Thursday, September 19, 2013

Brad DeLong versus Ben Bernanke on Forecasts

I have already pointed out the absurdity of Brad Delong promoting  CBO USG deficit forecasts that go out more than a decade.

But, I find it instructive that  even Fed chairman Bernanke doesn't buy into such nonsense. A key variable in determining deficits will be the unemployment rate. During yesterday's press conference, Bernanke made clear that it is "stretching the bounds of credibility" to attempt to forecast unemployment numbers out to 2016, never mind DeLong's promotion of forecasts going out more than 15 years. Bernanke said  in response to a question about unemployment, from  Robin Harding of the Financial Times:
I imagine it would take a few more years after that to get to the 4 percent level. I couldn't be much more precise in that than we were already obviously stretching the bounds of credibility to talk about specific projections to 2016.
There you have it. Bernanke cautions on going out just 3 years with projections, yet  DeLong is willing to give a bear hug to forecasts that go out 15 years plus, which must include forecasts on variables that Bernanke is cautious about only three years out.

1 comment:

  1. If they are so good at forecasting, how come they dont kill it in the market? See Alan Greenspan's years on Wall Street in the 70's for hint as to how these "economists" would do in the market.