Doomed to be wrong
Doomed to be wrong’Yes, sir, we’ve just had our 70 fat years in America, thanks to the Greatest Generation and the bounty of freedom and prosperity they built for us,” New York Times columnist Thomas Friedman wrote last week. But it’s over. “Welcome to the lean years.”
He may be right. I don’t know. But I do know that Friedman is far from the first big-name pundit to confidently proclaim the dawning of a new, dismal era. For the better part of the last year I’ve been writing a book about expert forecasts and much of that work consisted of going through archives and digging up old predictions. Two conclusions emerged with overwhelming clarity.
First, there are always very smart people with impressive credentials telling people we are going to hell in a hand basket. And second, very smart people with impressive credentials are lousy at predicting the future.
Friedman is terrified by the state of American finances. And rightly so. I am too. But it’s instructive to recall that the imminent bankruptcy of the American government was a recurring theme all through the 1970s and 1980s. And it was a mere 18 years ago that a book called Bankruptcy 1995 — the title says it all — spent months on the New York Times bestseller list, solidifying a widespread belief that the point of no return on debt had been passed, or soon would be if the government didn’t make savage cuts.
But there were no savage cuts and the point of no return was not passed. In fact, by the mid-1990s, the American government had erased its deficit. By the late 1990s, it was racking up the biggest surpluses in history and the hot issue of the presidential election of 2000 was — anyone remember? — how to spend all that cash. A pundit who predicted that a decade earlier would have been medicated and put in a rubber room.
Friedman is also worried about economic stagnation. And again, he’s right to worry. An L-shaped recovery is possible. A “lost decade” is possible. It’s even conceivable that the American economy could slip back into recession and sink further into a depression, taking everyone with it. Have a look at the best-selling business books and you’ll find plenty of experts who are sure that’s just what will happen. They have data. And charts. And theories. And they say we’re doomed.
Is that frightening? Perhaps. But it helps to know that there are always experts predicting imminent economic doom. Remember The Great Depression of 1990? Released in the summer of 1987, it sold very nicely. But when the stock market crashed in October of that year, it became one of the best-selling business books of all time.
As the reader may recall, there was no depression in 1990, great or otherwise.
Remembering is precisely the problem, however. We forget. Or we revise our memories to make them fit with what we know actually happened. It’s called “hindsight bias.”
Imagine it’s 1989. You’ve just read The Great Depression of 1990 so I ask you how likely you think it is that there will be a depression in 1990. You make an estimate. Then, 21 years later, I ask you to recall how likely you thought it was, back in 1989, that there would be a depression in 1990. It’s almost a sure thing that you will remember yourself worrying less than you actually did. Why? Because your brain knows there wasn’t a depression in 1990 and it adjusted its memories accordingly.
This is a key reason why the past always looks less troubled than the present. Consider the recession of 1982. Doesn’t seem so awful, does it? In fact, everyone today says the current recession is the “worst since the Depression.” But they’re wrong. The data clearly show the recession of 1982 was worse than the current troubles. (At least in Canada. Not so the United States.) And guess what people were worried about in 1982? In “this bleak winter of 1982,” as it was described, the New York Times ran a long essay explaining how the recession could become a depression.
In 1983, economic indicators shot upward. The giddy years of the 1980s began.
And then there were the 1970s. What a dismal decade. I’m glad I was too young to follow the news. In a 1974 essay in the New York Review of Books, historian Geoffrey Barraclough surveyed nine books about the current economic situation. All saw disaster ahead, although there were variations in precisely what sort of disaster was coming. Some of the authors Barraclough surveyed thought a depression was in the cards. Others thought this would be averted by the adoption of fascism. Barraclough wasn’t so optimistic. “The odds, it seems to me, are that we shall get both.”
As overheated — or completely bonkers — as this sort of pessimism may sound today, it was far from uncommon at the time. The 1970s was a misanthrope’s playground.
One of my favourite prognosticators of the era was the renowned economist and essayist Robert Heilbroner, who concluded in 1973 that pollution, resource shortages, and economic collapse would soon plunge humanity into the greatest crisis in history. Total collapse was likely, Heilbroner feared. The only hope for civilization was to adopt a savagely totalitarian government — something along the lines of Maoist China — that could keep things together with an iron grip. Otherwise, all was lost.
And Thomas Friedman, please take note: Anthony Lewis, the Thomas Friedman of his time, spent most of the 1970s repeating the prophecies of doomsters like Robert Heilbroner while waving his hands and running around in panicked circles. Reading his columns today is, frankly, embarrassing.
Of course, none of this means that Friedman’s “lean years” will be fat. It simply means that a flipped coin has as good a chance of predicting the future as Thomas Friedman. Or me, for that matter.