Tonight, Alan Greenspan will be talking about his new book, The Map and the Territory, Penguin, October 2013 at the American Enterprise Institute. He will discuss the trouble with economic prediction and may suggest how to improve the process.
“For many years, economists have made authoritative and mathematically complex predictions about where the US economy is headed. Yet as Alan Greenspan, former chairman of the Federal Reserve and head of the Council of Economic Advisers under President Gerald Ford, observes in his new book, “The Map and the Territory” (Penguin, October 2013), no one predicted the timing of the 2008 financial crisis, or its severity.
What is wrong with economic forecasting that it could not foresee a cataclysm of this magnitude, even days before it happened? Greenspan’s book may portend a complete revision in the way economists forecast the future. At this AEI event, he will argue that entirely new data capturing “animal spirits” (the elements of human behavior) will be necessary if the economics profession is to improve its forecasting accuracy.”
The nation has more than a prediction problem. It not only lacks vision and ability to plan and see ahead. It has a very deficient roadmap.
The capitalist economic paradigm is deeply flawed and has led the nation and the world to an unsustainable dead end. It is neither socially nor environmentally responsible. Skewed wealth and power has led to a diminishing middle class and an increasingly large population of poor people. That condition is politics aside.
Needed is an optimized sustainment model that maximizes return on resources while ensuring a fair and equitable good life for all. That model ensures Constitutional equality of rights while providing sufficient incentive for people with more advanced capabilities and capacity.
So while economists fret with methods and techniques, needed is more energy toward economic engineering that produces results with greater determinism.
A report about Greenspan's remarks will follow tomorrow.