Back to the Trouble with Economists: The real issue I have with Brian's Op-Ed piece has to do with this section:
There are at least a half-dozen other institutions publishing surveys, and all of them report very similar results among the 100 or so active professional forecasters. Except for two well-known economists (Nouriel Roubini at New York University, and Gary Shilling of A. Gary Shilling & Co.), who are not in many surveys, a super-duper majority of professional forecasting economists believe the economy will continue to expand during the next year and have believed so for the past four or five years" . . .
In short, over the past five years, forecasting economists from academia, consulting shops, financial services and industry have a perfect 5-0 record against a random sample of American citizens. (emphasis added).
That's a slick trick: My issue is with the phrase "the past five years." That time period was no doubt chosen because it omits the last recession.
Why? There is a specific reason for omitting that time period: Economists, as a group, failed to forecast the 2001 recession. In fact, even when we were smack dab in the middle of it, the group failed to notice it.
AS A GROUP, ECONOMISTS HAVE NEVER CORRECTLY FORECAST A U.S. RECESSION. EVER.
For sure, certain Individuals may have gotten it right, but the collective group has a perfect record of missing the major turns.
I laid out my views on forecasting several years ago in a column titled "The Folly of Forecasting."
Essentially, most forecasters fall into one of two camps: Camp one are the extrapolaters. They take whatever trend exists at present, and project them out to infinity and beyond. This makes them right in expansions, but causes them to miss major turning points.
Camp two are the anticipators: They look for signs that the present trend is about to end. They often are too early, and miss some of the existing trend in order to capitalize on the reversal. (I have struggled to keep a foot in both camps, sometimes less successfully than others).
The bottom line is this: Economists as a group are a paid part of the Wall Street machinery. They do not get raises or promotions even when they correctly forecast a Recession. Its verbotten. Outside of academia, its even referred to as The "R" word.
A perfect 5-0 record? Perhaps that's their pre-season score. But when the big money is on the line, when its crunch time in the SuperBowl, you can expect the entire group of on the dismal scientists -- as a whole -- to do what they have always done: choke big time . . .