Seen Through a Glass, Darkly

May 19, 1994

When Howard County Executive Charles Ecker said he would impanel a group of government and business officials to provide an early-warning system for the local economy, he said more than he probably intended to about the usefulness of such a group. The panel would make "educated guesses," he said. "We still may be wrong, but this is an important tool."

Such is the problem in predicting economic trends. No matter how much data are used, the end result comes down to guesswork, and it is only as useful as people's willingness to go along with the conclusions. In the end, economic forecast groups bring science to the art of reading tea leaves and crystal balls. It's like going to an astrologer with a degree in psychology.

None of this makes Mr. Ecker's idea a bad one. Absent the true ability to see into the future, educated guesses are about all one can hope for. The county executive's group, after all, will be turning to fairly sound economic indicators upon which to base its conclusions. They include data on employment, income, sales taxes, building permits and real estate sales. The panel will meet four times a year, issuing quarterly reports.

The problem will come in trying to build public policy around the panel's predictions. Mr. Ecker's group will be hard-pressed to prove that its guesses are any better than the conclusions of other groups or individuals looking at the same indicators.

There is another pitfall. The idea of an economic early-warning system comes from the Economic Forum, a lobbying group made of representatives from real estate, farming, business and education. Its purpose is to promote a healthy economy and quality of life in the county, goals sometimes at odds with each other. One can easily see how such a group could become the engine for unbridled development.

The pronouncements of an institutionalized think tank of this sort could carry far more weight than they should. They should be tempered by a heavy dose of skepticism about motivations and predictive abilities.

In the end, any panel's conclusions will have to be judged alongside the best guesses of experts and observers already in the community. The well-worn axiom is often true: There are as many conclusions as there are economists willing to make them.

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