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Every profession has its occupational hazards. For economists, one of these is the risk that in the midst of a social occasion, we will be asked to forecast or interpret the movements of the stock market. In this lecture I shall try to do just that. Since this is a professional meeting, I shall give enough detail to glaze the eyes of any casual questioner. But I hope to be able to show that there is genuine intellectual interest, as well as popular appeal, in this issue. It is important from the outset to distinguish the two parts of the requestto forecast the market, and to interpret the market. These tasks are quite different. To forecast the market means to predict price changes in the near future. To interpret the market means to explain, with the benefit of hindsight, why prices have changed in the way they have. This is something which the financial press does almost every day. But the financial press does not impose on itself the …