Victor Zarnowitz, well known US economist and expert on business cycles died last Saturday in Manhattan. He was 89. Although I didn’t know him in any way personally, I learnt a lot from reading Victor’s papers and his monumental book on the US business cycle – â€œBusiness Cycles: Theory, History, Indicators and Forecastingâ€ (University of Chicago Press, 1992). Among other ideas of note, Zarnowitz divided the history of modern industrial society into deflationary and inflationary epochs, with the system switching around from one mode to the other for reasons we still barely understand. In his view, 1875 to 1918 would be, basically, an inflationary epoch, 1918 – 1945 a deflationary one, 1945 – 1995 an inflationary one, and 1995 to……… a disinflationary/deflationary one.
Thank you Victor, your presence among us will be missed now more than ever. Dennis Hevesi has an obituary in the New York Times.
Dr. Zarnowitz, who was emeritus professor of economics at the University of Chicago, was also a research associate for the National Bureau of Economic Research, and in that capacity was one of the seven economists who officially determine when the United States is in a recession. Speaking of the growing dependence of forecasters on computerized econometric models, he said the following in a New York Time Op-Ed in 1980:
â€œTheir expectations ran high that in such models lay the answer to the challenges of economic forecasting and policy making…..They were to be disappointed……..Forecasts of econometric model builders have been no more accurate than the forecasts of those who analyze business conditions using less formal methods,â€