The Washington Post reports:
Recently, economists at the Organization for Economic Cooperation and Development (OECD) published a retrospective study of its economic forecasts. This qualifies as an act of bureaucratic courage, because the record was predictably dismal. Not only did the OECD miss the 2008-09 financial crisis, but it routinely over-predicted the recovery’s strength. In May 2010, for example, the OECD forecast that the U.S. economy would grow 3.2 percent in 2011. Actual growth was 1.7 percent. This is a huge error, and there were larger misses for some European economies as well.
The OECD wasn’t alone. As the study notes, “groupthink” is endemic among forecasters. The International Monetary Fund, private economists and government agencies — including the Federal Reserve and Congressional Budget Office — all committed similar mistakes.
There's more:
This conclusion is surely controversial because many economists attribute the weak recovery to misguided austerity, especially in Europe. Just follow the advice of John Maynard Keynes (1883-1946), they say. When the economy suffers a massive drop in private spending, government should offset the loss by increasing its budget deficits. Europe’s budget cuts were too aggressive, they say, while U.S. “stimulus” policies were not aggressive enough.
Perhaps history will vindicate this appeal to Keynesianism. Or perhaps not. The fact is that the United States did respond aggressively under both George W. Bush and Barack Obama. It certainly didn’t embrace austerity. Federal budgets ran massive deficits — $6.2 trillion worth from 2008 to 2013, averaging 6.4 percent of the economy (gross domestic product). Nothing like this had occurred since World War II. Yet, the economy limped along. Why wasn’t this enough?
The triumph of Austrian free market
economics. After all ,
Ron Paul predicted the economic mess in 2002.
