LONDON — ECONOMISTS pay too little attention to what is happening around them. Our record at forecasting economic growth has not recovered from the failure to predict the 2008 crash, yet the profession has not done enough to improve things.
Growth forecasts for gross domestic product in the United States at the end of this year vary from about 1.75 percent to 3 percent — a good measure of the lack of consensus. We need a wider variety of indicators to help us take a more accurate reading of the economy. Some of these might seem frivolous, but paying close attention to worldly detail could make forecasting more reliable.
Take women’s fashions, for instance. One playful theory, born in the days of flapper dresses in the 1920s, is that the height of hemlines provides a surprisingly good indicator of the state of the economy. Long skirts are associated with hard times; but when the economy booms, as in the ’20s or ’60s, skirts get shorter. So if you see skirts sweeping the floor next season, it might be time to start worrying — assuming there’s a discernible fashion trend.
The hemline is only one of myriad indicators that economists have used to divine prospects for growth. Another anecdotal measure is the number of cranes visible on the skyline, their stately dance a prominent visual signal of the underlying pace of construction activity.
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Spending on luxury items is another example. During a boom, sales of fast cars, expensive paintings, prime real estate and diamond necklaces all soar, as do their prices. A chart of prices realized on modern art at auctions looks like the stock market. One well-known index, the Modern Art 100, rose by two and a half times in the two years before the collapse of Lehman Brothers in 2008; it then lost half its value in 18 months.