Does this apply to predicions about the mortgage meltdown (or otherwise)? I suppose so.
Economists Don’t Predict Recessions:
It would be helpful if the many articles reporting on economists’ predictions about the future state of the economy reminded readers that economists do not forecast recessions. For whatever reason (I don’t care to speculate), economists are notoriously bad at seeing recessions coming, even when they are right in front of their face.
In the fall of 2000, not one of the “Blue Chip 50” forecasters saw the 2001 recession coming. The Philadelphia Fed’s Livingstone Survey in December of 2001 saw nothing but clear skies ahead. Even in June of 2001, three months after the recession is now dated as having begun, the wise forecasters still saw a relatively healthy scenario, including a 1455 S&P 500 by the end of 2002 (try 900).
One of my favorite Greenspan moments was when he spoke confidently at a Fed meeting in July of 1990 that the economy looked healthy for the immediate future. The recession is now dated as having begun in June of 1990.
The point here is that there is an incredible bias among economists that prevents them from seeing recessions until they are well underway. (I’m the only one that predicts recessions that don’t happen.) This information should be included in a cautionary note in articles on economic forecasts.
–Dean Baker
(Via Beat the Press)