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ECONOMIC THEORY, REALITY DON'T ALWAYS JIBE

When a nation's interest rates begin to fall, so goes the theory, its economy becomes less attractive to foreigners, who seek better returns elsewhere.

So goes the theory - and so goes the reality off in a different direction. It's happening with the dollar right now, to the dismay of some of the best minds in the monetary world. The dollar is rising, and they don't know why.Making the situation all the odder is the likelihood that West Germany and Japan might make their interest rates more attractive. Wouldn't you think that prospect would draw money from the dollar into the mark and the yen? It hasn't.

The situation provokes the question: Why does reality so often contradict the publicly stated expectations and forecasts of "experts," and even, as in the case of the dollar, government efforts at manipulation of markets?

No. 1 on any list of explanations has to be the reminder that there are few experts in financial, monetary and economic matters, and nobody at all who can foretell the future, even when they have their hands on the controls.

There are other reasons too.

On policy matters, for example, government officials are not always able to speak their minds lest they influence the future in undesirable ways.

For the monetary head of a large country to express fear that the exchange value of a nation's currency might rise in the next month could actually produce that rise by encouraging investors to buy into that nation's currency.

Domestically, for the Federal Reserve Board to say it planned to loosen the money supply could cause an explosion of unwanted economic activity. The Fed prefers instead to allow events to unfold and then explain its role.

On Wall Street, notions about where the stock market is headed are often biased by self-interest. Brokers want to make sales, because commissions on sales are their livelihood. Opinions, as a consequence, may be akin to promotions.

Why does reality so often go its own way in defiance of these "geniuses?" Why? Simply because reality has very little to do with such folks, and above all, it doesn't take orders from them.