Marriott Alumni Magazine

Fall 1981 Exchange

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Page 25 of 35

Communicating into the Future Forecasting Fades as Economics Assumes a New Role Richard M. Oveson Mention the word economist to a group of businessmen or women and visions of GNP, interest rates, and unemployment rates are likely to spring into view. Further, the vision is likely to be crowded with forecasts of these and many other elements of the "macro" economic picture. After all, in the eyes of much of the business community, that's what economists do! Lately, however, macroeconomic forecasting has fallen on hard times. The smoothly growing U.S. economy of the mid-1960s was rudely shocked by the oil embargo of the mid-1970s, and things have just not been the same since. Major unforeseen events have conspired to wreck economic forecasts about growth, inflation, interest rates, and unemployment, to name a few. Consequently, economists, once viewed with some awe, equivocate a bit when asked about their profession. Does this imply the twilight of the business economist? Not at all! It simply means that economists-and particularly business economists-must spend less time developing massive models of the economy and more time on the nuts and bolts of the business decision process. The major macroeconomic models, such as those developed at ORI (Data Resources Incorporated), Wharton, and Chase Econometrics, were built in the early sixties. These models were specifically designed to, forecast major elements of the U.S. economy and, incidentally, to increase understanding of interactions with in the economy. Growing out of the pioneering work of Lawrence Klein at the Univeristy of Pennsylvania (the Wharton Model), these macro "services" were directed by eminent economists such as Otto Eckstein of Harvard (ORI) and by brilliant newcomers such as Michael Evans (Chase Econometrics).

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