David R. Henderson  

Predictions are Hard, Especially About the Future: California Edition

A Question of War and Peace: S... Nominations for Top Economic S...

I used to think that the title of this blog post derived from baseball great Yogi Berra. But I have also seen it attributed to Danish physicist Neils Bohr. (By the way, have you ever noticed that when people quote a great line, a very high percent of them attribute it to Mark Twain or George Bernard Shaw.) Whoever said it, the line about predictions is a great line.

Which brings me to the issue at hand. Over at Reason.com, Steven Greenhut, a savvy commenter on California politics and political economy and, by the way, a fantastic speaker if you're ever looking for someone who can both inform and entertain while at the same time digging deep, makes 10 predictions about California's future. It's titled "Tough Year Ahead for California's Taxpayers and Wealth Producers." The first 9 of his predictions are pessimistic and the last is somewhat hopeful. All of his predictions seem reasonable. I won't bother repeating them: you can check for yourself.

But. Here's what I wonder. Even though Greenhut's predictions seem reasonable, are they reasonable? That is, to what extent will they come to pass? I don't raise this issue because I have any deep insight that allows me to challenge any particular one of them. Rather, my perspective is that of someone who has been unduly pessimistic in the past. A couple of examples from my history of pessimistic predictions.

1. In the early 1980s, one of my bosses at the Council of Economic Advisers, the late Bill Niskanen, told me that at a Heritage Foundation event in 1984, he had asked a bunch of fellow Reaganites who were celebrating Reagan's "success" in trimming government spending whether they thought that by the end of a second Reagan term, he would have got federal spending to under 20% of GDP. The silence, said Niskanen, was palpable. Both Niskanen and I were pessimistic about the prospects. We were right. But we were wrong in thinking that Reagan was our last best hope. It did go under 20% of GDP, due both to Clinton and the 1995-and-on Republican Congress. The Republican Congress restrained the rate of growth of federal domestic government spending. And Clinton kept the U.S. defense budget on its glide path that Bush Sr. and his defense secretary, Dick Cheney, had chosen to reflect the end of the Cold War. (See my August 26 post, "U.S. Federal Budget Cuts in the 1990s," for more details.)

2. And speaking of the end of the Cold War, here's my other bad prediction. Here's what I wrote in The Joy of Freedom: An Economist's Odyssey about President Reagan's famous June 12, 1987 speech in front of the infamous Berlin Wall:

Reagan said:
General Secretary Gorbachev, if you seek peace, if you seek prosperity for the Soviet Union and Eastern Europe, if you seek liberalization: Come here to this gate! Mr. Gorbachev, open this gate! Mr. Gorbachev, tear down this wall!

A year later, West German Chancellor Helmut Kohl says that the Berlin Wall will not come down in his lifetime.

I didn't write this down anywhere but at the time, I agreed with Kohl. I was wrong.

Notice something about both of my predictions. Neither was based on wishful thinking. I would have loved for government spending to fall below 20% of GDP and I was glad when it happened. I would have loved for the Berlin Wall to crumble and without a shot being fired and I was ecstatic when that happened. So I tend to be skeptical when people make predictions based on pessimism. They can be just as wrong as when they base them on excessive optimism.

If you comment on this post, I would appreciate your sharing your own history of predictions: pessimistic or optimistic, fulfilled or unfulfilled.

Comments and Sharing

CATEGORIES: Economic History

COMMENTS (24 to date)
The Dirty Mac writes:

In 1985, I predicted the Mets qould win the NL East if Ron Darling won 17 games. He won 16 and they were eliminated the last week of the season. More recently, I predicted that corn ethanol would be exposed as a boondoggle and that even after it had the mandates and one was pretty obvious.

vlad writes:

You might want to look at Nate Silver's book, it covers many examples of failed predictions (has an entire chapter on failed predictions in economics), some successful attempts to improve predictions (e.g. in meteorology), and the incentives faced by those making predictions.

