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Home Publications Blogs Beat the Press Tales on the Economy: Track Records Should Matter

Tales on the Economy: Track Records Should Matter

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Saturday, 02 March 2013 09:52

A fortune teller who is constantly adjusting his predictions for the future when they are repeatedly falsified by events is likely to lose credibility after a while. Unfortunately the same does not hold true among economists. That is why a Washington Post article on the prospects for future growth treats the varying perspectives among economists as carrying equal weight.

Some of the economists have had their predictions for the economy repeatedly falsified by events, starting with the initial crash which they never thought possible. Some in this camp now insist that we are on a permanently slower growth path. This prediction is a sequel to their earlier prediction that the economy would bounce back quickly even without any special boost from fiscal or monetary policy. There were also many orthodox mainstream economists who, like those at the Congressional Budget Office, also expected the economy to bounce back quickly whether or not there was a boost from government stimulus.

On the other hand, at least some of us Keynesian types saw the housing bubble and yelled at the top of our lungs that it would collapse and bring about a severe recession. We also warned that demand would not bounce back quickly since there was nothing to replace the construction and consumption demand generated by the bubble. And we pointed out that we would not be likely to see deflation since wages are sticky downward.

In all of these predications were we shown right, but in Washington policy debates being shown right counts for little as the Washington Post tells us today.

 

Thanks to Robert Salzberg for corrected typos.

Comments (5)Add Comment
It's not what you say or do it's who you are
written by Jennifer, March 02, 2013 2:08
It isn't any different from the people who have high profile jobs in Washington. No matter what happens under their watch they have an amazing ability to snag high income if not high profile jobs after there Washington gig is up.
...
written by watermelonpunch, March 02, 2013 2:47
Hmmm... maybe the correlation between fortune tellers & economists is stronger than imagined!
I've always suspected that fortune tellers are popular not when they're highly accurate or proved right, but when they tell people what they want to hear.

I watched one of those true crime tv show episodes where the one victim was a fortune teller who was killed by a client that was furious that the fortune teller would not tell her that her ill-fated relationship would work out with a man who wanted nothing to do with her (the client/murderer).
Right? Who Cares Who Was Right?
written by Roger Bloyce, March 02, 2013 3:05
In a poll taken by Quinnipiac University last December, 85% of registered voters, including 77% of Republicans, said a pledge not to raise taxes was a bad idea. Taken at the same time, a Washington Post-ABC poll had 60% of respondents favoring higher taxes on the wealthy.

Yet 95% of Republican members of the 113th Congress and one Democrat signed the Taxpayer Protection Pledge, thus annulling their oaths of office, restricting their legislative powers, and making it impossible for the Congress to counteract a prolonged recession with fiscal spending offset by tax hikes.

It has nothing to do with predictions in policy debates. While a few of them have recanted, a majority of Republicans in the U.S. Congress blatantly refuse to raise taxes at the worst possible time for two reasons: to please the ultra-rich from whom they accept substantial bribes, and to buy the votes they need to get those bribes.

A pledge not to raise taxes is an attempt to buy votes. Nothing more, nothing less.
Fortunetellers
written by Tim Bassett, March 02, 2013 6:41
It's a rare day I disagree with Deano but I think he overestimates the propensity of the market to drive out bad fortunetellers.

We know that:-
1) There is no evidence for any real fortunetelling (as opposed to gifted cold readers)
2) Despite this many 'practitioners' have lone and lucrative careers

In the light of the above perhaps we should be less surprised at the persistence of failed economists. If the act is good enough they can get away with the rubbish.

Financial markets, where one would expect mis-pronouncements to be punished faster, are similarly full of such pundits (who like stopped clocks may be occasionally right but no more than by chance). They are successful because they tell people what they want to hear. Larger firms exploit this by having several in-house economists/strategists etc so there is always one that you can agree with.
look at medicare predictions...
written by pete, March 03, 2013 3:08
Folks predicting medicare expenses into the future grossly underestimated its current costs....are we still listening to them or their offspring?

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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