The Quern

The Great Depression Ahead — Harry S. Dent, Jr.

Rating: 1.5/5

I can’t really claim this is a full and complete review of The Great Depression Ahead, because I didn’t finish it. I borrowed it from a friend at work, and although I made an attempt to read it and got through the first three or four chapters, there was way too much pseudoscience in here to motivate me to complete it.

Dent’s central thesis is that the economy operates according to cycles, and that these cycles are relatively regular both in amplitude and frequency. He posits the existence of multiple overlapping cycles, ranging from an every-decade stock market cycle and cycles based on our presidential election years, all the way up to a 500-year “mega innovation cycle” (his term) and even a 5000-year “civilizational advancement cycle”.

I don’t have a problem, really, with most of the short-term cyclic approach, particularly that based on demographic analysis.  I can easily see that demographic spending trends will change as large generational cohorts enter and leave the workforce, and as their aggregate family conditions change.  So far, so good.  And I’m willing to go with the empirical evidence of some of his odder cycles — given enough points that plot with regularity, you can infer the presence of at least a temporary cycle with reasonable confidence.

But these longer cycles that he anchors with one or two conveniently-chosen points are just bunk.  For example, he chooses the invention of the printing press and the rise of computers as anchor points for his 500-year innovation cycle.  But what about the steam engine?  The assembly line?  The railroad?  The telegraph?  The cotton-pickin’ cotton gin?  You could make a reasonable case for each of these as being society-transforming innovations, but since they don’t fit his 500-year model, they’re conveniently left out.

But when prediction fails, hindsight comes to the rescue!  The 60-year Kondratiev Wave cycle theory went off the rails in the 1990s, trashing some of his earlier predictions.  So, to cover himself, he posits a new, 80-year cycle.  But a one-time change in cycle length doesn’t fit his “everything can be explained by cycles” model — if cycles can arbitrarily change in length, then they weren’t really truly cyclic to begin with, and the whole premise of his analysis goes straight into the wastebasket.  So he concocts the explanation that the 60-year cycle shifts back and forth to an 80-year cycle on a schedule governed by a 250-year Revolutionary Cycle.  Fiction masquerading as truth is truly stranger than honest fiction!

So what is the predictive value of his theory?  He claims successful prediction of the Japanese slump in the 1990s.  Fine.  Let’s take that at face value.  He’s also the guy that wrote Dow 30,000.  Oops.  His most successful “predictions” appear to be immediate reads of the existing situation, more akin to psychic cold reading than any long-term prediction of market trends.  He touts the recommendations he made that paid off, and conveniently fails to mention the ones that didn’t — a classic use of confirmation bias.  The terrorist attacks of 2001 and their effects on the market took him by surprise, so now he has incorporated a nine-year “terrorism cycle” into the mix — retroactively, of course.  By this model, we’ll be “due” for a major terrorist attack in 2010, and apparently can breathe easy until then.

Folks, you can’t make this stuff up.  Economics is supposed to be a science, but for Harry Dent it’s more like astrology.  Or, if you want to be generous, it’s more along the lines of astronomy: Ptolemaic astronomy, with scads of epicycles to attempt to shoehorn ever-more-complex observed behavior into the straightjacket of a single, incorrect unifying assumption.

The irony in astronomy was that the truth, given the illumination of proper mathematics, is much simpler and more elegant than the Ptolemaic model could ever have been, and I suspect (with no proof, I admit) that the same is probably true of macroeconomics.  Possibly the greatest irony in this book, though, is on the back cover of the hardback, where (at least in my edition) he proudly features a glowing testimonial from none other than recently disgraced South Carolina governor Mark Sanford.  It’s tempting to thus just refer to Dent’s cyclic theories as the “Argentinian School” of economics, and to put it quietly back on the shelf where it belongs.