Why Economists Overestimated Soviet Growth

Here is how Paul Samuelson presented his forecast of Soviet growth in his best selling textbook Economics. And many other well known textbooks erred similarly. Surprised?

The picture comes from Alex Tabarrok ("Soviet Growth and American Textbooks", Marginal Revolution, January 4) who has a very good post on how economists, even the best ones, blind themselves by restricting their analyses to a narrow set of tools. Using competitively several models at the same time may improve their view of the real world, while relying exclusively on one set of tools can lead you astray even more than political bias would.

He quotes a paper by David M. Levy and Sandra J. Peart, available on SSRN, on the textbook presentations of the Soviet growth compared to the US performance.

The punch line: “Applications to the financial crisis are apposite.”