The Man who Knows too Much?
D. Thomas
August 2000
Big business is entitled to a refund! In that article, Ruthven predicted a great depression in Australia in the 1990's, complete with dole queues.
The reality was just a little different. GDP growth in Australia has powered ahead, averaging 4%, well above long term trend, since 1994 and has never gone into recession (two successive quarters of negative growth).
So how did Ruthven make such a bad forecast and what can we learn from this mistake?
"Everything is cyclical," Ruthven says. "Straight lines do not exist. Some of the cycles are short - the major underlying economic cycle in Australia lasts about 38 years - while others are as long as 150 years or more. The trick is to know the amplitude, length and variation of the cycles and, more importantly, to be able to explain the reasons and causes for such behaviour."
I agree that it is important to understand the causes of behaviour but clearly Ruthven's explanation is wrong.
More importantly, it is not true that everything is cyclical. It is easy to fit cycles to historical data but that does not mean that the cycles are real or will continue.
If everything was cyclical, we should soon be seeing an increase in the number of people employed in farming and a resurgence in church-going!