Nouriel Roubini is an economist famous for predicting the current market downturn. Because of his accurate predictions, everyone is swinging from his sack. Should we, though?
There are thousands of economists in this country. Many of them have made predictions. Many of them made predictions about whether or not we were in a housing bubble; and whether or not the bursting of the bubble would cause a recession.
Let's say there were 100 economists opining on this issue. As a matter of chance alone, wouldn't we expect at least one person to have made mostly accurate predictions?
Are we, Nassim Nicholas Taleb might say, being fooled by randomness: Are we seeing a causal connection where none exists? Are we seeing a prophet where instead we should see a dice player?
Also, what is a prediction, exactly?
For years Roubini has claimed that were were one step away from a recession. If you say that every year, you'll eventually be right. Does that mean you made a prediction? Or did you simply note that a high-probably event would eventually occur?
I can say, for example, that you (whoever you are) are going to die. I will say that you will die this year. If you surive this year, I'll say that you will die next year. Eventually you'll die. Do I then get to say, "See! I told you so?!"
Roubini (who I think is right; though that's probably only because his analysis mirrors what I have been saying) kept saying we'd face a recession. Well, here we are. Should we really give him credit?
After all, recessions do tend to occur. Claiming that we're going to eventually face a recession isn't exactly controversial. It's as controversial as saying that death is certain.
So how can we say Roubini wasn't right because he was lucky; he was right because he knew his stuff? (More broadly: How can we know anyone is right about anything?)
But what of the economists who did not predict the meltdown. Why should we listen to them at all? They got it wrong before, after all.
Yet we all get things wrong, even if we are right 75% of the time. If someone can give me good advice 75% of the time, I want to know that person. I want that person to counsel me. So is it fair to shut out everyone who missed the issue?
Yet here is one economist claiming that economists do not know much about depressions at all.
What are the answers? I do not know. I do know that many people seem to lack any epistemic humility. The same economists who couldn't see the ice berg now have no problem telling us which way to steer trillions of dollars. Why should we trust these would-be captains of currency?
Yet there's a good chance that even guys like Roubini got it right only by dumb luck; or through making certainy predictions over and over.
