September 10, 2009

Economists as Prophets

The Age:
Professor Roubini embodies the old joke that a good economist is someone who accurately predicted nine out of the past two recessions.
Update: My friend Amy Wang sends in with a nice story:

In one of my economic lecture, when the professor Tony talking about the basic assumptions about economic theory, he said that Let's assume there is no arbitrage in the world, and then some students look at him doubtfully, then he said" Hey, we are economists!"

I think it is the assumptions behind the theory that make it hard to apply to the real world and fail to predict with accuracy about the past and future events.

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