Some economists as accurate as TV soccer pundits

In recessions and economic booms, most economists are very good at telling you what went wrong and what has gone right. They can frustratingly tell you, repeatedly, things that are fairly obvious to the rest of the population, such as retail sales are falling in empty shops or that unemployment is rising. At their worst, they are no better at forecasting than television soccer analysts who will tell you confidently that the team leading at half time will go on to win the match. Many take little account that what went on previously can be a poor guide to what will happen in the near future. Some of the best economists are frustratingly reluctant about forecasting at all. They are at their best crunching numbers to inform the public and policy-makers alike. Some of these useful calculations include estimates to the taxpayer of buying out the bad loans from the banks, or that each person losing a job costs an average €20,000 after taking account of the lost tax revenues when the person was working. Some trained economists I have come across, who appear regularly in the media, have other obsessions. At their worst, some economists are more comfortable talking about the percentage gap to GDP of widening public spending deficits than about predicting unemployment, the most obvious way people experience a recession. I know one trained economist who will dismiss the importance of the jobless rate altogether and believes unemployment will not reach the heights in the 1980s because people will leave the country. He is unable to say, though, which countries will offer the jobs. There is another group of international economists whose precise predictions such as how much the euro will be worth against sterling or the dollar at the end of the year are closely watched. A lot of money can be lost or won by the banks who employ the currency economists and the accuracy of their forecasts are tracked in league tables complied by the international financial newswires. Strikingly, it is rare for the same economist to head the list in successive years. So, economists and market analysts are a diverse group. Some of the best-known economists work in the universities and colleges, which does not automatically guarantee the best independent forecasts. Some have got entwined in fairly technical debate over the rescue of the banks. In Ireland, the best of the academic forecasters long realised that the banks could not be trusted when it came to assessing the amount of bad loans on their own books. Only a few economists here faced down opposition to calculate the amount of bad loans to back up their analysis of the depth of the banking crisis here. Significantly, the stock market analysts of Irish banks who most accurately predicted a year ago the destruction of the Irish bank stocks worked overseas, not locally. Much of the overseas coverage of Irish banks has stopped because international funds are no longer willing to invest in Irish banks, leaving nobody to pay for the research written by the analysts. Several international economists are worth following. Nouriel Roubini carved a reputation as the prophet of the slump for his downbeat forecasts on the world economy. His forecasts are still worth following, if only to balance out the recent splurge of upbeat forecasts talking up the prospects of a rapid recovery in world stock markets. Another is Roger Bootle, who has been around international markets in London for the last three decades. His analysis of the world slump appears to apply to Ireland, too. This is what he writes in his updated book 'Money for Nothing": 'Over the last decade, we have been caught up in a gigantic illusion of wealth, generated by soaring share and house prices as investors sought to condense the productive potential of the infinite future into instant capital value - money for nothing. The bursting of the equity bubble left wreckage strewn across the financial system, and there is now a real danger of the housing market collapsing, pension schemes failing - and whole economies deflating.' Few would disagree with the analysis. But what sets Bootle"s economic forecasts apart from television soccer punditry is that he believes that a 1930s slump is not inevitable - if governments make the right decisions. Indeed, he says, a new stable world prosperity could grow from the banking ruins. 'We face the threat of a deflationary slump at just the time that we stand on the brink of the greatest increase in prosperity in our history,' he says. If 'good governance' in the Middle East and Africa were to combine with a renewal of world trade, 'the interaction between these forces opens up an era of true globalisation - with developed countries enjoying a rise in the rate of economic growth to historically unprecedented levels as well as poorer countries coming within prosperity"s embrace. This is 'The Wealth Spiral". While it may not be so quick or spectacular as stock market booms, it is real wealth rather than financial fantasy.' Now, that is an uplifting economic message for these gloomy economic times.