The economist is a fan salesman.
Imagine a fisherman Jim and his friend…. Ben. Ben raises his hand and tries to determine the direction the wind is blowing; he then signals Jim how best to compensate for the wind by throwing his line at a certain angle. So too in modern Economics, where economists (Bens) tell the producers (Jims) how to compensate for economic weather, with interest rates the signal which determines the production and investment decisions they should make.
Allow us to complicate the analogy a bit. What if Jim was fishing for a deep-water fish? Then the wind would be a less important factor, as the line is heavily weighted; also, the current underneath the surface may well be moving opposite in direction to that of the wind; for Ben to give Jim the same advice he may well cause Jim to throw the line too far to compensate for a weak problem, while amplifying the deeper problem. Such is the problem for economists, trying to determine all the factors that are applicable and the extent of their impact. Some of these may not be even observable to Ben, especially as markets become more complex and services more abstract(Collateralized Debt Obligations anyone??). If he were a good economist, Ben must tell Jim that while he can offer some guidance, he may be wrong in some areas; Ben has to be humble enough to admit he had made a mistake based on ALL the data he is receiving, not just a carefully filtered portion of it. He would then tell Jim that he is the fisherman and since he knows his craft best he is the best person to decide on how long to stick with Ben's advice and that he is willing to listen to Jim about his insights into the craft of fishing so that he can optimize the model and account for the undercurrents. This analogy is untrue only in that an Economist deals with far more than two variables, and several of the variables are not only unknown; they adapt to overcome his policies, the ingenuity of human behavior which behaves like a random-walk and a trend- line, a psychopath and a genius.
Economists today and in particularly large countries see this challenge as irrelevance…. And hence as a threat to their existence; unwilling to concede defeat they oversimplify matters by telling Jim that the wind is all that matters and prescribe a slew of signals that serve to confuse and deceive the fishermen of today. They tell Jim that it takes time for his compensation to take effect, and to keep throwing his line further. Worse, in order to manipulate the market in their favour they implement monetary policies like Quantitative Easing, which is akin to buying a gigantic fan to blow so strongly that the wind is always predictable and temporarily renders their predictions correct; the undercurrents still unaddressed (Though if the fan is big enough even the undercurrents may be completely swept away, together with all the fish). QE is presumed to create high levels of inflation (wind) that would overcome deflation (natural weather), the underlying unemployment and GDP (undercurrent) can only be known after the overall production can be measured (fisherman has determined how many fish he has caught).
Despite the poorer catch resultant upon their recommendations, they presume to tell the fisherman that his skill was poor, or that if he had not compensated as they had prescribed he would not have caught any fish at all, or that despite having caught guppies rather than groupers, that he had caught MORE fish and was thus better off, or that it would have all worked out if only Jim had believed with all his heart and soul in the process.... The giant fan however costs money to operate, and must be shut off eventually. When it does the overcompensation the fisherman has made will be compounded by the backlash of natural weather. He will be left with the bill for 1 giant fan, which he had never agreed to buy, whiplash injuries that prevent him from working and to add insult to injury have caught fewer fish for all his effort at fighting the artificial weather than required to pay for either the fan or medical treatment to get him back on his feet. The fan producers don't even end up being paid for the fan in the end, and will probably go bankrupt too if there are too many Bens around. Some may be bailed out with Jim's meagre remaing savings, but as with any decisions he makes, they occur for reasons Ben-only-knows.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.