When former California Gov. Pete Wilson spoke last June at the UCLA Anderson Forecast conference in defense of his decision to deregulate the state's energy market, he opened his talk before a packed Korn Convocation Hall with reflections on another challenging time, when Californians were caught in the economic slump of the early '90s.

"We consulted with any number of economists and consultants trying to determine what the future would be," Wilson recalled. "The only one that came up with a prognosis more pessimistic -- and more accurate -- than the state Department of Finance was, of course, Anderson UCLA."

It's not always easy being right. But in the last 50 years that it has undertaken the difficult task of predicting economic trends, the Anderson Forecast has consistently chosen the right -- not the easy -- path, and for that, it has won international respect and credibility as one of the most accurate yardsticks of the state's and the nation's economies, a gauge that government economists, CEOs and business journalists throughout the country rely on for its insight and accuracy.

Its findings -- generally announced at quarterly conferences -- are routinely reported in newspapers and journals worldwide, from the Los Angeles Times to The Economist of London, and its senior staff members are constantly sought out for their expertise on matters ranging from the energy crisis to housing to unemployment.

Observed Ted Gibson, chief economist for the California Department of Finance: "Here in Sacramento, the Forecast has a very unique position, not only for us but also for our counterparts in the Legislative Analyst's Office. It's very well-respected in the Legislature and by the governor because it's sort of a disinterested third party. Often, when we present a forecast, the first question we're asked is, 'What does UCLA say?' "

Relying on professional expertise and the latest computer-based econometric models, the tiny staff of four churns out four major forecasts a year that help illuminate the underpinnings of the local, state, national and global economies. At age 50, it is the oldest major forecasting group in the West and is included in the Blue Chip Economic Indicators survey, one of the top consensus forecasts in the country.

"Going back decades now, the Forecast has built a strong reputation for its accuracy," said Anderson School Dean Bruce Willison. "But two important things are happening: First, we're reaching out to the business community and providing this insight and guidance as to what's happening behind the numbers. Secondly, we're reaching further into our own school to incorporate more faculty and student involvement, where we have a variety of expertise that cuts across industries and into a lot of different sectors."

All this takes place in a quiet corner of the Anderson complex, where Forecast staff and faculty members support management education through teaching, supervise M.B.A. field-study projects and train Ph.D. students in advanced econometric model building and forecasting methods.

Just how all this is achieved -- so successfully and for so long -- is a remarkable story. The Forecast is virtually self-supporting, receiving most of its funding from seminar membership, consulting fees and conferences, which have presented speakers such as Kathleen Connell, California state controller, and Leon Panetta, chairman of the U.S. House Budget Committee and later White House chief of staff to President Clinton. Scheduled to appear at the next Anderson Forecast conference in March will be Los Angeles Mayor James Hahn.

When it began 50 years ago, the UCLA Anderson Forecast (then called the UCLA Business Forecasting Project, or BFP) was a modest affair: a roundtable discussion with a few economists who presented their views on different sectors of the national economy. Later, other faculty members in attendance filled out a questionnaire focusing on the key economic variables they'd just heard discussed. The answers were tabulated, resulting in a median forecast for each area -- the gross national product, for instance.

Under the direction of Economics Professor Robert M. Williams, the BFP expanded eight years later with the presentation of its first annual public forecast conference. In 1968, the UCLA Business Forecasting Seminar was established to fund the construction of more complex econo-metric models and the production of quarterly conferences. Initial corporate members included Bank of America, General Telephone, the Los Angeles Times and Southern California Edison.

The Forecast staff also continued to grow. Donald Ratajczak joined the faculty in 1968 and assumed primary responsibility for forecasting and model construction. He developed a sophisticated model of the state economy based largely on employment and personal income data, an approach that the staff still uses today.

Economist Larry J. Kimbell joined the staff in 1973 to take over Ratajczak's job of producing the forecast numbers and became the Forecast's second director in 1981. Kimbell sought to accomplish two things: strengthen the Forecast's ties with major banks, aerospace firms, utilities and government, and finish Ratajczak's task of converting the Forecast from a consensus-based model to a fully computerized, econometric model.

While others were still dependent on large, mainframe computers, Kimbell acquired a personal computer in 1978 and began training his staff to utilize its power. By the late '70s, the unit's U.S. forecast was available online.

"We were certainly ahead of our time in California," said Kimbell, who won the Sterling Prize in 1988 for the most accurate forecast of the U.S. economy. "In some sense, what you see now as routine was nothing new to us 20 years ago. We were very advanced in terms of the technology of forecasting."

In 1990, David Hensley took the helm when Kimbell took a two-year leave of absence to work in private industry. Hensley was aware that some people had problems with the nature of the forecast activity itself; that they viewed the BFP's research as applied, not academic.

"I suspect that people looked at us and wondered why, exactly, is the university doing this? And if it's that successful, maybe it should be done outside of the university," Hensley said.

But those concerns evaporated with the Forecast's much-acclaimed prediction of the recession of the early '90s. California was a costly place to do business for several reasons, its economists concluded: It was highly regulated, housing was too expensive for most people and there was slow migration into the state. When the recession actually occurred, the Forecast took an even stronger position on the aerospace and defense downturn than anybody else.

"We gradually acquired a reputation of being 'negative' on California," Hensley recalled. "There was a certain amount of bitterness about our forecast, that we were part of the problem and that we were creating a sense of anxiety that didn't need to be there. Eventually all that faded, and everyone went in our direction. Even we underestimated the magnitude and severity of what was happening, and all of us were sort of humbled by what ultimately came down."

Even today, the right-on predictions of the Forecast, with Edward E. Leamer, the Chauncey J. Medberry Professor of Management, at its head, are not always uniformly welcomed or embraced. When it predicted recession in 2001, Leamer recalled, "we were accused of being pessimistic because we called the recession early."

Then came the terrorist attacks of September 11.

After the assaults on New York and Washington, other economists who didn't before see a recession in the offing suddenly were saying, "Oh, the recession is here, and it's caused by the terrorists." The Anderson forecasters, however, were not so quick to rush to that judgment.

"Our response was, 'Let's be more thoughtful here and think about whether this was really going to be a recession-causing event,' " Leamer said. "My view was that [those predicting recession in the wake of the attacks] were giving the terrorists way too much credit."

Leamer's view is shared by Washington Post economics writer Steven Pearlstein. "I noted last year, when I was thinking that the economy was in much worse shape than other people thought, that Ed had been issuing some warnings," Pearlstein said. "So I called him up and was impressed with the way he thought about the economy. Because he thinks about it differently."

The Anderson forecasters' ability to look beyond the numbers -- to frame their projections within the context of the forces that cause the economy to sway in one direction or another -- has added to their credibility.

"My view is that forecast numbers are unintelligible and meaningless," Leamer explained. "What you've got to do is show a picture that communicates the main message, and then you must tell the story as well. Don't come here for the 'what' of the forecast, which is the numbers. Come here for the 'why.' I'm going to tell you why I think this; if you listen to me and agree, you're going to understand my message."

Leamer admits that this approach initially upset several regular conference attendees who came expecting to hear primarily numerical forecasts. While the numbers are still provided, Leamer is more concerned about giving his listeners insight.