Economic forecasting is a long-standing joke, but the laughter has turned harsh and bitter in the wake of the credit crisis. The conventional wisdom seems to be that economic forecasting is impossible, and that economic forecasters are charlatans.

“In that case,” asked Professor David Hendry in a spring lecture at the Royal Economic Society, “why am I wasting my time on this?”

For one of Britain’s most respected economists, Hendry gives the strong impression of a man ploughing a lonely furrow.

His choice of field – the theory of economic forecasting – is to blame. It is viewed with scepticism not only by laymen but by most academic economists, too. But his research – a heady mix of bewildering computer-assisted mathematics and straightforward common sense – has convinced me that economic forecasting shouldn’t be consigned to the realm of quackery quite yet.

The remainder of this column can be read here. Please post comments below.

Dear Economist,
I have been trying to discourage the practice of “service” being added to restaurant bills. Where it’s added I ask for its removal and don’t leave a tip, and where it isn’t I tip a fair amount plus the saved service charges from other restaurants.What else can I do?
Patrick Gillett

Dear Patrick,

Discard any question of whether the service charge is aimed at the staff or at the restaurant managers. It makes no difference. Because staff are not stupid, lower tips must mean higher wages, otherwise the waiters will find somewhere else to work.

Similarly, higher service charges will have to mean lower up-front prices, or commercial disaster will surely follow.

That noted, it seems to me that optional tips are an attractive way of doing business. By leaving the customers some discretion, the restaurant manager creates a way of charging less to stingy customers and more to fat-walleted ones. Huge marketing databases are interrogated to achieve the same effect; the tip system is easy by contrast. The American reputation for excellent service may also owe something to a culture of high and variable tipping.

In short, I have no idea why restaurants are abandoning this most excellent, business-friendly custom. If you wish to stamp out the practice, perhaps management consultancy would be an influential place to start?

Questions to economist@ft.com

I’m reading Stefan Klein’s excellent “The Secret Pulse of Time“. Recommended - Klein’s style is charming, if rather German, and his grasp of the science is strong. He covers the biology, psychology and physics of time and yes, it really is all relative. One observation that struck home was that we do not remember time as a continuum but as a series of events; that is why a fortnight recuperating in bed seems like an eternity (because we have no events to observe) but almost vanishes from the memory (because there are no events to remember). That is also why a wonderful day’s sightseeing can fly by, yet when looking back over an evening drink, that morning’s coffee can seem impossibly distant. Much to enjoy.

…Taxi Driver, claims Robert Mundell. John Authers has the scoop:

John Hinckley, the deranged would-be assassin who attempted to kill Ronald Reagan in 1981, claimed that he was inspired by [Taxi Driver]… According to Mundell, the wave of sympathy for President Reagan that was engendered by the assassination attempt deterred Democrats in Congress from voting against his proposed tax cuts. Due to this accident of history, the US administered a big fiscal stimulus at the same time that Paul Volcker at the Federal Reserve was administering tight money. This, for Professor Mundell, was vital in creating the era of prosperity that followed.
“Taxi Driver is the most important movie ever made from the standpoint of creating GDP,” Mundell told delegates. “It’s the movie that made the Reagan revolution possible. That movie was indirectly responsible for adding between $5 trillion and $15 trillion of output to the US economy.”

John’s despatches from Vancouver are well worth reading, by the way.

Those in shouting distance of London may be interested in this:

‘Why Economics Matters’: The New Palgrave Public Lecture 2008

Chair: Evan Davis
Speakers: Tim Harford, Martin Wolf, Professor Klaus Nielsen and Professor Franscesco Caselli

Date: Tuesday 20 May 2008
Time: 6.30-8pm
Venue: Old Theatre, Old Building, London School of Economics and Political Science

My experience suggests that the place will be full long before the start time - do turn up early. The New Palgrave dictionary of economics website is here.

Clay Shirky reports on a conversation with a TV producer, after describing a flurry of activity on the Pluto page:

She heard this story and she shook her head and said, “Where do people find the time?” That was her question. And I just kind of snapped. And I said, “No one who works in TV gets to ask that question. You know where the time comes from. It comes from the cognitive surplus you’ve been masking for 50 years.”

