Carefully evaluate economic predictions
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Because the world economy is so unstable, we are hearing more economic predictions. However, I am not so sure that some predictions are correct, as some media are likely to try to attract the audience's attention with eye-catching – but inappropriate – titles.
It is necessary to predict the economic situation in order to follow the social trend, so there must be some experts and organizations reserved for this job. The public usually won't be overcritical of their predictions as long as they are not drastic. But things are not that simple.
I recall that an economist once said theoretical economists seldom make predictions, simply because it is so difficult. If making a prediction were as easy as making a cup of coffee, market economies would be unnecessary, and a planned economy would be the best economic system. I am very surprised by how often the great theoretical economists engage in prediction, and I am even more amazed at their enthusiasm. Some honored economists, like Robert Mundell, have become consultants of research organizations or the presidents of "expert committees." Mundell's opinions frequently appear in various media.
Governmental organizations also have their own research institutes and release prediction information as well. I notice that some information is very meaningful. I assume that information on a government department's future domain is carefully prepared before being released, because if the information is either too good or too bad, it will directly affect the budgets it can get or else the organization's reputation.
When it comes to predictions, the "research institutes" belonging to some large enterprises pose the greatest potential for error. In these organizations there are a large number of professionals hopping from one editorial page to another. I have heard that some organizations have "objective" versions of research reports that are printed for their own use, and different versions to be released to the public. The purpose is quite obvious.
Some predictors are smart, and safely release veiled predictions in this manner: "If a huge amount of capital is poured into the market, the A-Share Index is expected to climb up next week." There is no error in this statement, but there's not much sense, either. It's like the saying, "If the hen can find the rooster, then they can hatch a chick." Unfortunately this kind of valueless prediction floods the media.
Consumers of information pay a high price for confusing predictions. In the last few years, professionals from different fields released predictions regarding the changing property prices, which had a considerable effect on consumers' decisions. In 2008, it was said that the A-Share Index would soar up to 10,000 points, which no doubt affected some purchases.
I would like to give a piece of advice to the Beijing News: Set up a research institute that specializes in assessing all kind of predictions. An investigation needs to be conducted on the interests of those professionals and institutes who make predictions. Their past performance should also be kept track of. By analyzing these two statistics, we can create an index to assess their predictions. Under such scrutiny, predictors may be prudent when making prediction.
(This post was first published in Chinese and translated by Xue Rui.)
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