Sunday, February 17, 2013

The illusion of certainty

Another good article by Ross Gittins appeared in The Age last week. In relation to the Australian Reserve Bank and its critics Gittins, in an article entitled ' Reserve Bank bursts bubble of certainty', observes:

"The other reason the Reserve has yet to get things badly wrong is that no one understands better than it how fallible its forecasts are - all forecasts, for that matter. And it's never afraid to admit its fallibility to the world."

He goes on to say:

"But if economic forecasts are so universally inaccurate, how come we hear so little about confidence intervals? It's partly because economists don't like advertising the considerable limitations of their art. They don't even like reminding themselves of their own fallibility."

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