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First, Assume a Can Opener

The "invisible hand of the market" so famously postulated by economist Adam Smith 250 years ago has proven to be the most remarkable engine of economic growth and social progress ever devised by human beings. And yet still, after all these years, much of its inner workings remain a great mystery.

Which explains, no doubt, the continued popularity of the old joke about how an economist opens a can of soup -- i.e., "First, assume a can opener."

Indeed, economics -- and especially economic forecasting -- is still largely an exercise in making assumptions. Even with all the mountains of quantitative data at their hands, economists still cannot tell us with even a modicum of certainty whether the stock market will rise tomorrow or fall, whether consumer purchasing will be up next month or down, whether employment growth will continue or level off. That's because the so-called "science" of economics assumes that individuals make rational decisions in the marketplace, and as anyone who has ever observed a parent and child in a toy store can attest, the truth is a rather different matter entirely.

Perhaps what's needed is better qualitative data -- economics with a human face. Just as "product definition" blogging may tell R&D; managers not only what new products their customers want but why, maybe "economics blogging" -- a statistically-valid sampling of consumer and business blogs -- could enable economists to get a better handle on the often less-than-rational but always deeply-human motivations behind consumer purchasing and business investment and hiring.

Maybe what was invisible in Adam Smith's "invisible hand of the market" was not the hand, but the heart and soul behind it.


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