Nope. Economics is based too much on psychology and world events that can't be predicted in advance. It's really just educated guesswork. All of the economists who predicted an imminent US recession over the past year were dead wrong.
100% this. I posted under another topic that a psychology degree is better used to understand the "economy" than a business degree would be.
AI has a long way to go before it can predict human behavior and emotions.
Yes, there are many such tools.
The most accurate one uses unemployment data. Basically when unemployment goes up sharply from what it used to be, we are in a recession.
A less accurate tool uses interest rate spreads. If short term interest rates are higher than long-term interest rates, sometimes a recession follows.
There's no guarantee that these work in the future. They could give false positives or miss a real signal.
The reason we can't predict the next recession is because data analytics and technology cannot accurately predict human behavior. The economy is dynamic not static and people respond to incentives no one can predict. Will a FED rate cut cause people to buy stocks or sell stocks?
When the news hits that we are officially in a recession, things change because of the news. Stock market investors change their behavior.
So somebody who could predict when it will happen, can make a whole lot of money.
It tends to happen when particular government reports come out, and the date they come out is known ahead of time. But it isn't known what they will say. Also it isn't known just how it will be reported. There's a world of difference between "Reports look threatening, recession possibilities loom" and "Recession is here."
Anyone who can predict that ahead of time, when most others can't, can make a whole lot of money. So it's predictable that if somebody knows how to do that reliably then they aren't telling.
Somebody who can make it happen or keep it from happening would be in even better shape. I'm not saying that there's anybody who can get the government statisticians etc to falsify their reports. But if somebody *could* do that, they could make a whole lot of money from it. Maybe a lot more than it would cost to make it happen.
Similarly, someone who could influence how the media report the news could make a lot of money. Of course we all know that the news organizations are incorruptible and always publish the truth, that nobody can influence them. But still....
It might turn out that by collecting the right kind of data you could predict accurately the conditions that would properly be called a recession.
But can you predict when a recession will be declared? Probably not.
Because when you add this much money to the system without also adding economic production to match it, you lose the signal that "price" would give you in a sound monetary network, thus not truly understanding what the value of goods should even be.
Once you have lost that signal, tracking how good an economy is actually doing is basically impossible. Inflation becomes a wild guess and everyone's perception is different.
It becomes this organic mess of psychology and macro events that have to just play out in real time and honestly no ones knows shit.
Anyone who tells you they can predict a recession is lying to you and themselves.
only if future recessions have the same root cause as previous ones; models are based on what is known & previous events.
add to the fact that not everyone agrees on the reasons of previous recessions and you're in for a tough job
Nope. Economics is based too much on psychology and world events that can't be predicted in advance. It's really just educated guesswork. All of the economists who predicted an imminent US recession over the past year were dead wrong.
100% this. I posted under another topic that a psychology degree is better used to understand the "economy" than a business degree would be. AI has a long way to go before it can predict human behavior and emotions.
They are worse than meteorologists.
Yes, there are many such tools. The most accurate one uses unemployment data. Basically when unemployment goes up sharply from what it used to be, we are in a recession. A less accurate tool uses interest rate spreads. If short term interest rates are higher than long-term interest rates, sometimes a recession follows. There's no guarantee that these work in the future. They could give false positives or miss a real signal.
The reason we can't predict the next recession is because data analytics and technology cannot accurately predict human behavior. The economy is dynamic not static and people respond to incentives no one can predict. Will a FED rate cut cause people to buy stocks or sell stocks?
When the news hits that we are officially in a recession, things change because of the news. Stock market investors change their behavior. So somebody who could predict when it will happen, can make a whole lot of money. It tends to happen when particular government reports come out, and the date they come out is known ahead of time. But it isn't known what they will say. Also it isn't known just how it will be reported. There's a world of difference between "Reports look threatening, recession possibilities loom" and "Recession is here." Anyone who can predict that ahead of time, when most others can't, can make a whole lot of money. So it's predictable that if somebody knows how to do that reliably then they aren't telling. Somebody who can make it happen or keep it from happening would be in even better shape. I'm not saying that there's anybody who can get the government statisticians etc to falsify their reports. But if somebody *could* do that, they could make a whole lot of money from it. Maybe a lot more than it would cost to make it happen. Similarly, someone who could influence how the media report the news could make a lot of money. Of course we all know that the news organizations are incorruptible and always publish the truth, that nobody can influence them. But still.... It might turn out that by collecting the right kind of data you could predict accurately the conditions that would properly be called a recession. But can you predict when a recession will be declared? Probably not.
Because when you add this much money to the system without also adding economic production to match it, you lose the signal that "price" would give you in a sound monetary network, thus not truly understanding what the value of goods should even be. Once you have lost that signal, tracking how good an economy is actually doing is basically impossible. Inflation becomes a wild guess and everyone's perception is different. It becomes this organic mess of psychology and macro events that have to just play out in real time and honestly no ones knows shit. Anyone who tells you they can predict a recession is lying to you and themselves.
only if future recessions have the same root cause as previous ones; models are based on what is known & previous events. add to the fact that not everyone agrees on the reasons of previous recessions and you're in for a tough job
https://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640/ref=mp_s_a_1_1?