Predicting the Next Panic: The Pioneering Economic Forecasters and their Legacies

Abstract

A market for predictions is part of any capitalist economy. In the U.S., the modern economic forecasting industry got its start in the early twentieth century. By elaborating on the “rules” by which economies function, forecasters provided ways to make sense of the very atmosphere in which businesses and investors operate. Like the development of routines for managing work within a firm, the popularization of forecasting models provided a sense of control over uncertainty.

Keywords:

• Economic forecasting

JEL classification:

• C53

Notes

²On econometrics, see Morgan 1990 and Klein 1997. Starting in the early 20th century, several firms, including the Cleveland Trust, National City Bank of New York, and American Telephone & Telegraph, published periodic economic forecasts as a sideline to their main business.

³Warren M. Persons, 1916, “The Construction of a Business Barometer Based upon Annual Data,” The American Economic Review 6, no. 4 (Dec. 1916): 739–769.

⁴Fisher also used a more intricate version for his forecasts: PT = MV + M'V’. According to Fisher: M, the money in circulation, was taken from estimates by the Director of the Mint and the Comptroller of the Currency. M’ was based on reports of the Comptroller of the Currency for individual deposits. V and V’ were worked out by a formula developed by Fisher in “A Practical Method of Estimating the Velocity of Circulation of the Currency,” Journal of the Royal Statistical Society (Dec. 1909).

⁵London and Cambridge Economic Service, Introductory Number, January 1923, p. 4.

⁶Annual Report, 1921–22, p. 8–9. Harvard University Archives, Lowell Papers, Call #UAI5.160, Box: Series 1919–1922, Folder 310.

⁷See letter from William P. Everts.