|
Predicting the Recovery
|
| In a 1988 paper*, three economists studied economic forecasts
from 1929 made by two competing groups. One, led by Professor W.L. Crum,
was known as the Harvard Economic Service (HES); the other was lead by
Irving Fisher at Yale. HES sold subscriptions in a weekly letter at a cost
of $100 per year ($850 in 1996 dollars). Fisher's forecasts were syndicated
to newspapers.The HES forecasts were based on statistical analyses of three
indexes (one of selected stock prices, one of commodity prices, and a third
of interest rates); Fisher's forecasts were based on a modified version
of the classical model we have studied in class. Both forecasters, constrained
by the thinking of the classical model and the properties of previous recessions,
persistently presented optimistic forecasts of impending recovery. This
page reports a selection of their juicier quotes. |
| Thrown in here and there are some headlines from the
New York Times. These were originally collected and posted by Mark Underwood
of the University of Kentucky, on a site no longer available. Note that
a major slump occurs in the stock market on Octover 24, 1929, 8 days before
the infamous crash of November 1, 1929. As Underwood asks: if you were
an invester reading these headlines, would you have kept your money in
stocks? |
| * K.M. Dominguez, R.C. Fair, and M.D. Shapiro (1988):
"Forecasting the Great Depression: Harvard versus Yale." American Economic
Review, 78:595-612. |