Saturday, 28 February 2009

Public v. private forecasts

A while back Matt Nolan asked, over at TVHE blog, Question: Have economists been over-confident regarding their ability to predict things? Well I now ask a related question: Do public sector forecasters make more biased forecasts than private sector forecasters?

The following comes from a posting at Greg Mankiw's blog:
Here (in red) are the growth forecasts used to put out the new Obama administration budget, followed by the consensus forecast of a panel of "Blue Chip" private forecasters (in blue, naturally). (Source. Go to Table 3.)

2009: -1.2% -1.9%
2010: +3.2% +2.1%
2011: +4.0% +2.9%
2012: +4.6% +2.9%
2013: +4.2% +2.8%

Accumulating the difference, you find that Team Obama projects about 6 percent higher GDP in 2013 than do private forecasters.
Mankiw goes on to write
A related news story:

The Obama administration's outlook has private economists wondering: Has Rosy Scenario made a comeback?...

Nariman Behravesh, chief economist at IHS Global Insight, a major private forecasting firm, called the administration's forecasts "way too optimistic" and said it could represent a return to the overly optimistic forecasts of previous administrations confronted by surging budget deficits.

"They used to joke during the Reagan years that the highest ranking woman in the administration was Rosy Scenario," he said. "We may be seeing a return of Rosy Scenario."

The actual highest ranking woman on the economic team is named Christy, not Rosy, and here is what she had to say:

Speaking to reporters Thursday, White House economist Christina Romer called the projections an "honest forecast" by the administration's professional forecasters. "I'd reject the premise that we're noticeably rosier," she said. "We certainly are somewhat more optimistic, but certainly nothing out of the ballpark."
To me the Team Obama forecasts look just too politically convenient to be credible. But time will tell.

1 comment:

matt b said...

What happened to the worst economic catastrophe since the Great Depression justifying that $800 billion in public spending? What a beat up.