Economic forecasting is a mug’s game. There are simply too many unknowable factors that affect “the economy” for anyone to make accurate predictions. The Fukushima earthquake and nuclear disaster, for instance, had a noticeably negative macroeconomic impact around the world, and nobody knows what lurks inside the hearts of central bankers. Plus, if I did possess the secrets to the future, I’d be making a fortune as a speculator, not telling you about it.
There are plenty of financial types who have funds where investment is contingent upon expectation of macroeconomic conditions. You know what they think because you know how they invest, and they’ll tell you what they think as well. What’s the point of journalists and academics even offering predictions if they don’t have “skin the game”? You can basically just say anything to be contrary, perhaps like in a publication such as Slate.
Here’s another anti-pessimism piece from Slate, No Pessimists Allowed! America’s economic recovery will be twice as big as experts predict. Date: January 2nd, 2010. With hindsight this was obviously unwarranted optimism. But how sure was the author, Dan Gross, about his prediction? It would be nice to get a sense if Gross had some put real money down on his predictions and made the values transparent. The amount of money would have given you a sense of the individual’s confidence in their proposition.
Of course, as Matt Yglesias says above why would he even publish his predictions instead of investing them? As Yglesias has said explicitly and implicitly he’s not a blogger for the money, he likes his job a great deal. He likes making predictions and performing rapid analyses. So that’s one reason why a Harvard grad with a degree in philosophy didn’t go to law school or into finance to make more money. But another issue here is that most journalists are probably not big enough individually to move the market. Therefore, their “small bets” would be a good gauge at least of how seriously to take any given prediction for their readers. Though obviously most readers aren’t interested in this stuff for truth. They just want to be entertained….