged by their errors, stayed on the job. FULL ARTICLE
Source link: http://blog.mises.org/10357/keynesians-cant-predict/
Keynesians Can’t Predict
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“They believe earnestly that their ideas are fundamentally new, unique, and a definite answer to the problems of a competitive economy.”
I’m not willing to concede many weaknesses of Americans with respect to Europeans, but this is a serious one. Americans worship the new, or at least anything that can be spun as new. Ignorance of history makes everything seem new. It’s like we are a nation of Alzheimer victims.
I would have thought that after a period of military Kenesianism (WWII) there would at least be a short recession due to sharp changes in the capital structure as money was finally allowed to shift from military goods to consumer goods.
Tank lines can easily be retooled to manufacture cars and bullet lines are almost identical to lipstick lines – most of the postwar conversions were back to factories’ original purposes(besides, the economy didn’t recover until a short while after the war).
The production of war is a complete waste. During a war, you use valuable resources to built things that are distroyed or destroys assets. After the war, you have items that cannot be used. So if you want to make a prediction, the economy will have to recover from this misallocation of resources.
I have to agree about the validity of economic predictions. Economist would be better off mastering probability theory because it is more about playing the odds than understanding the entire economy.
The one absolute given is every downturn ends in an upturn and every upturn ends in a downturn. The odds of a reversal increases over time and you just have to time it to your target odds.
Or you can play it like Roubini or Schiff, they maintain their position on the downside and they will be right about 30% of the time.
The best argument against the ability of state funded academics to predict anything but the near future is that they are state funded academics. (The near future is somehow predictable, e.g. new car plants are not produced in a day and consumers also seldom decide all at once, that they all need 2 new cars, so car production and car sale is within some limits determined for the next few months.)
Not because being state funded makes them inefficient in producing scientific knowledge – the scientific method is so powerful, that it can even work while being state funded – but because they are state funded.
If their predictions would be reliable in even the slightest way, they could fund themselves by buying the right stocks at the right time.(e.g. just before they publish their prediction, that the recession is over in year X and that the economic behavior until then is Y(t)).
It seems that the notes about Dailies which are re-prints of articles that previously appeared elsewhere have moved from the header to the footer. I prefer the old method – especially for a much older article so that I am in the right context from the start.
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