Claude Rains’ Economics

The only function of economic forecasting is to make astrology look respectable.

John Kenneth Galbraith

Claude Rains was “shocked, shocked!” when he learned that there was gambling at Rick’s in the classic film Casablanca. It appears that certain elites in our society are using the Claude Rains’ gambit.

The phrase “downside surprise” is being used rather regularly. It accompanies virtually every economic report issued, whether it be housing, employment, durable goods, GDP or whatever else.

Just who is surprised? Is it the economists? If so, how smart can they be? They are presumably paid big bucks for their forecasting ability. If there were any validity to their skills, outcomes versus the forecast would approximate a coin toss in the sense that half of their estimates would be too low and half would be too high. All actuals however turn up heads, i.e. on the unfavorable side of the forecasts. In a real coin toss, that is impossible, at least within reasonable probability ranges.

Thus, either they know nothing about their subject or they are engaging in political propaganda designed to fool the masses. It is improbable, even if they knew nothing about their so-called field of expertise, that they could be so consistently wrong. Even the man in the street is not “surprised” by every outcome. Presumably he is not as “educated” as the economists (perhaps that provides an advantage). He lives daily with data, long before some statistician compiles it with whatever data collection errors and seasonal adjustment biases are added. But all economists have access to this data so this cannot be an explanation.

The man in the street is  protecting himself and his family. If his judgments are incorrect, there are costly consequences. It behooves him to evaluate sitatuions correctly.

It appears that the economic forecasters are in the pocket of the political class. Their rewards appear to be based on politically favorable rather than accurate forecasts.

The media, of course, is always “surprised.” We know they do not understand economics nor much of anything else. We also know they have a meme they try to communicate. When the meme is falsified, they have to be “surprised.” The meme today appears to protect the Obama regime. Prior to Obama, the meme was just as predictable — to destroy Bush.

Apparently the only ones surprised are the “elites.” How can people so smart be so consistently wrong?

If I were not of a libertarian bent, I would suggest that a law be passed forbidding the term “surprise” to be used with negative economic data.  Only upside “surprises,” which are truly rare these days, could qualify to be labeled as such.

But that would be thinking like the elitists that want to tell you what to believe and how to live your lives.

I will forgo the idea because there are already too many people trying to pass rules and run your lives.

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