The first lesson is do not trust economists religiously. First look at the following diagram. It is the IMF forecasts of Chinese Current Account Surplus vs the actual data. What is striking but not surprising from this diagram is how they systematically got it wrong. Impressive record.
When economists manage to keep such a lousy record, you know they are missing something important. They simply do not understand.
The inability or reluctance to contextualize data is a fatal trend among researchers in general. We ask RA to collect data and we never bother to waste another minute on the data other than running some damn regression to find some spurious relations to publish. We sometimes do not even know what is a canonical data point is like. In this case, it never occurred to us that given such an anomaly, we probably need to understand the country a little bit better. No.
This is a sure recipe for disaster. We never recognize or admit our mistakes (even with a lousy record as shown in the graph) until a disaster takes place and force us to rethink. This is true of Asian financial crisis, the 2007 financial crisis. We can only ex post rationalize, and head towards the next mistake.
The industry of publication no longer cares about truth. We are no longer interested in a simple story linked to the context of a country. Country idiosyncrasies do not matter. They are error term. However, once in a while, we are sure to get a real big error term. We want fancy statistical methods carried out on a huge data set. Thus many of us spend hours to construct dataset without ever thinking or looking at the data. We use all kinds of fancy names, pooled data, panel techniques, cluster analysis, instrumental variables and GMM. This is a complete farce.
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