Tim Worstall writes:

A few years back I predicted (in print) that the Chinese attempt to exploit their monopoly on rare earths production would fail.

It did fail, it has failed.

The why? A contestable monopoly is not exploitable. As soon as you do try to exploit it, it is contested and is thus not exploitable.

I get to do the victory dance for that one.

Ken B writes:

Funny about the Berlin Wall. I never had any doubt it would come down someday, as long as the communists were never elected in western Europe, but of course the actual timing was a surprise. All praise Kennan and Truman! Not all my predictions have been as good.

I predicted WMDs would be found in Iraq or just over the border. Awful.

I thought John Glenn would be a strong candidate for president.

In high school I predicted religion would fade and vanish. P T Barnum is still giggling over that one.

And, Colonel Mustard with the revolver in the kitchen.

genauer writes:

As somebody, who grew up 14 miles from the east/west border, I actually didnt feel that much at that time. It was a gradual process, opening the wall 11/1989, currency union 7/1/1990, reunification 10/3/1990, termination of my military reserve marching orders around 1993, last russian soldiers leaving around 1995, temporary deactivation of the draft 2012 in Germany.

The same goes for Europe. We hope that law and financial order will prevail, the process is roughly on track, but we are prepared for everything. Soffin II can guarantee 480 b€, over a weekend, that would be equivalent to 2.4 t$ for the US.

Si vis pacem, para bellum

Helmut Kohl:
„Mein Ziel bleibt, wenn die geschichtliche Stunde es zulässt, die Einheit unserer Nation."
Rede am 19. Dezember 1989 vor der Frauenkirche in Dresden.

Translate to:
"My goals remains, IF history permits, the unity of our nation."

Very carefully chosen words, spoken in front of the rubble, carpet bombed 45 years before.

Tom West writes:

Not politics, but I confidently predicted to all my friends that the iPad (and consumer tablets in general) would fail. After all, who needs to watch TV on their iPad while watching TV in their living room?

As for WMDs, I knew they had to be there. After all, what sort of idiot would start a war that he couldn't win in order to protect something he didn't have?

David R. Henderson writes:

@Tom West,
Interesting. One factual thing, though. Saddam Hussein didn't start a war.

Ken B writes:

@DRH: the Kuwaitis and Iranians might be surprised to hear that.

David R. Henderson writes:

@Ken B,
I was obviously quoting Tom West. He was referring to the 2nd Gulf War.

Ken B writes:

David, yes I should have left out Iran. But technically the second was still the first; a ceasefire was agreed, with terms which Saddam violated. WWI did not end in 1918 likewise.
Tom West should have said resumed, not started; Saddam had already done that.

Brandon writes:

I predicted that Romney would win the 2012 election...

Robert writes:

Prof. Henderson,

I'm too young to have made any sophisticated predictions that didn't pan out, but I did want to thank you for this post. Deliberative and thoughtful posts like this, that are willing to look carefully at theory and how theory relates to the practical outcomes in the real world, are part of why EconLog is required reading (and sadly, all too rare in today's public dialogue). Thank you for your continued contributions to EconLog.

Brandon Berg writes:

I used to think that the title of this blog post derived from baseball great Yogi Berra.

Well, he never really said most of the things he said.

Grant Gould writes:

A former coworker of mine used to maintain a page of all the people he'd heard the "especially about the future" quote attributed to (http://larry.denenberg.com/predictions.html) but gave up because it was too much of a pain to maintain: New attributions come up constantly.

It's hard to attribute quotes, especially from the past.

Shayne Cook writes:

I predicted that by 2010 a rampant and nearly out-of-control inflation as a result of the 2008 bailout efforts. I re-doubled that prediction after the "stimulus" bill was passed. Both were wrong, but it's been an interesting study in economics for me to understand why.

I predicted in 2008 there would be a coin minted sporting Barack Obama's visage. Or perhaps a new denomination of U.S. foldable currency with Barack Obama's visage. (A three dollar bill seems appropriate.)
Not happened yet.

