Clearly the Queen of England hit a nerve when she asked in 2008 why the economics profession had not seen the crisis coming.

Noah Smith provides the latest example of the economics profession trying to trivialize this profound failure.

And some economists do pay attention to their models’ forecasting performance. But the vast majority of research is about predicting the effects of policies, rather than about predicting what will actually happen.

This might seem like a dereliction of duty. Many, such as the Queen of England, expect that economists should be able to see recessions coming — or at least to try.

The Queen didn’t ask why economists didn’t see a recession coming.  She ask how they managed to miss seeing a financial crisis coming.  Everybody understands a financial crisis is a much bigger economic event than a recession and therefore it is much harder to miss the signs a financial crisis is coming.

Is that fair of me to say?  After all, I saw the crisis coming and publicly said what it would take to prevent the acute phase.  After all, I developed the Information Matrix so non-economists could understand how our financial system is designed, where financial crises come from, how to respond to a financial crisis and how to prevent future financial crises.

So it really is unfair of me to say there were neon lights flashing financial crisis dead ahead.

Instead, I should take Noah at his word economists focus on predicting the effects of policies rather than predicting what will actually happen.

But this of course raises the natural follow-up question: how can you predict the effects of policies if you cannot predict what will actually happen if the policy is pursued?

Hmmm….

Fortunately, Noah answers the question.

With inferior data and inferior theory, perhaps it’s not surprising that macroeconomists would throw up their hands. There’s also a cynical interpretation — policy recommendations are a lot harder to falsify, while with forecasting everyone knows when you get it wrong.

Hmmm….

How can you make a policy recommendation without also making a forecast of the future?  After all, isn’t the reason for following a policy recommendation to reach a desired future?

The more the economics profession tries to trivialize its inability to accurately forecast the performance of the economy; the more it reveals the combination of inferior theory and inferior data makes it not worth the non-economists’ time to listened to economists.