As posted today in Stumbling and Mumbling,
It’s a bad day for experts. The Times complains that economic forecasters are as blind as ancient soothsayers, whilst proof that Colin Stagg was innocent discredits Paul Britton’s expertise as a forensic pyschologist. To point out that experts are wrong, however, is to misunderstand the purpose of them. Their function is not to provide knowledge, and still less clear thinking. Instead, it is to provide certainty. People hate dissonance, doubt and uncertainty. Experts help dispel these. So, Paul Britton’s function was to tell the police that they had the right man, whilst economic forecasters’ job is to provide an impression that the future is knowable; no-one wants to hear about standard errors, parameter uncertainty or the Lucas critique.
Or to repeat the old joke, “God created weathermen to make economists look good.”
The truth is that the future is unknowable and that we must deal with the probabilities and the ranges of potential outcomes. I’ve had clients fire me because they wanted certainty, something they could find on CNBC but not in my office. These are educated people, who have run companies, who have studied economics. Another excellent example of behavioral investing.