Most of my economics professors opened class with some variation of the old in-house joke: “Economists have correctly predicted nine out of the last five recessions.” Their scholarly modesty apparently exhausted, however, they proceeded to spend the next four months teaching precisely how to model and forecast the national economy.
In a world where describing the current state of the economy proves difficult — the Bureau of Labor Statistics always has to revise its estimates of current unemployment — it’s understandable that predictions are unreliable. Even so, the manner and degree to which economists are wrong in their forecasts is illuminating. For example, the Obama White House’s predictions often stem from methodological overconfidence.
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