I predicted in 2008 new gasoline taxes at or in excess of $2.00 per gallon by 2010. Also not happened yet.

By the end of 2009, I predicted I'd stop making predictions due to the fact that I'm not very good at it.

Tom West writes:

DRH: Agreed that Saddam did not actually start the war, but I am quite convinced that until about a month before the start of the war, he could have destroyed the political will to go to war by opening up *everything* to the UN inspectors.

At that point, I think popular support in the US and the rest of the world would have collapsed, and as it turned out, he would have lost nothing (except pride).

And I suppose that's another pair of predictions I failed at - although I opposed the war because I thought it offered a terrible precedent in justification for other nations like China and Russia, I thought the war would be tougher and the follow-up would be orders of magnitude easier.

Certainly taught me that in weighing the pros and cons of military action, always add a big con for a small, but significant chance that things go worst than your worst case scenario.

MG writes:

Not only are predictions about the (general)future hard, but even predictions on things about which you should have a lot of expertise and control -- yourself -- don't seem to be any easier. For most of my life I was sure that I was at best ambivalent (and if pushed, not predisposed) to having children. I was wrong, and the best introspection I can muster only suggests that I should not have been so sure, not that I could have predicted with better accuracy.

john hare writes:

I predicted much more time and many more American casualties in both gulf wars.

I missed many optimistic predictions about my own business. 1986 at business start that I could train crew leaders in a few months and build my business from there. A fairly low percentage of people going into concrete work have the mental ability, physical capability/desire, and the personality traits to become competent tradesmen, never mind crew leaders, foremen, and supervisors.

I thought the recession would be a couple of years or so, as did most of the business people I know.

I thought sub-orbital spaceflight would be common by now after the X-Prize flights of 2004.

David Friedman writes:

I'm pretty sure that I predicted, somewhere, that an anonymous digital currency along Chaumian lines would exist before now. I suppose one can argue that bitcoins are finally making that come true, but that wasn't the sort of anonymous digital currency I was thinking of.

Orwell comments somewhere that he thinks he got the direction of change right, but consistently overestimated its speed, underestimated the effects of inertia.

Nathan Smith writes:

I thought the overthrow of Saddam would be a lot bloodier than it turned out to be, amd I still supported. However, once Saddam fell, I didn't expect the *aftermath* to be as bloody as it was.

I expected stimulus to fail to help get the economy back to trend. But I greatly underestimated the ability of Keynesian economists to refuse to admit failure. If I had been able to foresee in 2009 the macroeconomic history of the last four years, I would have expected expert opinion to have buried the idea of Keynesian fiscal stimulus.

tmc writes:

Ken B You actually got the WMD one correct:

| The Associated Press
First Published Jul 30 2012 01:03 pm • Last Updated Jul 30 2012 01:05 pm
Baghdad • Britain will help the Iraqi government dispose of what’s left of deposed Iraqi dictator Saddam Hussein’s chemical weapons, still stored in two bunkers in north of Baghdad, the British embassy in Baghdad announced Monday.

Ken B writes:

@tmc: Thanks! Partial vindication at best I fear, but beggars can't be choosers.

jeppen writes:

I predicted in the early 1990-es that that all of our plastic cards soon would merge into one. I replaced that idea (late 1990-ies) with that our wallets (money, plastic cards) and car keys would soon merge into our cell phones. The technology has been there for ever, it seems, but it still doesn't happen! Very annoying.

A lot of very useful things that can be done isn't done due to a lack of ability or incentive to come together. Look at media streaming and purchases. It took a very long while, and it needed strongmen such as Steve Jobs to force the ball into motion.

English Professor writes:

In the early 1980s I told friends that there were three things I never expected to see in my lifetime:
1) the fall of the Soviet Union (Reagan had said that it was headed for the ash heap of history. I thought he was wrong.)
2) the Republicans in control of the House of Representatives (I believed that the Democrats, as bigger, more willing spenders, had a natural advantage in House elections.)
3) the Chicago Cubs winning the World Series ('nuff said on that one)

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