Inside the Crystal Ball

A practical guide to understanding economic forecasts
 
In Inside the Crystal Ball: How to Make and Use Forecasts, UBS Chief U.S. Economist Maury Harris helps readers improve their own forecasting abilities by examining the elements and processes that characterize successful and failed forecasts. The book:
* Provides insights from Maury Harris, named among Bloomberg's 50 Most Influential People in Global Finance.
* Demonstrates "best practices" in the assembly and evaluation of forecasts. Harris walks readers through the real-life steps he and other successful forecasters take in preparing their projections. These valuable procedures can help forecast users evaluate forecasts and forecasters as inputs for making their own specific business and investment decisions.
* Emphasizes the critical role of judgment in improving projections derived from purely statistical methodologies. Harris explores the prerequisites for sound forecasting judgment--a good sense of history and an understanding of contemporary theoretical frameworks--in readable and illuminating detail.
* Addresses everyday forecasting issues, including the credibility of government statistics and analyses, fickle consumers, and volatile business spirits. Harris also offers procedural guidelines for special circumstances, such as natural disasters, terrorist threats, gyrating oil and stock prices, and international economic crises.
* Evaluates major contemporary forecasting issues--including the now commonplace hypothesis of sustained economic sluggishness, possible inflation outcomes in an environment of falling unemployment, and projecting interest rates when central banks implement unprecedented low interest rate and quantitative easing (QE) policies.
* Brings to life Harris's own experiences and those of other leading economists in his almost four-decade career as a professional economist and forecaster. Dr. Harris presents his personal recipes for long-term credibility and commercial success to anyone offering advice about the future.

List of contents

Acknowledgments xiii
 
Introduction: What You Need to Know about Forecasting xv
 
Chapter 1 What Makes a Successful Forecaster? 1
 
Grading Forecasters: How Many Pass? 2
 
Why It's So Difficult to Be Prescient 8
 
Bad Forecasters: One-Hit Wonders, Perennial Outliers, and Copycats 16
 
Success Factors: Why Some Forecasters Excel 22
 
Does Experience Make Much of a Difference in Forecasting? 23
 
Chapter 2 The Art and Science of Making and Using Forecasts 27
 
Judgment Counts More Than Math 28
 
Habits of Successful Forecasters: How to Cultivate Them 34
 
Judging and Scoring Forecasts by Statistics 43
 
Chapter 3 What Can We Learn from History? 51
 
It's Never Normal 52
 
Some Key Characteristics of Business Cycles 55
 
National versus State Business Cycles: Does a Rising Tide Lift All Boats? 62
 
U.S. Monetary Policy and the Great Depression 65
 
The Great Inflation Is Hard to Forget 68
 
The Great Moderation: Why It's Still Relevant 73
 
Why Was There Reduced Growth Volatility during the Great Moderation? 75
 
Chapter 4 When Forecasters Get It Wrong 79
 
The Granddaddy of Forecasting Debacles: The Great Depression 80
 
The Great Recession: Grandchild of the Granddaddy 81
 
The Great Recession: Lessons Learned 85
 
The Productivity Miracle and the "New Economy" 86
 
Productivity: Lessons Learned 88
 
Y2K: The Disaster That Wasn't 90
 
The Tech Crash Was Not Okay 92
 
Forecasters at Cyclical Turning Points: How to Evaluate Them 96
 
Forecasting Recessions 99
 
Forecasting Recessions: Lessons Learned 101
 
Chapter 5 Can We Believe What Washington, D.C. Tells Us? 105
 
Does the U.S. Government "Cook the Books" on Economic Data Reports? 106
 
To What Extent Are Government Forecasts Politically Motivated? 109
 
Can You Trust the Government's Analyses of Its Policies' Benefits? 114
 
The Beltway's Multiplier Mania 120
 
Multiplier Effects: How Real Are They? 124
 
Why Government Statistics Keep "Changing Their Mind" 127
 
Living with Revisions 133
 
Chapter 6 Four Gurus of Economics: Whom to Follow? 137
 
Four Competing Schools of Economic Thought 139
 
Minskyites: Should We Keep Listening to Them? 140
 
Monetarists: Do They Deserve More Respect? 149
 
Supply-Siders: Still a Role to Play? 156
 
Keynesians: Are They Just Too Old-Fashioned? 161
 
Chapter 7 The "New Normal": Time to Curb Your Enthusiasm? 171
 
Must Forecasters Restrain Multiyear U.S. Growth Assumptions? 173
 
Supply-Side Forecasting: Labor, Capital, and Productivity 175
 
Are Demographics Destiny? 179
 
Pivotal Productivity Projections 184
 
Chapter 8 Animal Spirits: The Intangibles Behind Business Spending 199
 
Animal Spirits on Main Street and Wall Street 201
 
Can We Base Forecasts on Confidence Indexes? 207
 
Business Confidence and Inventory Building 208
 
How Do Animal Spirits Relate to Job Creation? 213
 
Confidence and Capital Spending: Do They Move in Tandem? 217
 
Animal Spirits and Capital Spending 226
 
Chapter 9 Forecasting Fickle Consumers 229
 
Making and Spending Money 230
 
How Do Americans Make Their Money? 231
 
Will We Ever Start to Save More Money? 237
 
Why Don't Americans Save More? 239
 
More Wealth = Less Saving 240
 
Do More Confident Consumers Save Less and Spend More? 248
 
Does Income Distribution Make a Difference for Saving and Consumer Spending? 2

About the author

MAURY HARRIS is a Man-aging Director and Chief Economist for the Americas for the UBS investment bank. Dr. Harris has led forecasting teams ranked as the most accurate in the country in four separate years over the past decade. In addition, he has been named numerous times to the Institutional Investor (II) All-America Research Team over the past two decades. Dr. Harris is a past President of the Forecaster's Club of New York. Prior to the UBS AG acquisition of PaineWebber Incorporated, he was the Chief Economist for PaineWebber. Before that, Dr. Harris worked for the Federal Reserve Bank of New York and The Bank for International Settlements. Dr. Harris holds a PhD in eco-nomics from Columbia University, an MA in economics from Columbia University, and a BA in economics from the University of Texas, where he graduated Phi Beta Kappa. He is married with two children.

Summary

A practical guide to understanding economic forecasts In Inside the Crystal Ball: How to Make and Use Forecasts, UBS Chief U.S. Economist Maury Harris helps readers improve their own forecasting abilities by examining the elements and processes that characterize successful and failed forecasts.

Product details

• Authors: Harris, Maury Harris, Maury Coleman Harris
• Publisher: Wiley, John and Sons Ltd
• Languages: English
• Product format: Hardback
• Released: 20.02.2015
• EAN: 9781118865071
• ISBN: 978-1-118-86507-1
• No. of pages: 400
• Dimensions: 162 mm x 236 mm x 33 mm
• Subjects: Social sciences, law, business > Business > Economics; Prognose, Volkswirtschaftslehre, Economics, Allg. Volkswirtschaftslehre, Prognose (Wirtsch.)