Economic Forecasters: Crow or Eat Crow
Name: Dr. Gene Audette
Question: Every year it’s prognostications, prognostications. But seldom do “columns” like yours do a retrospective to compare what was predicted to what actually occurred, and to get the same prognosticator to have to defend his/her predictions and consequent outcomes. Further burnish your excellent work by bringing back some those experts to crow or eat crow.
Paul Solman: “Crow or eat crow.” Nice. But if you read this “column,” Dr. Audette, you know one of its iron mottoes, courtesy of the towering John Kenneth Galbraith: “There are two kinds of economists; those who don’t know the future and those who don’t know they don’t know.” We feature the former.
The closest we come to “prognostication” in our own work is admonition. That is, in picking which story to tell, we’re identifying an apparent trend or problem that, we think, could cause such significant change as to warrant attention. Using that criterion, we might crow about affording Nouriel Roubini his housing crash TV debut in November of 2006 and interviewing Nassim Taleb that same month, before the publication of “Black Swan,” on the “unknown unknowns,” as Donald Rumsfeld so pithily put it in his own defense. We even wondered about a housing bubble in a piece back in 2003.
But then, I can’t help remembering a stock market story from 1987, after a crash that October, in which I analyzed the question: “How low can it go?” The Dow was under 2000 at the time, yet I sketched reasons why that might be too high!
One of my favorite stories along these lines was produced two years ago:
Economists Explain Why Hints of the Economic Crisis Eluded Them.
Bottom line, though: we try to avoid predictions, especially those about the future.