Today: "Economists in the latest Wall Street Journal survey see an end to the recession by autumn, but say it will take years for the economy to fully recover."
Should we care about surveys like this? Do economists know more about the future than the rest of us?
DISCLAIMER: this is a blog post, not a rigorous empirical study of economic forecasting.
Despite the disclaimer, I thought you might be interested in what I found when I searched the WSJ from 2006 to 2008 for surveys of economists. See a nonrandom sample of excerpts from such stories below. In some instances, the economists were right about the future, but in many instances, the economists surveyed were fairly clueless about what was coming down the pike. And that's pretty much what we would expect, isn't it? The future is tough to predict, even with lots of data about the past.
June 9, 2006: "WSJ.com survey finds Wall Street economists, 3-1, expect incoming Treasury Sec Henry Paulson to have more influence than his predecessors."
August 28, 2006: "National Assn of Business Economists biannual survey of nearly 200 economists finds 34% cite terrorism as greatest short-term risk to economic growth, up from 26% in March survey; finds 29% cite high energy prices, up from 23%, though they believe
it will take unlikely scenario of oil hitting $100 a barrel to bring on
recession."
September 8, 2006: "WSJ.com survey of 48 economists
finds most expect housing market to cool significantly next year, and
many predict that average home price won't rise at all in 2007 and
could even decline."
January 2, 2007: "Wall Street Journal survey of economists finds expectation that service sector will keep humming along while housing and manufacturing slumps abate and Federal Reserve begins to reduce interest rates; rapid expansion of technology companies and huge bonuses for investment bankers are signs of sector's strength."
March 16, 2007: "WSJ.com survey of 60 economists
finds 32 believe it is 'very' or 'somewhat' like that trouble in
subprime mortgage market will spillover into rest of mortgage market,
but only 22% say problems in subprime market have caused them to
downgrade their economic forecasts."
October 12, 2007: "WSJ.com survey finds average forecast for chance of recession among economists fell to 34% from September survey that forecast 36% probability of recession."
November 15, 2007: "WSJ.com survey of economists
finds more than half believe credit crunch is about half over, while
25% say it is in early stages; just under 30% say credit crunch is
biggest downside risk to their forecasts, while 30% cite housing."
December 11, 2007: "WSJ.com survey finds economists believe risk of US recession is rising."
February 7, 2008: "Latest Wall Street Journal forecasting survey of economists finds respondents put odds of recession at 49%, up from 40% in January and 23% in June."
May 9, 2008: "Latest Wall Street Journal forecasting survey finds majority of economists say surge in global food and energy prices is being driven by market fundamentals, rather than investment bubble."
October 10, 2008: "Wall Street Journal forecasting survey finds economists put odds of recession in next 12 months at 89%, up from 60% in September survey."
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1. Posted by Jake on May 14, 2009 @ 19:53 | Permalink
Quite sound, Gordon.
At the present time it is safe to say that any economist advising folks to stock up on canned food, bottle water, and ammunition probably has good advice to offer generally.
Much as I hate to admit it, the Obama administration is proving me wrong. Heretofore I never thought the day would come when life under Jimmy Carter would look OK by comparison.
2. Posted by Sarah L. on May 15, 2009 @ 9:26 | Permalink
Great post. Reminds me of Philip Tetlock's "Expert Political Judgment," an empirical study of forecasting, which finds, to oversimplify drastically, that "experts" aren't much better at predicting things than anyone else. (My favorite finding in that book is that, if I recall correctly, a chimp throwing darts is actually slightly better at predicting political outcomes than a Berkeley undergraduate.)
3. Posted by fedgovernor on May 15, 2009 @ 13:53 | Permalink
"A chimp throwing darts is actually slightly better at predicting political outcomes than a Berkeley undergraduate."
You know, I think the constant chimp-bashing that goes on at this site borders on animal cruelty. Comparing them to someone who would go to Berkeley is grounds for notifying PETA.
Have you sir, no shame?
4. Posted by Doug H. on May 16, 2009 @ 11:05 | Permalink
Good post. I suppose it shouldn't suprise us that economists are not very good at predicting the future since they often cannot agree on the causes of financial turmoil that has already occured.
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