Saturday, February 22, 2014

Why Rational People Can't Succeed as Economic Forecasters - Justin Fox - Harvard Business Review

Harvard Business Review takes a look at economic forecasting.  One comment,

"Is there a risk that you get overconfident because of that? One of the things that happened in the ‘20s is that things kept going so well, and the forecasters who predicted a continued boom were right again and again. If you get very confident that government knows what it’s doing and can manage the economy well, does that increase risk at all?"

This is consistent with the ideas that trends can generate positive feedback that encourages overshooting and complacency.  This make it all the more likely that a bubble will ensure.  The difficulty is that it starts with something real and becomes over-extended.  Where do the two meet?:

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