Persistently Pessimistic Predictions of the US Economy
D, Thomas
March 2000
Why such poor accuracy? It seems that faster productivity growth than in previous years has boosted output growth. But what has caused the increased productivity growth? The most common explanation is technology, specifically investment in computers and the internet.
Surprisingly, there is one forecaster who predicted the boom in the US economy. Harry Dent, in The Great Boom Ahead, published in 1993, correctly predicted a surge in both consumer spending and productivity in the US from the mid-1990's. He predicted the acceleration in consumer spending on the basis that the large baby boomer generation was reaching the age of maximum spending – the late 40's, when income is high and commitments fall. He predicted the quantum leap in productivity on the basis that the average age of the workforce had increased and that a smaller generation of new workforce entrants would result in less drag on efficiency.
Curiously, debate about this new growth era in journals such as The Economist do not mention Dent's accurate forecast, nor the demographic shift he used as the basis for his predictions. Instead, we are told, there has been a "paradigm shift".
Maybe economists flock together like sheep and maybe they believe in a return to "trend". Perhaps they don't really understand the drivers of economic growth. They certainly need to broaden their horizons before their models and predictions can be relied upon.
