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Megan McArdle:

If you keep predicting a recession, eventually you will be right. Every time there was the slightest downturn in the numbers, Paul Krugman predicted a recession. Eventually he was right. Do we give him credit for the one he got right, or the multiple ones he got wrong? To liberals, the answer seems obvious. Which gives credence to the conservative belief that liberals are people who cannot do basic math.

A more interesting question is what to do about doomsayers like Nouriel Roubini, who got the magnitude of the crisis right, but has similarly been predicting a financial holocaust for five years, with changing scenarios which mostly did not come to pass. Obviously, he was right that the global financial system was shaky. On the other hand, his understanding of why the global financial system was shaky does not seem to have been strong enough to predict the source of the failure--the current account deficit and the dollar have been at best minor players, at least in the way that he was worried about way back in 2004.

Finally, someone is criticizing Roubini. His status as a financial visionary is wholly undeserved. He’s been screaming about the downfall of capitalism for years now.

Here's my complaint about making predictions--there’s a lack of balance. Basically, you can call for the world to end for years, then step back and take any crisis and claim vindication. It’s like the people who said they were right about Iraq. But the disaster they saw coming was millions of Arabs rushing to Saddam’s side and a Stalingrad-like siege of Baghdad.

Also, Robert Shiller is a similar story. He never said what people think he said about the stock market. But if you make a bullish prediction and you’re wrong, well then forget about it. Glassman will forever be linked to Dow 36,000. His mistake was being specific. In June 2003, Krugman said the stock market was in a bubble, and he was fantastically wrong. Yet that disappears down the memory hole.

So here's the lesson, if you ever make a forecast always be gloomy and vague.

Posted by edelfenbein at October 15, 2008 11:45 AM