In an entertaining piece Economics is Hard. Don't Let Bloggers Tell You Otherwise Kartik Athreya of the Fed in Richmond has suggested that financial bloggers are a mentally incontinent bunch, pathologically incapable of stopping themselves from opining on financial matters on which they actually offer no insight. Now, leaving aside the question of whether we want our professional economists to be entertaining, this opens up the question of whether untrained commentators can provide any useful insight into matters financial.
The answer, speaking as an economically untrained scribbler, is almost certainly no: the vast majority of financial blogging opinion on any matter of prediction is worthless and that which isn't is indistinguishable from the rest. Unfortunately this is a conclusion of limited usefulness, because most trained economists can't actually offer any useful predictions either and following Athreya's prescription would almost certain deny us any opportunity for useful advances in the world of macroeconomics.
Dissonance in Economics
Athreya's article has, unsurprisingly, attracted a lot of commentary from financial bloggers, most of whom wonder whether the Fed should be worrying more about managing the current crisis and rather less about harassing them. However, he has a point: mainly you'd be better off throwing chicken entrails at a blindfolded soothsayer than taking the word of anyone making predictions about macroeconomics. As the article puts it:
"The real issue is that there is an extremely low likelihood that the speculations of the untrained, on a topic almost pathologically riddled by dynamic considerations and feedback effects, will offer anything new. Moreover there is a substantial likelihood that it will offer something incoherent and misleading".
With which we would agree. In fact this site is riddled with articles saying so in a less direct fashion, on the sound psychological grounds that you'll never convince a believer head-on, but you might succeed in getting them to think for themselves if you manage to create enough cognitive dissonance.
Problematic Theories
However, Athreya goes on to argue that the only people who can hope to provide genuine macroeconomic insight are those students subject to proper training, armed with carefully designed models and subservient to the careful control of scientific peer review: aka macroeconomists. Given that the Richmond Fed itself, based on this article, doesn't know whether the Efficient Market Hypothesis is a scientific fact, an irrefutable -…
