Quote of the Day: Economic Numbers Cannot Stand Without the Logic that Produces Them

Economic models aren’t engineering models. If you ask several aeronautical engineers to project how adding flaps affects an airplane’s takeoff speed, their models will be complex, but they will come up with about the same, and reliable, answers. You don’t need to know why.

But good economic models are quantitative parables, not authoritative black boxes. They only are trustworthy if they illustrate clearly understandable and explicitly stated pathways…

But economic numbers cannot stand without the logic that produces them. Clarity and transparency are far more important to a good quantitative parable than the illusion of authoritative precision.

This is from professor John H. Cochrane of the University of Chicago at the Bloomberg discussing the unrealistic Keynesian based assumptions and projections made by the CBO on the “Fiscal Cliff”.