RMS Queen Elizabeth 2

“Attention passengers.  Due to wind and currents, the ship has been pushed 12o miles north of its expected path.

The captain met with the QE2’s officers (the Frequently Off-course Mariners Committee), and decided that the setting of the steering wheel was still ‘appropriate.’  Thus rather than change our steering, we are changing our forecast.  We no longer expect to make our scheduled arrival in New York, and instead expect to reach Boston on Tuesday.  Unless we hit an iceberg.  Enjoy the rest of your cruise.”

[Memo to Fed:  Your job isn’t to change your forecast, it’s to change your policy in such a way that you don’t need to change your forecast.]



10 Responses to “RMS Queen Elizabeth 2”

  1. Gravatar of Morgan Warstler Morgan Warstler
    2. November 2011 at 19:19

    Long ago, I sold all the coal found at the RMS Titanic site.

    They hit the iceberg because the ship was on fire and Capt. Smith didn’t want to land at daylight bellowing smoke, he wanted to land under cover of night.


    The metaphor works far more if you focus on WHY they were off schedule, WHY they were going to fast.

    Otherwise, you teach the wrong lesson.

  2. Gravatar of Brito Brito
    2. November 2011 at 19:21

    Scott that was an awesome analogy! Actually made me laugh.

  3. Gravatar of Philo Philo
    2. November 2011 at 19:22

    “Memo to Fed: Your job isn’t to change your forecast, it’s to change your policy in such a way that you don’t need to change your forecast.”

    How can Bernanke not understand this? Yet he gives many indications that he does not. He has me baffled. Perhaps someone who knows him personally can shed some light on his thinking.

  4. Gravatar of Sumner Needs to Watch Some Film and Hit the Gym Sumner Needs to Watch Some Film and Hit the Gym
    2. November 2011 at 19:51

    […] example, here’s Scott’s latest post that is quite clever, but ends up leading him into absurdity. (This is a metaphor for Scott’s […]

  5. Gravatar of Leigh Caldwell Leigh Caldwell
    2. November 2011 at 20:40

    It is a common response in organisations all over the place to change one’s target when the circumstances change.

    If I discover that I was unexpectedly optimistic in planning my project schedule, I am more likely to move the delivery date back and then try to replan to hit it, than keep the delivery date where it is, knowing that I almost certainly won’t make it.

    I’m not saying this response would be appropriate for the Fed – if you assume that they have unlimited power to do whatever they want, then they should of course keep the target where it is. But it could explain why it feels like a natural thing for Bernanke to do – both to himself and to non-market-monetarist outsiders.

  6. Gravatar of Jaap Jaap
    2. November 2011 at 20:40

    Still much better than the other side of the pond.
    There they are deliberately looking for icebergs to hit. Looks like they have one in sight!

  7. Gravatar of Luis H Arroyo Luis H Arroyo
    3. November 2011 at 02:10

    Nice, Scott. and very true.

  8. Gravatar of ssumner ssumner
    3. November 2011 at 05:38

    Morgan, Here’s what Bob Dylan has to say:

    Praise be to Nero’s Neptune
    The Titanic sails at dawn
    And everybody’s shouting
    “Which Side Are You On?”
    And Ezra Pound and T. S. Eliot
    Fighting in the captain’s tower
    While calypso singers laugh at them
    And fishermen hold flowers
    Between the windows of the sea
    Where lovely mermaids flow
    And nobody has to think too much
    About Desolation Row

    Let’s not fight about details while the ship is sinking.

    Thanks Brito.

    Philo, I’m puzzled too.

    Leigh, you already anticipated my answer, turning the wheel is essentially costless. Indeed it has negative costs as it reduces our budgetary crisis.

    Jaap, Good point.

    Thanks Luis.

  9. Gravatar of Becky Hargrove Becky Hargrove
    3. November 2011 at 06:09

    At least we can all be glad that everyone now knows what “rearranging the deck chairs” really means.

  10. Gravatar of Mechanical vs. Intentional Economics « azmytheconomics Mechanical vs. Intentional Economics « azmytheconomics
    7. June 2012 at 10:04

    […] estimates on mathematical models or correlations. On the intentions side, Scott Sumner compares the central bank to a captain of a ship – if the course is off, change the steering wheel until […]

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