Why do we survey economists’ opinions when the majority are wrong?

When it comes to the question of when (and if) the Federal Reserve will raise interest rates, we’re not really sure why the media continues to report on “what economists think“.   It’s clear to anyone who is paying attention that economists are not good at making predictions, and that the consensus of economists has been consistently wrong after every FOMC meeting.

The following chart does a great job of illustrating this years’ track record of wrong-guesses.

Note the first column which shows the confidence placed in a July/August (or sooner) rate hike.  Even in March of this year, the majority of economists still expected a hike over the summer.

june2015_predictionchanges

January 2015: 73% said before September.

 

So now they say September at the earliest

At this week’s FOMC meeting the Fed “signaled” that the rate hike will likely be coming in September at the earliest.  So we feel safe saying that all those predictions of July/August aren’t going to happen.

And when we see a phrase like “September at the earliest“, it’s already clear that our central planners have begun prepping us for a “lift off date” sometime even later than September.

Despite that glaring clue that the date will be pushed back once again, we can’t help but notice that nearly 80% of economists surveyed still believe the rate hike will occur in September.

…And right now the talking heads are on TV again discussing “what economists think” will happen.

Should we care what the consensus believes?

Should we pay attention to their “expert” opinion?

Should we have paid attention to economists back in January when a whopping 73% of them guessed wrong that the Fed would hike rates by this summer?

At the risk of sounding like we’re rubbing it in:  This is no small margin of error.  

But this of course is economics:  Where ivory tower academicians ruminate over politically conjured statistics and ignore inconvenient truths like,  “There has been no recovery to speak of”,  and “Attempting to taper a ponzi scheme will collapse said ponzi scheme”.

Once again we find ourselves entertained as an entire profession of “experts” repeatedly throws darts and misses the board — only to try again next time.  

Stay tuned for the same “experts” to come back with more predictions in September — without a hint of awareness that what they are doing is demonstrably meaningless.

NQ

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  • SevenSons

    Climate science is the same deal. Politically motivated consensus, bad science and industry lobbyists. Actually lots of pharmaceutical research falls into the same category.

  • Nubnub

    They’ll be making the same guesses in 10 years.
    They can’t normalize.

    • End The Fed!

      First there will be another crisis. Then they can start talking about a ‘recovery’ all over again.

  • Melanie

    Seven years later, economists still think we’re in a “recovery”.