So how big is that surplus? So if you take Wikipedia as a kind of unit, all of Wikipedia, the whole project–every page, every edit, every talk page, every line of code, in every language that Wikipedia exists in–that represents something like the cumulation of 100 million hours of human thought. I worked this out with Martin Wattenberg at IBM; it’s a back-of-the-envelope calculation, but it’s the right order of magnitude, about 100 million hours of thought.

100 million hours sounds like a big number, but as Clay goes on to describe, it’s tiny. 100 million hours is about 20 minutes per US citizen - roughly the amount of time collectively spent watching advertisements in a typical weekend. (That’s Clay’s number: I’d have guess it only took an evening for each American to watch 20 minutes of adverts, but I am clearly a TV-pessimist and out of touch.) HT: Virtual economics.

Update: My TV pessimism was correct - see Comment No 2 from Gerald, below. Thanks, Gerald!

Today’s “More or Less” looks at whether - after successfully predicting the results of the London Mayoral election - Internet-based opinion polls are the future. Also, 400,000 rejected votes in that election: is the British National Party justified in saying something fishy is afoot?

Also, is it really true that the death rate rises when doctors are on strike?  And we may also be asking how anyone figures out the street price of drugs.

4.30pm BST, Radio 4 - or thereafter streaming from the website.

Would smokers prefer that cigarettes be expensive? The Office of Fair Trading seems to think so, to judge by its recent announcement alleging that some supermarkets and tobacco companies had been fixing the price of tobacco.

Certainly, higher cigarette prices would make smokers healthier. There is plenty of evidence that smoking is very bad for you, and almost as much evidence that people smoke fewer cigarettes if they are expensive. But “healthy smokers” are not the same thing as happy smokers.

So, do high cigarette prices make smokers happier? If smokers are rational, they don’t. But if smokers are wracked by temptation and are trying unsuccessfully to quit, then higher prices might make them happier by encouraging them to smoke less, or even to stop entirely.

The remainder of this column can be read here. Please post comments below.

Dear Economist,
I have been invited to give a presentation at a conference. Naturally, I’d like to look as good as possible. I have been given some flexibility over length, topic, timing and so on. What advice can you give me, and is it best for me to open or close the proceedings?
Jeremy L, London

Dear Jeremy,

Anyone can tell you the obvious stuff: don’t use boring bullet-point slides and keep it simple. Obvious, but most people, at the expense of their audience, ignore this advice.

Let me instead focus on a less-obvious insight, discovered by the economist Lionel Page and his wife, the psychologist Katie Page. The Pages looked at years of results from talent contests such as X-Factor and American Idol, in which contestants perform and viewers vote as to who they’d like to see again.

The Pages were able to measure whether it was an advantage to appear first or last, or immediately after a flop or a show-stopper. Because most singers appeared several times, the Pages could take account of the fact that the show’s producers might deliberately open and close with strong performers. In effect, they looked at what happened to the same contestant when they appeared earlier or later.

The bottom line is that it’s OK to go first but better to go last. A partial explanation is that these acts are easier to remember. Obscurity doesn’t seem to attract you, so make sure you’re closing the show.

Questions to economist@ft.com

As Greg Mankiw wittily observes, a young fogey reviews an old turk:

The excesses of the 1960s are forgotten and once again, the government is seen as society’s savior. For people of all political stripes, it is worthwhile returning to “The Affluent Society,” and pondering what Galbraith got right and what he got wrong.

While I am a staunch supporter of free markets, I agree with Galbraith that there is much the public sector needs to do. Private firms do not automatically provide safe streets, good roads, and clean water. Even more important, Galbraith was dead right in arguing that we need more effective schools. Human capital is our best tool against poverty and economic stagnation.

Galbraith’s great failure was that he never really understood how much society is strengthened by a free and competitive private sector. “The Affluent Society” argues that a lack of regulation made American homes inferior to those in European social democracies. That view was wrong in 1958 and is completely untenable today.

The whole review is here, and there is more of interest beyond the left-wing right-wing stuff I quote. My sympathies lie with Glaeser, who was a big influence on two chapters of “The Logic of Life“.