----- Original Message -----
From: "James Annan" <[EMAIL PROTECTED]>
Newsgroups: gmane.science.general.global-change
Sent: Wednesday, December 20, 2006 6:29 AM
Subject: [Global Change: 1089] Re: economics and anthropogenic climate
change: from RealClimate
Exactly what distinguishes the fifty Dow numbers from fifty wild
guesses, except perhaps for the fact that all of the prognosticators
probably have considerably higher incomes than you or I?
Specify more clearly what you mean by "wild guess" and I'm sure it would
be possible in principle to quantify how well the prognosticators have
performed in the past (assuming they have done it for several years).
That's not a complete answer, but it's a start.
James
Michael is being a bit silly by taking the annual Dow forecast as more than
mere amusement, although I gather he is poking fun at business economics.
The late Lois Rukeyser always put this into its appropriately comedic
perspective on his annual New Year's show, where he would invite the closest
guessers from among his bevy of "elves" to be his guests.
Following James' advice, we might begin with Y=1.1X + e as our quantitative
model, where Y is the value of a common stock index next year, X is the
value this year and e is unexplained variance in Y, then crank up our old
Cray to compute the coefficient of determination.
More seriously, we might examine macroeconomists' record on predictive
validity using "the Commerce Department's index of leading economic
indicators", which purportedly predicts economic activity six to nine months
out.
-dl
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