Which Economists Can See the Future?

MAKING SENSE -- September 4, 2012 at 11:34 AM EDT

Which Economists Can See the Future?

Scholar Nassim Taleb and Economist Nouriel Roubini Nassim Taleb and Nouriel Roubini predicted the last collapse. But even they don't think that means they'll be able to predict the next one.

Paul Solman frequently answers questions from the NewsHour audience on business and economic news on his Making Sen$e page. Here is Tuesday's query:

Name: Mike Sachse

Question: Which economists have the best track record in predicting future economic performance?

Paul Solman: It's been more than eight months since I last used this line here on Making ¢: There are two kinds of economists - those who don't know the future and those who don't know they don't know. If that's so, then it makes little difference which economists "have the best track record." Why? Because the best record is more likely a function of luck than foresight. And even if it's foresight, how would we ever know? Worse still, who's to say that, like eyesight, it doesn't deteriorate over time?

I've interviewed Nassim Taleb of "Black Swan" fame three times on the NewsHour -- here, there, and back here. Sadly, we never had time for his wonderful monkey example. Here's an early version, from his book "Dynamic Hedging":

"If one puts an infinite number of monkeys in front of (strongly built) typewriters and lets them clap away (without destroying the machinery), there is a certainty that one of them will come out with an exact version of the 'Iliad.' Once that hero among monkeys is found, would any reader invest his life's savings on a bet that the monkey would write the 'Odyssey' next?"

Back in 1983 I published a book with the award-draped Thomas Friedman - not the New York Times columnist but the PBS writer, executive and humor author ("1,000 Unforgettable Senior Moments: Of Which We Could Remember Only 246"; "The Senior Moments Memory Workout"). In that book we quoted Hollywood mogul Samuel Goldwyn as having said "Forecasts are difficult, especially those about the future." Along came the Internet, then the Yale Book of Quotations, and now we know: "It is difficult to predict, especially the future" is the quote, it was attributed to Niels Bohr [!] in Marc Kac's book "Statistics" and may have been "an old Danish proverb."

I am pleased to be able to correct the record. But it's the thought that counts and the thought seems irrefutable: life on earth is stochastic; the future is unknowable. And if you think there MUST be someone who knows better - some Delphic economist out there somewhere -- please read Canadian journalist Dan Gardner's book, "Future Babble." Or John Gaddis' short "Landscape of History." Or both.

Want best guesses? Try markets. They overshoot; they undershoot. But their ability to predict tends to beat "the experts." See our story on prediction. If you want economic predictions in the here-and-now, try InTrade.com.

Let it be known that this entry is cross-posted on the Making Sen$e page, where correspondent Paul Solman regularly answers your economic and business questions.

Follow @paulsolman

Beginning October 24, 2012, PBS NewsHour will allow open commenting for all registered users. We hope that the elimination of our moderation process will enable a more organic discussion amongst you, our audience. However, if a commenter violates our terms of use or abuses the commenting forum, their comment will be removed. We reserve the right to remove posts that do not follow these basic guidelines: comments must be relevant to the topic of the post; may not include profanity, personal attacks or hate speech; may not promote a business or raise money; may not be spam. Anything you post should be your own work. The PBS NewsHour reserves the right to read on the air and/or publish on its website or in any medium now known or unknown the comments or emails that we receive. By submitting comments, you agree to the PBS Terms of Use and Privacy Policy, which include more details.