Predicting Downturns

Despite decades of research, economists have a famously poor track record at predicting recessions. Economies are complex systems where millions of interconnected decisions create patterns no model fully captures.

Models capture historical relationships but miss novel risks. No recession model included a global pandemic, and nobody predicted the 2008 crash would start in obscure mortgage securities most economists had never heard of.

The most honest economists admit that precise timing is impossible. We can spot the vulnerabilities that make a recession more likely, but pinpointing when the tipping point arrives is still beyond us.