Are economists getting better?- (14.05.02)

The UK treasury in particular seems to be getting more confident in its economic forecasting. Now that it has consistently been conservative with its economic growth estimates, without been too far away, Gordon Brown recently included in his budget a 30 year projection for the economy.

The problem for the chancellor is that the apparent forecasting success has been more based on wide bands of growth estimates and regular updates (at least quarterly) rather than a better track record in forecasting. Surely it is easier to forecast in any case when the economy is relatively stable.

The key to economics is predicting big changes rather than short term targets. Perhaps it is sensible to predict 30 years into the future, as long as you predict that in that time 4 or 5 big economic shocks (either positive or negative) will hit the economy and the path from time 0 to 30 years hence will not be smooth. Economists won't become more useful until they accept that certain things are not predictable however good an economist you are and however accurately you can predict the short term. Perhaps rather than specifying one hypothesis as the truth for where we are going, economists should get into the habit of providing a range of possible options with an acknowledged guess as to the probability of them happening. Debating over the likelihood of a scenario happening would probably be more interesting than just listening to alternative opinions as to what the end result will be.