Most of us are aware of the hazards of making predictions; unfortunately, economic forecasting, which is of such vital importance, has proven to be among the most unreliable.
Many years ago Sam Goldwyn, a movie mogul, announced that he never made predictions, especially about the future!
John Kenneth Galbraith, a well-known economist and friend and adviser to President Kennedy, wrote irreverently that, “The main function of economic forecasting is to make astrology respectable.” That was ridiculously cynical.
Rene Levesque, the Quebec politician and journalist, was a chain-smoker who mocked his doctors for warning that cigarettes would be his undoing. Eventually, of course, before long those warnings were validated.
The lesson here: do not denigrate forecasters.
The record of economic forecasters, including this columnist, leaves much to be desired. Many “unknowables” should prove that humility is essential for forecasters. Yet, it should not mean that they are without merit.
For years this columnist has written that the actions of governments did not provide any real resolutions to our economic problems. Incurring gargantuan budget deficits “paid for” by money printing that distorts the economy merely postpones a day of reckoning.
However, recently it has been doing better than any rational observer would have assumed. After all, if too much debt triggered our economic difficulties, is it reasonable to create more debt? Eighteenth century France, Germany in the 1920s, Latin American nations repeatedly, and Zimbabwe over the past decade, have followed that path to ultimate doom.
We constantly looked abroad for examples that should be copied for economic salvation. In the 1950s it was assumed that the Soviet Union, with its Moscow-planned economy, would surpass the United States. However, the economy collapsed.
Later Japan was anointed by experts as the future economic powerhouse. Its top-down management style was eyed enviously by many. Yet for the past 20 years Japan has been mired in a very sluggish economy.
More recently, China’s government-directed economy was destined theoretically to become the world’s leading economic power. All the infrastructure gaps in the economy and rampant corruption seem to be dismissed for the time being.
Still, hoping for definitive remedies, we now are focusing on our central bankers to lead us to an economic Promised Land.
Instead, we should realize the unknowables and modern shibboleths make failure inevitable.
Rather, we simply must go back to old-fashioned, basic economics, proven successful repeatedly by history.