Sept. 2, 2015 SIGN IN | REGISTER

Forecasting in the Dismal Science: Walter Friedman's 'Fortune Tellers'

The mythological Cassandraís curse was to see the future and not to be heeded. Babsonís curse was to see the future but without knowing when it would arrive. Bullockís curse was to see the future and not believe it himself. Or possibly not to see it until it was past. The audienceís problem then, as now, is to choose among Cassandras ó Bullocks and Babsons and dozens of other seers shouting simultaneously at the top of their lungs.

The corollary of being able to see the future is doing something about it when you donít like what you see. Friedmanís book is best when he touches on this intellectual and political relative of the early forecasting work.

John Maynard Keynes, an early supporter of Bullock and Personsí work, became less enthusiastic when they didnít share his interest in formulating policies to flatten the cycles they were forecasting. Keynes suspected they feared the loss of profits if policy eliminated the cycles.

Before Hoover became president, he wanted businesses to take the actions to smooth out business cycles. More knowledgeable about what was going on in the world than most Americans, Hoover was acutely aware of the alternative economic management advocated by the Bolsheviks in the Soviet Union. He thought government should provide the data and the private sector would do the rest.

Hoover worked hard to tap the expertise of Wesley Mitchell, who helped establish the National Bureau of Economic Research in 1920, for his purposes. Both of them suspected private forecasters were more interested in profit than accuracy. As a Cabinet member, Hoover created a business cycle committee and later said that committee deserved credit for avoiding an economic panic.

Nobody remembers Secretary of Commerce Hoover for avoiding a panic in 1923 and 1924. President Hoover is well remembered for the 1929 panic and subsequent Depression that he didnít avoid. He never even saw that one coming.

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