A board packed with Ph.D. economists does not guarantee a good record when it comes to forecasting, says Lindsey, former director of the National Economic Council.
President Donald Trump has said he will nominate Steve Moore and Herman Cain to be members of the Board of Governors of the Federal Reserve system. Both have been criticized as being unqualified for not having Ph.D.'s in economics.
But even a board packed with Ph.D. economists does not guarantee a good record when it comes to economic forecasting. Such a board definitely did not see the Great Recession happening. At its meeting at the end of October 2007 the members forecast growth of between 1.8% and 2.5% in 2008 and 2.5% in both 2009 and 2010. They also projected that the unemployment rate would never rise above 5% through 2010.
Then, for the Trump presidency their errors went in the opposite direction. In December 2016 they projected 2.1% growth for 2017 and we got 2.5%. In December 2017 they projected 2.5% growth for 2018 and we got 3.1%. They forecast very rapid growth after the recovery began because all of the demand-side variables were being thrown at the problem. Interest rates were effectively zero, the quantitative easing programs had been begun and the country was running large fiscal deficits.
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