As Yogi Berra put it (or Niels Bohr, depending), prediction is hard, particularly about the future. I’ve been interested in mathematical models for more than the last half century. Here’s the dirty little secret about them: the results you get out of them can be no better than the data you put into them.
I’ve been reading up on the disease models’ projections of the course of the Wuhan coronovirus outbreak. Not to put too fine a point on it but they don’t make sense. They don’t comport with what seems to be happening at all. Funny thing, though. Several of them would be right on the money if the numbers of infected and killed were much, much higher than are being reported from China.
Even as we speak economists are industriously trying to predict the run-on effects on the economy of the outbreak. BusinessInside reports:
Economists predict China’s economy will slow to to growth levels not seen since the 2008 financial crisis, a Reuters poll showed on Friday. The 40 economists surveyed said gross domestic product will fall to 4.5% in the first quarter, while full-year 2020 growth could be 5.5%, down from 6.1% last year.
Further, a recent report from Bloomberg found that analysts now see China GDP going as low as 3.8%. That would be an especially problematic growth rate, as it sits below 4.15% — a threshold that, when breached, would send the so-called bad loan ratio at China’s biggest banks up five-fold, Bloomberg finds.
For context, in 2019 the sector saw record loan defaults and the first bank seizure in twenty years in 2019 — and that was when the economy was expanding at a much more robust 6%.
The U. S. economy is anticipated to be affected but not nearly so much. You would expect the stock market to be more affected. Most of the present boom is derived from increases in the values of just five stocks and one of those, Apple, is more dependent on a robust Chinese economy than the others. Fortunately (or unfortunately depending on how you look at it) the stock market is almost entirely divorced from the real economy. So far it doesn’t really seem to be responding to the outbreak. Stock market recoveries from previous serious outbreaks have been quite rapid.
I’m skeptical than we can make any sort of informed predictions about the Chinese or U. S. economies based on the data about COVID-19 that are coming out of China. It makes a difference whether the outbreak started in January or November and whether there have been 68,000 infections or 680,000. Making projections from reliable data is hard enough.
There seems to be a greater number of people saying China knew about the Coronavirus in November, but didn’t fess up until the end of December. Also, most reports I hear are very skeptical about the numbers of infected people and deaths being posted by China.
As an aside, that introductory paragraph, about results of mathematical models being no better than the data put into them, rings true. IOW, garbage in, garbage out. I think such a claim also resoundingly applies to IPCC supported models, regarding climate change origins and inevitability predictions.