Predictions are always filled with surprises

Laurence Ball, an economist at Johns Hopkins, makes a similar point. " Nobody ever sees anything coming," he says. "Nobody saw stagflation coming, nobody saw the Great depression coming, nobody saw Pearl Harbor or 9/11 coming. Really big bad things tend to be surprises."

From http://www.boston.com/bostonglobe/ideas/articles/2008/12/21/paradigm_lost/

Asking the question of how economics could do better makes sense as we end the year, but did we really miss the signs of the crisis? I am now of the belief that we knew that a crisis was potentially upon us but we did not want to take steps to stop the behavior that was leading us down this path. We were willing to hope that situations albeit highly improbable would lead to avoidance. We did not want to raise interest rates when the housing market overheated. We did not want to regulate or change the system which was leading to unqualified buyers of homes. No one wanted to say no.

So what can we predict for 2009? The unexpected, of course. But, more likely is that any policy changes will attempt to avoid pain. Firms will be bailed-out. local governments will be bailed-out. Consumers will be saved through relevering. Yes, there will be pain but it will be focused on the ignorant and those willing to try and play by the rules and not by those rent-seekers who will try and manipulate the system. There will be no surprises when it comes to human behavior and pain avoidance.