Tuesday, March 2, 2010

Economy is Self Fulfilling Prophesy

Economics is not my most favorite subject. As it turns out I don't like it at all. Some of the aspects and the principles of macro-economics can be intriguing to me but overall I don't much care about the rest of it. To me one of the most annoying aspects of economics is that it governs itself. What I mean by that is that when economists predict that something in the economy is going to happen it happens. Not necessarily that they foresaw that it was going to happen but that it happens because it was predicted and prophesied that it would.

Let me give an example and see if i can make this any clearer. Let's say that a famous economist predicts that there is going to be a large recession, that stocks may plummet ant that consumer trust in the market is going to fall. He says these things because of some small predictors that show a specific trend that may or may not lead to any specific destination. Because of this genius prediction people start to be a little more careful with their money, they spend less, invest less, sell the stock that they do currently have. So what happens? This recession that was predicted would happen actually ends up happening. People change their behaviors because of the economist and the prophesy of the recession is fulfilled. The sad thing is that people collectively aren't clever enough to figure this out so they listen to and follow every word of these famous economists.

No comments:

Post a Comment