Fortune Tellers by Friedman Walter

Author:Friedman, Walter
Language: eng
Format: epub
Publisher: Princeton University Press
Published: 2013-06-22T16:00:00+00:00

CRITICISM AND CRISIS

Despite its international connections, the Harvard Economic Service faced challenges on several fronts—more than its competitors had encountered. On the one hand, a barrage of criticism came from rival forecasters. Bullock’s and Persons’s dedication to transparency in forecasting methods opened them up to attack in a way that forecasters with more opaque methods avoided. In 1922, Ray Vance, the head of the Brookmire Economic Service, complained that the Harvard service focused solely on short-term trends of the next quarter or season and that the model itself gave no sense of the magnitude of impending periods of boom or slump.108 In 1924, Roger Babson echoed this complaint about severity in an article in the Annals of the American Academy of Political and Social Science.109

But by far the most damning criticism came from academic economists. Here the fight surrounding the Harvard Economic Service was about methodology—and all the more severe because the Harvard group’s rivals were economists competing not for customers but for academic prestige. The attacks damaged the Harvard group’s morale, as well as their reputation as accurate forecasters. But the controversy did exactly what scholarly exchanges are supposed to do: expand the frontiers of knowledge and enlarge the world of ideas. From the attacks on the Harvard Economic Service came insights that enriched the work of several eminent economists and contributed to the founding of an entirely new subfield in the social sciences.

The opening salvo in this battle came from New Haven–based economist Karl Karsten, Irving Fisher’s colleague and sometime employee. In 1926 Karsten, who almost certainly showed his essay to Fisher, published “A New Interpretation” in the Journal of the American Statistical Association, in which he accused the Harvard group of misunderstanding the data they had collected.110 The famous A, B, and C curves were not, as Harvard claimed, true “mutually self-predicting” lags in the specified sequence of speculation, business, and money. The Harvard Economic Service’s graphs were simply points in time that did not illustrate how economies worked. “By what occult powers the speculating world in mass could accomplish a thing which no speculator seems able to do individually, and that is correctly to divine and discount the future of business, for between six months and a year in advance,” Karsten wondered.111 Making matters even worse, Karsten wrote a letter to Harvard’s president, Abbott Lawrence Lowell, accusing Persons and other Service staff members of trying to suppress another article by him that was going to appear in the New York Times Annalist by writing to that paper’s editor.

Karsten complained, “I am amazed at this attempt upon academic freedom of discussion.”112

In his defense, Bullock wrote a letter to all the members of Harvard’s Committee on Economic Research, saying that Karsten’s article was not well thought out and was, in fact, “unbelievably bad.”

His principal contention is that our Curve B really forecasts Curve A. In order to prove that, he first turns it upside down. Then he discovers that its trend isn’t right, and changes its trend. To

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