Government & forecasting

Hopi Sen asks question that’s both intelligent and naïve:

Why do governments bother making such definitive predictions of the future? Why not adopt a system of range forecasting, where we work within assumptions of probability of different outcomes?

There is, of course, a precedent for this; it’s just what the Bank of England does. But there are reasons why the government doesn’t follow suit.
For one thing, the range of outcomes would be huge. I’ve estimated that, since 1999, the average error in Budget forecasts for public sector net borrowing two years out has been over £20bn - that’s almost 2 per cent of GDP. And as these errors generally came during a time of unprecedented economic stability which has now passed, they under-state the uncertainty about future borrowing.
So, if we assume that the £173bn forecast for PSNB in 2010-11 is the central point of the projection, a range forecast would take the form of saying something like:

There’s a roughly two-thirds chance PSNB will be within the range £143-£203bn, and a one-in-six chance it will be below this, and a one-in-six chance it’ll be above it.

It would, however, be impossible for a government to do this.
Every know-nothing numbskull and opportunist would claim that this is not what it is - a sensible recognition of the fact that the economic future is inherently unpredictable - but rather a confession of ignorance. And it would be hard work to convince people otherwise; I wouldn’t envy the man trying to drill the concepts of standard error and irreducible uncertainty into the thick skulls of Jeremy Paxman or Windbag Naughtie (Evan Davis of course would be another matter, but he‘s the exception.)
So, why does the Bank of England do this? It lies in the difference between managerialists and technocrats.
The Bank are technocrats. Technocrats try to manipulate reality. And this require them to recognise that reality is a cussed bugger.
Governments, though, are managerialists. Their job is not to change reality, but to maintain images. One of the most important images is the illusion that they are "in charge", which requires that they deny the existence of uncertainty.

Comments

[Joe Otten]

Would the government still be managerialists if the media didn't demand that they be?

My guess is that this lot would be, but others maybe not.

[jameshigham]

Where does that then leave economists?

[kinglear]

Economists? If we get it right a couple of times in 100 that's pretty good.On the other hand, I am a firm believer in the cock-up theory of humanity, and, with George Soros, that every action has a reaction ( Newton too for that matter).
Which is why Governments make such a mess of things, because they keep trying to DO something.....

[Straus]

One thing that illustrates how little governments are interested in doing things rather than creating the illusion of action is the frequency with which ministers are replaced. How many education, transport, health, defence and home secretaries have we had in the last ten years? How much time and resources have been wasted on executing this perpetual merry-go-round?

[Howardclark@btinternet.com]

The government are wrong on all sorts of things.

Just look at shared services centres - John Seddon has just posted video that argues that government claims that it will save £15 billion are ludicrously wrong!

http://www.thesystemsthinkingreview.co.uk/index.php?pg=18&backto=1&utwkstoryid=177

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