On Humility, and What Forecasters You Should Pay Attention to
Yale economist Robert Shiller has been more right than most of his peers.
In 2000, his book Irrational Exuberance showed in clean detail how the stock market was overvalued. In 2004, the second edition of the book described how and why the housing market was an accident waiting to happen.
Shiller's background makes him worth listening to. He has the credibility to make forecasts on the economy and financial markets -- a distinction the great majorities of economists lack.
Yet when you listen to him talk, he is perhaps the most hesitant economist in the world. When I interviewed him a year ago, nearly every question was answered with some version of "I don't know," "It's hard to say," "It's just too uncertain," or "That's impossible to tell."
It may seem counterintuitive, but Shiller's hesitancy to forecast is part of what has made him a good forecaster in the past. He is only willing to lay down a firm opinion during periods of wild extremes, when the stars align and the odds of making a good forecast are at their highest. Otherwise, he shrugs his shoulders. That respect for uncertainty sets him, and his record for being right, apart.
Last month, I sat down with Hoover Institute economist Russ Roberts. I asked him how to make sense of forecasts and opinions in a world where smart people are so bad at forecasting -- a world with too few Shillers. Here's what Roberts had to say:
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