Monday, June 12, 2006

Economic (Over)Confidence

Arnold Kling at EconLog has an interesting post about overconfidence in economists. He links to an article by Erik Angner at University of Alabama - Birmingham (UAB). I found it interesting that the author found "overconfidence is endemic among economists who are called upon by public policy makers for their expertise." He further pointed out that this can have "dramatic effects on both public policy and investors."

I don't find anything really surprising about this. I remember a saying that went something like "people are least interested in the things economists agree on the most, and are most interested in the parts with the greatest disagreement", or something to that effect.

While this seems obvious to me, maybe it really isn't. I would think the fundamentals are just that, fundamental and probably not worth debating. It would be the application and forecasting that offer opportunities and the hitherto unknown. If one can bring clarity, one can make a name for oneself. And a person is more likely to get buy-in for their view if they're confident it's the right one. I suspect you can sell more if you actually believe in the product.

Maybe I'm making too big a leap. Am I missing something here?

Posted by TSchilling at June 12, 2006 8:00 PM

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