Tag Archives: predictions

A call for better macroeconomic statistics

Posted on by

As the economic crisis continues, one blogger suggests American macroeconomic statistics are “pretty weak” today:

In particular, the data coming out of the Bureau of Economic Analysis at the beginning of 2009 was way off. Here’s Cardiff Garcia, introducing an interview with Fed economist Jeremy Nalewaik:

The initial GDP estimate for the fourth quarter of 2008 showed that the economy contracted by 3.8 per cent. It was released on January 30, 2009 — about three weeks before Obama’s first stimulus bill passed. That number was continually adjust down in later revisions, and in July of this year the BEA revised it all the way down to a contraction of 8.9 per cent.

The BEA is happy to try to explain what happened here — but whatever the explanation, the original 3.8% figure was a massive and extremely expensive fail. It was bad enough to be able to get a $700 billion stimulus plan through Congress, but if Congress and the Obama Administration had known the gruesome truth — that the economy was contracting at a rate of well over $1 trillion per year — then more could and would have been done, both at the time and over subsequent months and years. Larry Summers warned at the time that the risks of doing too little were much greater than the risks of doing too much; only now do we know just how right he was on that front. (And even he didn’t push for a stimulus of more than $700 billion.)…

When I told Cardiff that the status of macroeconomic data-gathering has been declining for decades, I was making two separate statements — first that the quality of statistics has been declining, and secondly that the status of economists collating such statistics has been declining as well. Once upon a time, extremely well-regarded statisticians put lots of effort into building a system which could measure the economy in real time. Today, I can tell you exactly how many hot young economists dream of working for the BEA on tweaks to the GDP-measurement apparatus: zero.

Sounds like there is work to do. This commentator seems to suggest the government needs to offer the kind of money that would attract economists to this task. Are there economists out there right now who could handle this job and all it takes it some more money?

If we were looking at the causes of economic crises or perhaps what sustains them, could statistics really play a large role? Even with the best statistics, policymakers can still make bad decisions. But I suppose if the foundation of policy, the statistics that we trust to tell us what is really going on or what might, is faulty, then perhaps there is really little hope.

At the same time, I would suggest this isn’t only a macroeconomic problem: the world is complex, we want to tackle difficult problems, we are very reliant on statistical models, and there is more and more data to work with and collect. We need a lot of good people to tackle all of this.

How the recession is affecting American society

Posted on by

USA Today looks at “the sociology of recession” – how the economic crisis is changing some key features of American society. A quick overview: Americans are getting married later, the birth rate for 20 to 34 year olds has dropped, the divorce rate has dropped, more Americans are now living with relatives, the home vacancy rate is up, driving alone more, and fewer children are attending private schools.

This article suggests these features could become “the new normal,” particularly for younger generations who are facing more uncertain futures, but I’m not so sure. If the economy turns around, which of these would continue to decline and which ones would reverse direction? I suspect the marriage age and birth rate would still decline – these are longer term trends in the United States that also mirror patterns in other industrialized nations. The divorce rate was declining prior to the economic recession, at least according to the 2011 Statistical Abstract (see Table 1335), so perhaps this would continue. The last four I suspect would change course with a better economy.

The presence of error in statistics as illustrated by basketball predictions

Posted on by

TrueHoop has an interesting paragraph from this afternoon illustrating how there is always error in even complicated statistical models:

A Laker fan wrings his hands over the fact that advanced stats prefer the Heat and LeBron James to the Lakers and Kobe Bryant. It’s pitched as an intuition vs. machine debate, but I don’t see the stats movement that way at all. Instead, I think everyone agrees the only contest that matters takes place in June. In the meantime, the question is, in clumsily predicting what will happen then (and stats or no, all such predictions are clumsy) do you want to use all of the best available information, or not? That’s the debate about stats in the NBA, if there still is one.

By suggesting that predictions are clumsy, Abbott is highlighting an important fact about statistics and statistical analysis: there is always some room for error. Even with the best statistical models, there is always a chance that a different outcome could result. There are anomalies that pop up, such as a player who has an unexpected breakout year or a young star who suffers an unfortunate injury early in the season. Or perhaps an issue like “chemistry,” something that I imagine is difficult to model, plays a role. The better the model, meaning the better the input data and the better the statistical techniques, the more accurate the predictions.

But in the short term, there are plenty of analysts (and fans) who want some way to think about the outcome of the 2010-2011 NBA season. Some predictions are simply made on intuition and basketball knowledge. Other predictions are made based on some statistical model. But all of these predictions will serve as talking points during the NBA season to help provide some overarching framework to understand the game by game results. Ultimately, as Gregg Easterbrook has pointed out in his TMQ column during the NFL off-season, many of the predictions are wrong – though the makers of the predictions are not often punished for poor results.

Looking ahead 40 years

Posted on by

Smithsonian magazine celebrates its 40th anniversary by writing about “40 things you need to know about the next 40 years.”

Out of the 40 predictions, some of the ones that intrigued me:

4. New cars will be given away, free.

11. The heartland will rise again.

12. The top US social problem? Upward mobility.

13. By 2050, one out of three US kids will be Latino.

25. Artists will run the world.

27. Everyone will make his own music.

36. Good-bye stereo; hello, hyper-real acoustics

40. Reading will become an athletic activity