The period leading up to the Great Depression witnessed the rise of the economic forecasters, pioneers who sought to use the tools of science to predict the future, with the aim of profiting from their forecasts. This book chronicles the lives and careers of the men who defined this first wave of economic fortune tellers, men such as Roger Babson, Irving Fisher, John Moody, C. J. Bullock, and Warren Persons. They competed to sell their distinctive methods of prediction to investors and businesses, and thrived in the boom years that followed World War I. Yet, almost to a man, they failed to predict the devastating crash of 1929.
Walter Friedman paints vivid portraits of entrepreneurs who shared a belief that the rational world of numbers and reason could tame--or at least foresee--the irrational gyrations of the market. Despite their failures, this first generation of economic forecasters helped to make the prediction of economic trends a central economic activity, and shed light on the mechanics of financial markets by providing a range of statistics and information about individual firms. They also raised questions that are still relevant today. What is science and what is merely guesswork in forecasting? What motivates people to buy forecasts? Does the act of forecasting set in motion unforeseen events that can counteract the forecast made?
Masterful and compelling, Fortune Tellers highlights the risk and uncertainty that are inherent to capitalism itself.
Walter A. Friedman is a historian at Harvard Business School and the author of Birth of a Salesman: The Transformation of Selling in America.
"The book is a great read, based as it is around the personalities of these early forecasters. . . . I can see a terrific movie in the 'forecasting wars' of the 1920s as these larger-than-life, quintessentially can-do Americans competed with each other to call the stock market, win followers and make a fortune."--Diane Coyle, Enlightened Economist blog
"Timely, trenchant, and entertaining, Walter Friedman's Fortune Tellers is a captivating history of modern economic forecasting. With graceful prose and penetrating insight, Friedman shows how scientific pretension and cultural persuasion gave birth to a new industry. Through their frustrated attempts to predict the future, Friedman's cast of oracles, gurus, entrepreneurs, and academics finally began to shape it. This is a fascinating tale about doubt and certainty in modern economic life."--Jonathan Levy, author of Freaks of Fortune: The Emerging World of Capitalism and Risk in America
"Economic forecasters attempt to reduce the dimensions of the unknowable, for private profit and the public good. Fortune Tellers is the story of America's first professional forecasters. It explains their methods, quirks, limited successes, and major failures in the Great Depression. Friedman's cast of characters--Babson, Moody, several Ivy League professors, and Herbert Hoover--is a fascinating crew of would-be soothsayers. This is intellectual and business history at its best."--Richard Sylla, New York University
Table of Contents:
Chapter 1 Roger W. Babson: The Rule of Past Patterns 12
"The fundamental law of 'action reaction' "
Chapter 2 Irving Fisher: The Economy as a Mathematical Model 51
"The velocity of money"
Chapter 3 John Moody: The Bright Light of Transparency 86
"An aggregation of over 440 large industrial, franchise and transportation Trusts"
Gallery of Business and Forecasting Charts
Chapter 4 C. J. Bullock and Warren Persons: The Harvard ABC Chart 128
"The statistician . . . attempts to find a specific analogy existing in an orderly universe"
Chapter 5 Wesley Mitchell and Herbert Hoover: Forecasting as Policy 166
"If we could foresee the business cycle, there would be none"
Chapter 6 Visions of the Future 194