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January 01, 2007

Comments

james higham

If they were to ask either Tim or yourself, would that be asking an expert, Chris?

Cobbett Rides Again

Do I not recall reading somewhere that the supposed successes of those top fund managers can be explained by chance alone?

Glenn Athey (angry economist)

of course the 'experts' are looking to say something a bit different, or a new angle on things to make them stand out a bit from the crowd. If they were staid and conservative, and hedged their bets - odds on they wouldn't get asked next year, would they!?

It is not just the expert forecasters that need some sorting out - its more the people who read the forecasts, if you ask me. Educating he consumer a bit more would be useful.

Last year I posted on my '10 golden rules' of economic forecasting:

1) Forecasts should be used as part of a process of trying to understand the future – they provide only a partial insight into the economy

2) Any judgements about the future are not facts waiting to happen – there is a chance that they won’t come true

3) Any judgements about the future are based on current information – and this information can be out of date, inaccurate or wrong

4) The forecasts you use should be based on the most accurate and up-to-date information available

5) It is strongly recommended that forecasts do not lead policy/decision response

6) For any forecast it is correct to focus on broad movements and changes rather than on precise numbers

7) The user should recognise that all projections are subject to error

8) Forecasts cannot predict shocks or sudden events

9) Forecasts should be read with a critical eye – they are usually based on modelling techniques and can overlook the specific uniqueness of local characteristics

10) Finally, forecasts should never be used as the sole input into planning or decision-making

Who is the bigger fool!? I would say that the bigger fool is the person who places forecasts as the most influential factor in their decision making. The lesser fool is the person who provides the forecasts and pretends that they can either accurately predict the future or can predict it more accurately than anyone else.

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