Victor Zarnowitz, a noted economist and expert on business cycles who for decades traced the history of economic predictions — and often found the forecasting faulty — died Saturday in Manhattan. He was 89 and lived in Manhattan.
The cause was a heart attack, said Frank Tortorici, a spokesman for the Conference Board, for which Dr. Zarnowitz had been a senior fellow and economic counselor since 1999. The board is the nonprofit research organization that compiles, among other data, the nation’s monthly Consumer Confidence Index as well as the leading economic indicators for 10 countries, including the United States.
Dr. Zarnowitz, an 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. In 1952, Dr. Zarnowitz came to the United States from his native Poland and soon was analyzing the pitfalls of economic prediction. In 1975, he released a study of the findings reached by more than 50 forecasters from 1962 to 1974.
Preliminary figures showed that their predictions about shifts in the gross national product had generally been off by margins that Dr. Zarnowitz said would make a difference between a boom and merely good business, or between good business and a recession. The forecasters had incorrectly predicted the size of changes in the gross national product, erring by more than 1 percentage point — a significant error — four times. Twice, in 1970 and 1974, they had predicted that the G.N.P. would rise when it actually dropped.
As computerized econometric models came more into play, analyzing what would happen with each change in a complex set of variables, Dr. Zarnowitz turned his attention to adherents of the new formulas. “Their expectations ran high that in such models lay the answer to the challenges of economic forecasting and policy making,” he wrote in a 1980 Op-Ed article for The New York Times. “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,” he wrote. “Both groups, for example, failed to predict the recession in 1974.”
Dr. Zarnowitz wrote “Business Cycles: Theory, History, Indicators and Forecasting” (University of Chicago Press, 1992). In an endorsement of the book, Alan S. Blinder, an economics professor at Princeton who became vice chairman of the board of governors of the Federal Reserve, said Dr. Zarnowitz “probably knows more about business cycles than anyone else.”