Book Review: Inside the Crystal Ball
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This book is an invaluable resource for anyone striving for a command of the inner workings of the economy. The author details his impressively rigorous forecasting process, which draws on all major schools of macroeconomic thought. He also dives deep into the data to explain some of his expectations.
Beware of economic forecasters who achieve better-than-average accuracy in predicting extreme outcomes. They are less accurate than the average forecaster in predicting run-of-the-mill outcomes. Furthermore, it may not be by chance that certain prognosticators issue extreme forecasts with greater frequency than their peers. Those whose firms bear their own names depart from the consensus more often than other forecasters. Making a splash by “calling” a major setback can expand a forecaster’s following (and revenue base), even if the feat is achieved by acting as a “broken clock”—that is, predicting an economic decline year in and year out until it inevitably comes to pass as a function of the business cycle.