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The Economist surveys the failures of econometric modeling, and discusses the new breed of computable general equilibrium (CGE) models -- the greatest example ever of the GIGO principle.

...the results of CGE models flow from the presuppositions of their authors. Most empirical exercises confront theory with numbers—they test theories against the data; sometimes they even reject them. CGE models, by contrast, put numbers to theory. If the modeller believes that trade raises productivity and growth, for example, then the model's results will mechanically confirm this. They cannot do otherwise. In another context, Robert Solow, a Nobel prize-winner, has noted the tendency of economists to congratulate themselves for retrieving juicy plums that they themselves planted in the pudding.

Thanks to our correspondent "Irrational Exuberance" for the link.

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