March 04, 2003
Edward Leamer Asked to Contribute to The Wall Street Journal’s 2003 Economic-Forecasting SurveyLOS ANGELES — The Wall Street Journal honored Dr. Edward Leamer, director of the UCLA Anderson Forecast and the Chauncey J. Medberry Professor of Management at The Anderson School at UCLA, with his first invitation to participate in its annual economic-forecasting survey. The results of the survey, which polled 55 of the world’s leading business forecasters for their 2003 prognoses, were published in the Jan. 2, 2003, edition of The Wall Street Journal.
During his nearly three years as director, Prof. Leamer has been extraordinarily successful at elevating the quality of the UCLA Anderson Forecast. Under his leadership, the group has become renown for their numerical accuracy and is credited with being the first major U.S. forecast to predict the 2001 recession. Receiving recognition from The Wall Street Journal is further evidence of the enhanced reputation his efforts have earned for the already well-respected research center.
Prof. Leamer first broadened the scope of the Forecast’s outlook from a focus on offering only statistics to giving guidance into the meaning inherent in the data. Most other forecasting groups just project present trends into the future, which implies the economy is a simple repetitive continuum. Dr. Leamer is convinced that process is inadequate to reflect the dynamic and complex real world.
Dr. Leamer’s discernment of the story behind the numbers has identified an unusual set of forces creating the current cycle of recession and recovery. Unlike the consumer driven rounds of the past, his analysis revealed the first cycle propelled by the behavior of businesses. This unique phenomenon reflects a deep down turn in spending by corporations, a reaction to the lack of profit produced by the heavy investment in technology during the Internet rush of the late 1990s.
Generating wisdom is clearly a challenging undertaking that requires more than straightforward linear thinking. It’s actually an intuitive process more akin to art than science. One of the surprises for Leamer was how much time is required to reach a real understanding.
“It’s very much like doing an intricate puzzle,” Leamer explained. “The pieces don’t just fall into place. You continue to study and work with them until they finally do fit. I go through that every time I formulate a forecast. It’s always a struggle to form an opinion. Sometimes I have to let it rest and come back to it later, but so far, the pieces have ultimately come together and the bits of insight have been revealed.”
Another innovation in Dr. Leamer’s plan for the UCLA Anderson Forecast is the structure of a theme for each of the quarterly conferences. The choice of an appropriate theme is determined by what Leamer and his staff see as key issues impacting the marketplace. The theme dictates the selection of program participants, spurs dialogue with the business and government leaders involved, and gives background and ideas to the media for use in future reporting.
Always an educator, Prof. Leamer envisions the Forecast conferences as a forum for his colleagues in The Anderson School, as well as other UCLA faculty to share their knowledge and research with the world. He acknowledges that one of his concerns is that the UCLA Anderson Forecast has been somewhat of an “off shore operation” that is widely watched by the world but not as integrated into the life of the school as he would wish. Though forecasting is not a traditional academic discipline, the program can be an important conduit to the outside and is a logical extension of the school’s mission
“The Anderson School’s teaching function extends well beyond our physical borders,” observed Leamer. “The Forecast is potentially an enormous asset with a part to play in extending our reach into a much broader setting.”
Dr. Leamer’s seemingly prophetic skills did not just materialize. His success with the Forecast was prefigured in his teaching experiences at The Anderson School. Leamer was at Harvard University and then UCLA as a professor of economics before transferring to the graduate school in 1990. His background was in econometrics and international economics, and with the move, he carefully considered what he might teach. His training as a forecaster began in an executive MBA (EMBA) course he developed on how to turn the facts and figures found in the immense database we call the Internet into actual knowledge. Since he was not a macroeconomist, it was not an effortless transition.
Prof. Leamer credits the continual interaction with his “sharp, alert and interactive” EMBA students with enabling him to slowly build up a repertoire of useful mechanisms. Achieving what he considers to be the ultimate goal of a teacher, he created an environment where he could learn along with his students. For the last two years in a row, Leamer has been honored with the teaching awards given by the 2001 and 2002 EMBA graduating classes.
The passage from the classroom to the much larger audience of the UCLA Anderson Forecast, while a real challenge, was a more natural one for Leamer than perhaps it would have been for many other professors. Even in his early work he insisted on real world applicability for economic research, much to the dismay of many of his peers. He also does not attempt to hide in the arcane language and jargon used by some academics. A strong believer in clear, simple, direct language, he strives to make his communications accessible to the vast majority of his audience. He wants to support their ability to absorb and internalize his message, not put up an artificial barrier that is a hindrance to understanding.
Careful choice of concise language is also one of the ways Dr. Leamer deals with the uncertainty innate in a profession that demands the prescience to predict the future. Since he doesn’t use a fortuneteller’s crystal ball, he is scrupulously honest about the limitations of his craft and the level of certainty he feels for any part of his predictions. If he is unsure, he says so.
However, Dr. Leamer never hesitates to adopt and strongly support a contrarian position when he believes it is correct. He has become a much sought after expert for the business press, because they recognize and appreciate these qualities. They also understand that his is a unique position apart from other forecasters, which provides a more unbiased perspective outside the usual Wall Street point of view. However, having an oft-cited outlook and the higher public profile that goes with it applies additional pressure of its own.
“I have to constantly guard against being turned into some kind of a guru and vigilantly resist allowing that to lead me into error and inaccuracy,” remarked Prof. Leamer. “While we may have opinions, many of the areas my colleagues and I are asked to comment on are outside of our true expertise. I don’t want to read something that I said and think it sounds completely idiotic.”
Dr. Leamer also holds joint academic appointments in the departments of economics and statistics at UCLA. Among his recent research interests are an episodic analysis of the United States business cycle, the impact of the Internet on economic geography, and the effect of globalization on the U.S. economy. His research has been supported by continuous grants from the National Science Foundation, the Sloan Foundation and the Russell Sage Foundation.
Prof. Leamer’s research papers in econometrics have been collected in “Sturdy Econometrics” and published in the Edward Elgar Series of Economists of the 20th Century. His research in international economics and econometric methodology has been discussed in a chapter written by Herman Leonard and Keith Maskus in “New Horizons in Economic Thought: Appraisals of Leading Economists.” Dr. Leamer is a research associate of the National Bureau of Economic Research and a fellow of the American Academy of Arts and Sciences and the Econometric Society.Contact Information
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