Are there bearish economists?
Dean Baker bemoans the sheep-like tendencies of economists:
Not one of the “Blue Chip” 50 economic forecasters saw the coming of the 2001 recession in the fall of 2000… Forecasters do not make independent assessments. They try to make sure that their foecasts are consistent with the rest of the forecasts… Reporters should not be asserting that, “with Americans earning more and spending more, economists expect that the gross domestic product will expand faster than it did in the third quarter.”
On the same day, however, Barbara Hagenbaugh of USA Today runs a story with the headline “Economists sharply divided on where economy goes from here“. The difference is in timeframes: Baker’s looking at the next quarter, while Hagenbaugh is looking at the next five years.
In other words, economists can be bearish, but only when their forecasts are so vague as to be meaningless.
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Perhaps only when they refuse to listen to senior management:
“The U.S. and global economies will continue to expand in 2007, according to a survey of members of the Financial Services Forum, a non-partisan organization consisting of the chief executive officers of twenty of the world’s largest and most diversified financial institutions… “As CEOs of major financial services firms, our members have a unique hands-on insight into the U.S. and global economy,” said Forum CEO Donald L. Evans. “The results of the Forum CEO survey will provide valuable information to policymakers, market analysts and researchers on global economic trends.”…”
I have a thesis that it is impossible for the consensus to correctly forecast a recession.
It is based on the premise that recessions occur when the business community makes a mistake and ends up with unwanted inventories or
This happens when business plans for stronger growth in demand then is realized. But generally, business plans for the consensus forecast.
So for the consensus to correclty forecast a recession it has to forecast that the consensus forecast is wrong.
This is reinforced by the nature of the major econometric models that makes it almost impossible for them to forecast a recession. In the major econometric models markets always clear so you can never have unintended inventory accumulation to generate a recession.
An interesting point on time horizons and economic forecasts – it also applies to forecasts of the financial markets. It’s hard enough to predict the direction of a security price, so I don’t know what forecasters are doing by adding kinks in to the forecasts. Oh yes, of course, they are covering their own backs.