Back in March, 2009, I wrote about the Fallacy of Economic Forecasts, essentially arguing that economic forecasts are bullshit (or for the faint of heart: most likely wrong). In an odd sort of way, the “forecast” was really a future estimate of past economic results. Maybe I should have changed the title to the Fallacy of Economic Estimates.
Well, in this week’s The Economist, Growth figures: Six years into a lost decade, there is ample proof of my claim. The U.S. Bureau of Economic Analysis (BEA) has revised it’s growth numbers for the 4th quarter 2008. Initially, it was estimated to contract 3.8%. This was revised a year later to indicate a much more serious decline of 6.8%. Now, it has revised the estimate downward still, to 8.9%.
The inaccuracy is blamed on a piecemeal and slow collection of survey data, which gets fed into a national economic model. Revisions to past estimates are made but once a year.
Perhaps the BEA needs a better model to estimate economic growth! Maybe take a walk down Main Street and see how many storefronts are for lease. Measure the length of unemployment lines. Actually talk to real people about their spending plans.
In March, 2009, I estimated that growth would be down at least 10% compared with government estimates of -1% to -4%. Seems that my noggin houses a better economic model than the that of the Bureau of Economic Analysis.