Whilst observing our captive economist today prognosticating on growth for different economies across the globe I was struck by the remarkable similarities between this art form and that of general and ancient practices of divination.
One needs a source of divination. For the economist it helps to have a number of charts and usually plots of trends and potentials. All sorts of interesting terms are bandied about to nuance the viewpoint ‘output gap’, ‘trend growth’ or ‘inflation expectations’ but interestingly none of these are wildly different from present levels. All scenarios as merely extrapolations of the ‘known’ when what we are faced with is an unknown and dynamic notional system dubbed ‘the economy.’ I have no bones with the use of these charts to understand and explain economic activity but what I can’t understand is how an economy (being a giant description of a huge, interconnected system of trade) can have a trend growth rate? Or where one can physically observe the output gap?
This to my mind is akin to divination from the charts just as the sages of ancient China used turtle shells burned in fires to read the cracks in the charred shell and offer views on the future. I will take a bold step and suggest that actually the ancient sage’s method was appropriate for the world view at the time just as economic explanations for many modern systems help people make decisions and the future. That may in fact be where the value of economic forecasting lies. It’s never correct but it’s another tool to make sense of the world. Perhaps in the future the science of economic forecasting will be resigned to the scrapheap of obsolete description of the world such as the four temperaments or the celestial spheres.
For my forecast I am selecting the Bible and the Pharaohs dream of seven fat cattle and seven thin cattle. Using this estimate I foresee an upswing in recovery from 2015 assuming the 2001-2008 fat trends persists to the next cycle.