It's almost worth the Great Depression to learn how little our big men know.
—Will Rogers, American humorist
Learning from the past is critical for human progress. In this chapter we review what forecasters' history, both good and bad, can teach us. We first discuss particularly important events, including the Great Depression, Great Recession, and the turn-of-the-century high-tech revolution with its attendant productivity boom, Y2K computer fears, and the tech crash. Then we examine the characteristics of forecasts made at cyclical turning points.
A key question is, “Has the economics profession learned from its own mistakes?” As discussed in Chapter 3, we economists thought that we would never see anything like the Great Depression again. In fact, the two recessions after the early 1980s were so comparatively mild that some of the finest minds in the profession proclaimed a new era, labeling it the Great Moderation. Much to the chagrin of my profession, the Great Moderation was followed by the Great Recession. About the only fig leaf left was that the Great Recession, bad as it was, was far less severe than the Great Depression. Indeed, economists learned enough from the mistakes made prior to the Great Depression to propose, and then help implement, new government policies that have prevented a repeat.
As Will Rogers tartly observed, many of the day's leading economic and ...