The state of economic forecasting

WHETHER JUDGMENTAL OR ECONOMETRIC, FORECASTING BASICALLY RELIES ON THE APPLICATION OF HISTORICAL RELATIONSHIPS TO EMERGING ECONOMIC DEVELOPMENTS, IMPLICITLY ASSUMING THAT THESE RELATIONSHIPS WILL BE REASONABLY WELL MAINTAINED INTO THE FUTURE. ECONOMIC RELATIONSHIPS ARE ACTUALLY RATHER LOOSE, AND SUBJECT TO FREQUENT ABERRATIONS AND UNEXPECTED CHANGE. THEREFORE, ECONOMISTS SIMPLY CANNOT COUNT ON THEIR ABILITY TO FORECAST ECONOMIC EVENTS VERY FAR INTO THE FUTURE WITH ANY HIGH DEGREE OF RELIABILITY. STILL, REASONABLE CONFIDENCE CAN BE PLACED IN CAREFULLY CONSTRUCTED SHORT-TERM FORECASTS THAT ARE SUPPORTED BY A DETAILED STUDY OF PAST RELATIONSHIPS - PLUS THE USE OF GOOD JUDGMENT. SUCH FORECASTS ARE NOT POINTING TO GOOD - THOUGH NOT OUTSTANDING - ECONOMIC GROWTH THROUGHOUT 1976 AND PROBABLY WELL INTO 1977. THE ECONOMY APPEARS TO BE IN BETTER BALANCE THAN AT ANY TIME OVER THE PREVIOUS DECADE. THE ABSENCE OF SPECULATIVE EXCESS IS ALSO ENCOURAGING.