In May 2010, for example, with one-third of the calendar year already over, the OECD economists predicted the U.S. economy would grow 3.2 percent for the year. As it happened, gross domestic product grew 1.7 percent. Note that this is not a small error. That 1.5 percentage point spread between the two numbers means the original projection was off by nearly half. It’s as if you thought you saw a car go by at 60 miles per hour while it was actually going 30.
The new report is not solely an admission of error. It is also a catalogue of errors by type. The biggest mistakes, the economists point out, occurred when they forecast growth rates in countries with a relatively high level of government regulation. This surprises the economists, though it won’t surprise anyone who takes a dim view of government regulation generally. The forecasters, good statists all, assumed that the regulations “would help to cushion financial shocks” in the highly regulated countries and would therefore aid recovery.
The economists now say they failed to consider the damaging effects of regulation. In the real world, regulations “delay[ed] necessary reallocations across [economic] sectors in the recovery phase”—which, translated from the Economese, means that government was retarding the ability of businesses to do what they do best: find a way to create value and make money even in calamitous circumstances. The concession is implied, but it’s clear the economists regret letting an ideological assumption in favor of government intervention overwhelm their forecasts as the recession swept the globe, raining on the regulated and unregulated alike.