Why I Never Trust Economists or Weathermen

Consumer confidence was “unexpectedly” lower in May than what economists forecasted. In plain English, unexpectedly means “we didn’t know others would be so pessimistic”. Economics is often referred to as the dismal science. Dismal it is, science it’s not. Anything that’s based upon the emotions of humans can only be considered a guesstimate at best. Macroecomonics – predicting what a collective group of people will do, is like herding cats.

If people were rational all of the time, we wouldn’t have stock and housing bubbles. We could reliably predict the future growth of the economy, and we wouldn’t have had any bank failures. I believe Benjamin Graham’s Mr. Market is a better view of the way people behave. Sometimes people are rational, but other times they are not. Quaint mathematical forumulas work, until they don’t and blow up in 2008.

If I had the chance to start my career path all over again, I would choose to be either an economist or a weatherman. What other field could you be wrong most of the time and still get to keep your job? Weathermen, for example, have access to all this computing power, complex mathematical formulas, million dollar satellites, yet are still wrong at least 20% of the time with the next day forecast! I’m not even talking about the five day forecast, but the next day.

With economists, you have many different predictions from many different pundits. Who is correct? It was once said by Harry S. Truman “give me a one-handed economist. All my economists say, ‘on the one hand…on the other hand’”.

What good is a weatherman’s or economist’s forecast if it’s not accurate at least 90% of the time? How do you weed out the bad predictions from the good? How many times has a pundit made forecasts and been wrong? Yet society on the whole doesn’t ask these questions. We accept these people are “experts”. Most of a weatherman’s education is in communications. Most of their information comes from the National Weather Service, and they mostly regurgitate their information. Yet it amazes me the weather forecast is the most watched portion of prime time news.

My wife used to ask me what’s the five day weather forecast from the news. I explained why even bother getting this information, when it changes so often and many times wrong? It’s a waste of time, a waste of energy, and also the reason why 90% of my portfolio is in index funds. I do reserve only 10% of my portfolio for hedging bets and making risky investments. With that 10%, I know that the “expert” predictions might be wrong, but it won’t affect my retirement portfolio.

If forecasting the weather is a science that is often wrong, but economics is not a science, why should I trust an economic forecast? Take Nobel Prize winner Paul Krugman. He’s given out many predictions, but he’s also been wrong on many occasions. Particularly with his blog with its revisionist history, adjusted statistics to fit his agenda, and mostly shown to be no more than a partisan hack with his statements. Why should I accept an economist’s predictions, when it’s so heavily biased, and in reality it’s opinion? Predicting the future is hard enough when dealing with nature, it’s next to impossible when dealing with people.

Make a Comment

Your Email address will not be published.


Notify me of followup comments via Email. You can also subscribe without commenting.

Reader Comments

  1. says

    I think what kills me with both of these professions is that there is NO REPERCUSSIONS FOR BEING WRONG.

    Seriously, how many times does Al Roker have to be wrong before he gets fired? What is up with all those analysts predicting $200 oil 2 years ago? I bet they all still have a job (well those that didn’t work at Leh at least lol)

  2. says

    You bring up some good points. Not only is it important to beware of investment advice from certain sources, but keep in mind that the source could be 100% wrong! Instead, seek out financial advice on how to manage a portfolio, not what to invest in. I think economists can offer a lot, but if the market was as predictable as many make it seem, wouldn’t we all be rich by now? You’re right – you really can’t calculate something based on human emotion. You can, however, learn how to develop your own instincts.

  3. Joe says

    Good point and I agree 100% about Macroeconomics. There are two many variables that macroeconomic models don’t take into account. I would argue that Paul Krugman stopped being an economist a long time ago though and to lump him in with economists is unfair to the rest of them.

    • says

      For some revisionist history (from his own textbook mind you), check out this article: