Past Performance Does Not Guarantee Future Results: Economic Predictions ca. 2007

Phil Greenspun finds a gem:

Lecture 3 within “Modern Economic Issues”, by Robert Whaples, is titled “Economists’ View of the Future”. The course seems to have been published early in 2008 and perhaps recorded in 2007, since many statistics from 2006 are cited. One of the lecturer’s aims seems to have been to present listeners with a comprehensive view of thought by economists around the U.S.

Given this backdrop of pessimism and continually being proved wrong by events, what did the economists surveyed circa 2007 predict about 2008 through 2018 in the United States? Nearly all predicted the strong growth that had prevailed in the 1990s and through 2006 to continue virtually unabated. The only real debate was among those who through the strong growth was permanent and those who thought there would be reversion towards a less spectacular level of growth. Of those interviewed by Whaples, not a single economist, apparently, predicted the Collapse of 2008 and subsequent stagnation!

Greenspun takes this failure as mitigating current pessimism:

So next time that an economist shows up in an Op-Ed column or on TV to explain why lackluster growth is the new normal for the U.S. remember that, not too long ago, probably the same person was predicting a very bullish 2008 through 2018 and that the growth of 1991-2006 was the “new normal”.

I don’t see it. All the track record shows that the macroeconomic herd has limited predictive capacities. Predicting that lackluster growth is the “new normal” in America, however, may as easily be wrong because growth will cease altogether as it could be because growth will rebound.

This does offer a powerful refutation of macroeconomics’ argument from authority.

Unfortunately, much of the public puts climate scientists and economists in the same category: “the experts”.  Whether there are any experts in macroeconomics is not clear from where I am sitting. Climate scientists’ claims have far more prognostic power than those of economists. To be fair, climate science only makes predictions about physics, not about human behavior, so we have an easier task.  

A big problem is that neither the public nor the economists perceive this advantage. Economics is the enemy of sustainability not only because of its compulsion to discount the future, but also because of its aura of  hubris and incompetence that tars all of academia. One way economics supports the status quo is by devaluing all expert predictions in the public’s view.

(Mederated comments in this thread here)


  1. A whole lot of people predicted the collapse. I don't know where your friend was looking, but a whole lot of people called that shot. I used a bunch of pessimistic quotes in a report I wrote at that time for a UK government department to justify my own gloom and doom. When I delivered it, nobody was surprised. Nobody.

    [ As of yet an unsupported claim -mt ]

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  3. Links or references please?

    (I don't personally know Greenspun, though to be honest I was in the market for some kool-ade he was selling about getting rich on the web about a dozen years ago ("Philip and Alex's Guide to Web Publishing").)

  4. Tom Fuller, I believe, is referring to this recent conversation, wherein he refuses to acknowledge that the point he raised in support of his excessive claim was a point I had clearly stated (it was part of my first figure) in the first place:

    I have explained on a half dozen occasions why that point is not sufficient to prove his case but he stubbornly refuses to pay enough attention to what I am saying. This may be honest confusion or disingenuous rhetoric. I'm inclined to the former. The interested reader may decide.

    Vampire arguments indeed! Followups, if any, to this matter to Fuller's please.

  5. Jeebus.

    Doesn't matter. You'll forget the links ever existed in two weeks.

  6. Criminy, I went over there and looked, and now the memory of that whole past contretemps is coming back to me like the wet kiss at the end of a hot fist.

    The Fuller Gallop, same as it ever was: He relies mainly on Wingham, Shepherd et al. (2006). Amusingly, just months later Shepherd and Wingham (2007) found that Antarctica as a whole was indeed losing mass. The mass balance estimate change was from +27 Gt to -25 Gt (error bars apply to both). Straightforward, no? Science marches on. But having gotten so excited upon finding the first one, Tommy was unable to recognize the existence of the superceding second paper. He still won't, as shown by the current exchange. Because that would mean, you know, losing the argument.

    Conclusion: Same old Tommy, still not worth your time, Michael.

  7. "Econo-psychics"
    -- by Horatio Algeranon

    Economists* are like psychics,
    This cannot be denied.
    Whenever they happen to get it right,
    It's greatly AMPLIFIED!!

    But if. by chance, they get it wrong,
    They utter not a word
    For them to actually remind us
    Would almost be unheard.

    And when their GOOF's so blatant
    They really can't ignore it,
    They simply claim their "model"
    Was a "bad one" and deplore it.


    *Journalists too.

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  9. Who doesn't know Taleb or Roubini?

    You might look for their opinion on climate change. Bwahaaahahahaha...

    But forget Taleb's opinion on climate models, which seems just a variant (spiced by the word "nonlinear") of classic economist opining: If our models are bunk, so are yours. And yours aren't even linear...

  10. Please resist becoming unpleasant, Tom, or cope with being moderated out.

    Your last link begins "There are only a handful of people who predicted this financial crisis, or at least its severity."

    How does this support your broad claim, never mind your specific assertion: "I used a bunch of pessimistic quotes in a report I wrote at that time for a UK government department to justify my own gloom and doom. When I delivered it, nobody was surprised. Nobody." ?

    What report? What department? What time? Which quotes? Who was unsurprised?

    I am not convinced you are remembering this right and do not choose to take your anecdotal testimony as relevant.

    Lots of people were alarmed, you and I among them, but were they mainstream economists? Ron Paul, featured prominently in your links, certainly is not in that category - he's got the gold bug, which is not particularly in vogue in the academy.

  11. Here's another one who predicted the meltdown:
    Warren Buffett famously speaking of "financial weapons of mass destruction" in 2003. But you won't like what else he thinks:

    For example, doubling the carbon dioxide we belch into the atmosphere may far more than double the subsequent problems for society. Realizing this, the world properly worries about greenhouse emissions.

  12. No. If we freeze emission rates we still double, triple, quadruple, quintuple... CO2 as time goes on. That's my point exactly.

    Net emissions must go to zero. That's the problem. If it were just a matter of scaling back a little we would be having a real conversation, not the noise we have now.

  13. Krugman has written extensively on who among notable economists was right/wrong and for what reasons. I haven't read his recent book, but I expect it includes relevant material.

    IIRC he says that pretty much nobody got the scale of the housing bubble right, him included, and so missed getting the implications of the collapse right. That points up the fact that for an economist to have been truly right they have to have gotten all of those elements straight. A bare statement that there's a bubble and it's going to burst with unpleasant consequences is better than saying the opposite (which many economists did), but to do so without detail doesn't require being an economist.

  14. Hmm, apparently I didn't make myself clear. Of course I'm aware of the complete bleedin' obvious, Michael. My point was that Buffett's statement is broadly OK if one takes "we belch" as a reference to the total emitted rather than emission rates. The reason I think that's what he meant is because of the reference to the extensively-discussed doubling, noting that these are not concepts that someone who's a notable success at financial projections is likely to confuse. IIRC nobody's worst dreams involves a doubling of emission rates (although give BAU enough time...), so I don't think there's anywhere from which he even could have gotten such a reference. Finally, he should get credit for the main point he was making, which is that the damages are disproportionate.

  15. Buffett is an economist. What do you expect? Being a genius (or just lucky) in play with money (which is a social construct) does not need extraordinary understanding of physical reality stuff. That exactly seems the problem with economists. It's great enough that Buffett doesn't implicitly assume a flat planet, like most other Very Serious Economists. Should I throw a Larry Summers quote at you? 🙂

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