The forecasting track record of economists does not inspire much confidence in their current or future predictions. In February 1996, in a talk about the long-term prospects for the U.S. economy, I said that the prospects for prosperity were brighter than ever before in our history. I remember that prediction particularly well because, at least so far, it has turned out to be right. The analysis I used at the time was not standard. Since then I have added several more factors to the list.
Economists have a tendency to analyze only what is available in neat, historical tables.
They seem to prefer a precise, irrelevant answer to a more relevant one fraught with uncertainty. The econometric models, whose mathematical complexity once seemed to hold the promise of more-reliable forecasting, have been disappointing failures. There are just too many factors that determine future economic activity that are impossible to quantify. A little more than sixty years ago, in his influential book The General Theory of Employment, Interest, and Money , John Maynard Keynes addressed the question of the necessary conditions for economic prosperity. Although much of what passes for Keynesian economics today is of dubious worth, Keynes was a perceptive thinker, and a number of his earlier insights have been forgotten.