THERE ARE TWO REASONS why economic forecasters live dangerous lives. The first danger lies in the unknowables–unpredictable events of such magnitude that they swamp the variables that economists are comfortable dealing with. Consider just a few:

Last week, terrorists launched an attack on some of the facilities of the Saudi regime. Even though the attacks were largely unsuccessful, and even though they were not aimed at the Kingdom’s oil facilities, the price of oil immediately jumped some $2 per barrel. No one knows whether the regime’s opponents will mount more devastating attacks, and succeed in raising the risk-premium already built into oil prices. If they are, prices might well soar to recession-inducing levels.