Nouriel Roubini in TNR

Saturday Night Live recently had a strange skit about a talk show hosted by the Bee Gees. Honestly, it wasn’t terribly funny but what struck me was that one of the guests was supposed to be Nouriel Roubini (I think it was Fred Armisen).
The Roubini character was the straight man in the skit, but it’s telling that he’s reached the point where he can be a typical “important person” you’d see on a talk show, even a parody of one.
Roubini is probably the hottest economist in the world right now. More tellingly, we live in a time where there is a hottest economist in the world.
Roubini just got another honor, a profile in the New Republic. It’s a pretty good profile. One complaint I have is that these profiles often try a tired formula—that the person’s ideas are an outgrowth of who they are. The New York Times tried that recently with Freeman Dyson and it didn’t work.
The truth is that you often can’t see a connection between important thinkers and their personalities or backgrounds. This sort of game can easily descend in psycho-babble. It will read something like, “He’s ideas are outside the mainstream and in high school, he was…wait for it…an outsider. Hello, Theme!!”
There’s even a theory that the stalemate in economics between investment (the male) and savings (the female) was finally broken by Keynes, the homosexual. That’s totally loopy to me but hey, it’s not my idea.
I’ve never met Roubini, but I would think the interesting angle to take is that he seems to be the opposite of his ideas—the playboy professor with the buzzkill forecasts.
Unquestionably, Roubini is an important thinker. However, I was glad to see the profile mention that Roubini hasn’t been as prescient as many people believe:

Anirvan Banerji, an economist with the Economic Cycle Research Institute, has been particularly dismissive of Roubini’s forecasting abilities: “The average time between recessions is about five years in the postwar period,” he says. “So, if you forecast a recession one year and it doesn’t happen, and you repeat your forecast year after year … at some point the recession will arrive.”
And Roubini has undeniably overshot. In 2004, he predicted that the oncoming recession would precipitate the crash of the dollar. The crisis has mainly buoyed it. On September 1, 2005, three days after Hurricane Katrina made landfall, Roubini told Reuters that economic disaster was imminent. What followed instead was a bump in financial activity that forestalled the recession for more than two years.

If you’re waiting for Jon Stewart to do a sanctimonious takedown of Roubini, I wouldn’t hold your breath. Though I nearly choked when the profile mentioned Nassim Taleb, “who also predicted a catastrophe in his book The Black Swan.” The old adage is true: It’s not what books say that’s important, it’s what people assume they say that’s important.
I’m glad to see Roubini get the attention, fame and fortune he deserves. But I have to add we shouldn’t judge economists by how accurate their macro forecasts are. That’s a losing game. Instead, we should focus on the power of their ideas to explain the economy, and see the connections that they see.
If you want to be a prognosticator, then go on the record with specific advice. If not, then you should try to explain the economy as clearly as you can.

Posted by on May 20th, 2009 at 7:56 am


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