Caroline Baum of Bloomberg observes that in economic forecasting, the Yogi Berra rule applies:
As U.S. economic indicators started to sputter over the
summer, economists duly marked down their forecast for third-
quarter real GDP growth to 1.9 percent in the September survey
from 2.5 percent in August, 2.8 percent in July and 3 percent in
June. “Hindcast” would be a more apt description for what
these folks do.
“It’s really an indictment of the forecasting business,”
says Bob Barbera, chief economist at Mt. Lucas Management Co., a
New York hedge fund, and himself a forecaster.
Hindsight is always fifty-fifty, as Berra observed. Further, predictions are hard, especially about the future.
How in the world do economists stay employed? Do they occupy some sort of demi-shaman position among corporate management staffs? Is there really any value added to any organization to have a forecaster change his expectation of growth from, say, 2.0% one quarter to 1.5%, based on insights garnered from looking backward? Where are the economists that predicted the contraction in the Great Recession, prior to its occurrence? What of these great econometric models that purport to show the future by dint of looking at the past? Is the past always prologue? And if it is, why worry about forecasting? Every day is Ground Hog day.
Allow me to offer a forecast, based on my careful reading of the entrails of a goat I sacrificed to the gods of economic growth this morning on an altar constructed precisely according to the specifications of the conference table around which the Federal Reserve Board of Governors meets:
Economic growth in the American economy will range from 1.5% to 2.5% for the third quarter of 2010.
However, my long-range astrological readings point to an extended period of low to no growth, culminating in outright catastrophic contraction on roughly Dec. 21, 2012, coinciding with the alignment of the planets.
There. You heard it here first.