Forecasts without future
Author: Kurt Vogler-Ludwig
Publisher: Discussion Paper
Not the unpredictable circumstances blurred the view of business cycle forecast prophets on the financial crisis and its dynamics, as to a greater degree did the insufficient theoretical and methodological approaches. Macroeconomics are lacking empirical micro foundations. It gets by with the assumption about rational behaviour. The econometric is based on data of the past and therefore stands with ‘its back to the future’. Important aspects from psychology, sociology and policy research have not found an entrance into the economic mainstream until now. With the economic rationality the economy has created a world of delusion, with which the reality of the economy and the society can neither be recognised nor forecasted.
The economic science has to open its approaches for other disciplines, needs to accept the heterogeneity of goal settings and behaviour, and needs to link the micro- and the macroeconomics to empirical funded, dynamical equilibrium models. Admittedly this is a large programme!
The prophets of business cycle forecast must step back and admit that they don’t know anything about the future. Alternative scenarios about future trends are much more applicable to describe the future. And they point out options for politics and economy a lot better than one-dimensional forecasts.
It is necessary to split up the train of lemmings which follows the prophets. This is only possible if the lemmings take matters into their hands and create their own picture of the future.