Beware of Forecasting Season
The following is an excerpt from our Q4-2015 newsletter...
January means it’s time for the media to pronounce its always-bold, never-remembered New Year’s predictions. You will see, hear, and read grand prognostications. They have a general bias to provoking fear. Take them lightly.
There are many brilliant economists who provide incalculable value. Their predictions are nuanced, backed by ample evidence, and not tailored for headlines or soundbites. The media prefers loud, bold, and absolute. Realize, there is an inverse relationship between certitude and credibility.
Here are a few examples:
As you come across 2016 predictions, notice how many are anchored to the big stories of 2015. Remember, though, that most major 2015 stories were total surprises. The same will likely be true of 2016.
We believe Galbraith’s quote is spot-on for the short-term, calendar-oriented forecasts favored by the media. To counter, here is a long-term, not headline-worthy prediction by University of Oregon economist Tim Duy: