Are private forecasts useful?

Tyler Cowen thinks about the industry for forecasts. He makes me wonder how much private work he's done, as I think he seems to really miss the point of private economic modeling.

I must say--remember that a firm will often purchase a number of difference forecasts, which will disagree, as well as produce their own forecasts. Does one expect a firm to "believe" all of these forecasts? I don't think so. Would a firm cherry-pick one forecast that they choose to believe? Then, why purchase the others?

No, I think forecasts are more used to consider a range of possibilities. None is particularly more believable  necessarily, but having a variety of forecasts gives us a starting point in talking about what may happen in the future and assumptions we may consider using.

Particularly in the light of the recent recession, there is a lot of distrust in models anyways, even if they're considered necessary.

In that vein, Free Exchange tells me about a new NBER paper actually taking a stab at the financial aspect of macroeconomic modeling.

HFT, education, pedigree, and health care

An interview about high frequency trading. Recently, I've been more and more interested in similar topics.

Does education hurt your real income or help it? Data can be tricky.

Tyler Cowen thinks about pedigree bias in economics. Economics professors in top schools are very likely to have come from top schools themselves.

SCSU Scholars talks about innovation in health care. I've mentioned this before--technological advances in health care are unlike others. The equipment hasn't gotten smaller or cheaper. There seems to be different incentives at play than economists typically assume. More, given two procedures that give similar results, a doctor will often choose the more expensive procedure, since he can charge more for it. Consumers, meanwhile, don't know their options.

Unemployment rate <10%, income distribution, IV, the recession's end, and unemployment again

Nate Silver makes the claim that the unemployment rate won't hit 10%. Bold, considering there are many expecting it to go well above 10%.

People in the top .01% have 6% of the nation's income, the highest ever. It's interesting how it was so low for so long.

The Economist has an interesting article on instrumental variables. The gist: they attain more accurate answers to less broad questions. Instrumental variables are tools, however. We should never rely on one tool in our toolbox--that has always led us astray. That's just like articles bashing macroeconomics due to "bad" econometric forecasting.

According to this graph, a lot of economists seem to think that the recession is over. That's the WSJ, though, so take that with a grain of salt. The more interesting part, in my opinion, is that the unemployment predictions, on average, don't hit 10%. More predictions here.