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July 21, 2010

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Tim Worstall

"that, in fiscal policy, there is something inadequate about a “predict and control” mentality, when predictions are so prone to go badly awry."

Something of a death knell for detailed Keynesian demand management then really, isn't it?

Jim

What is the point of giving ranges and percentage probabilities? It's useless. I could do it. Because whatever the outcome I will have assigned a possiblity to it, and am therefore covered.

What will GDP growth be next year? I predict a 50% chance of it being in the range 1.75%-2.25%, with a 25% chance of being lower, and 25% chance of being higher. So on a one off basis (which each year is) I'm never wrong.

Now if the same year could be repeated a number of times, my prediction could be tested. If GDP growth for 2011 could be run 100 times, and 50 times it was in my range, 40 times lower, and 10 times higher, then I'd have been wrong. The outcomes did not match my predictions.

But on a one off basis it is useless.

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