“Right now, the war in Iraq is the most important event affecting the economy. With billions of dollars in energy costs, capital investment, government deficits and consumer spending resting on the war’s outcome, economic forecasters are spontaneously transforming themselves into military analysts. But can they really handicap the war?” asks Daniel Altman in Sunday’s New York Times.

“One answer came from Ari Fleischer, the White House press secretary. ‘I don’t know how anybody can do a formal analysis when there are as many variables as there are,’ he said at a briefing last Monday.”

“As that briefing drew to a close, the markets seemed to be backing up Mr. Fleischer. The Dow Jones industrial average had risen by 235 points on the previous Friday, propelled by good news from the front. Yet by the time Mr. Fleischer wrapped up his remarks on Monday, reports that Americans had been captured and killed had sent the index spiraling down by more than 300 points.”

“It looked as if investors were grasping for straws — or at least the latest shreds of information from journalists at the front — when it came to predicting the war’s outcome. In that sort of atmosphere, it’s not easy to be a forecaster, let alone one responsible for making daily or weekly pronouncements about the markets and the economy.”

“One forecaster, whom I will not name, was a case in point. On March 22, he had sounded the familiar refrain that some companies would wait until after the war to make big decisions about hiring and investments. But he also said that ‘most people are expecting the whole situation to be resolved within a week or two.’ “

“Three days later, he was not so sure, declining to guess when the conflict would end.”

“Many forecasters have posited two or three potential ways for the war to unfold, usually ranging from a short conflict that would give the economy a slight boost to a long, bloody struggle, worsened by confidence-crushing terrorist attacks. But they have rarely attached probabilities to the various possibilities. Though they may have fancy models for analyzing economic data, they have little advantage in gauging military might.”