Economists can predict almost nothing, because they are always looking for a model or a similar historical precedent, forgetting that “similarity is not sameness.” We should simply look at the facts in front of us and then make our predictions; guided but largely unrestrained by history.
He emphasizes this point with emphasis on the phrase used by every scoundrel to explain some crooked investment scheme — it is different this time. He is highly critical of the work by Reinhart & Rogoff, which was discussed in this space a year ago. They argue that there are predictable patterns to economic history while admitting “we are fully aware that, in such a broad synthesis, we are inevitably obscuring important nuances surrounding historically diverse episodes.” Then, what’s the point?
In addition, Moynihan does an impressive review of American recessions/depressions, pointing out the differences from popularly accepted models and the failures of public policy. Clearly, the review shows similar economic conditions but never the same economic conditions.
He explains the weakness of models and historical precedent is that they ignore the single most important determinant, which is contemporary human behavior. Economists want to believe economics is a science, when it is really an art.
Maybe, I should study art cycles. . . instead of economic cycles??