The Wall Street Journal released it’s latest survey of economists today, revealing the good news that they see the recession ending by autumn. The bad news is that they say it will take years for the economy to fully recover.”
The worse news: economists are just as crappy as everyone else at predicting the future.
Gordon Smith at the Conglomerate searched the WSJ economist survey for the last few years. What he found was that sometime the economists are right but sometimes they were wrong. In short, they’re “fairly clueless” about the future. That’s hardly surprising–the future is hard predict–but it makes us wonder why the Journal even bothers with these things.
Smith gives us a fair sampling of the good and bad predictions. We don’t feel like being that generous. (If you want, click here to read his full sample.) Instead, here are a few of the real whoppers.
- 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.”
It’s not all that surprising that economists aren’t good at predicting the future. The future is hard to predict because it is contingent on so many unknown factors. But what is a bit surprising is how bad economists are at even reading the present.
On February 7, 2008, two months after the US was in a recession, the WSJ reports: “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.”
Great work guys.