Should we trust the forecasters?

I’ve been flicking back over some posts by Robin Hanson at Overcoming Bias and came across this one about judging the reliability of macroeconomists’ advice:

It turns out that many macro economists frequently forecast future macro events. Furthermore, many places keep standardized track records of such forecasts, records that can be compared for accuracy; we can compare the accuracy of such folks!
. . .
Alas, it turns out that there is almost no overlap between the macro-economists who are considered the most prestigious and those who even publish forecasts.

I can understand wanting to rely on the economist with the best track record for ordinary forecasting, but is there a difference in the current climate? The current crisis was not predicted by many economists. Most did not forecast the extent of the problems. In extraordinary circumstances do the heuristics used by forecasters fail to predict the future as accurately? Is it possible that someone who specialises in studying structural models of the economy, rather than developing forecasting heuristics, might have a greater insight into what’s going on? Could those people be the prestigious academics on whose every word people seem to hang these days?

I’d be interested to know what forecasters think of Hanson’s idea.

  • What forecasters think of Hanson’s idea… yes there is much good forecasting, yes there is little correlation between the good stuff and the stuff you hear. I’ve had a full swing at these topics in my new book – micro-blurb:

    “We all know that nobody can predict the future, but it is also clear that some forecasts and forecasters are better than others. Foresight is crucial – all leadership decisions we make today will play out in the future – so wouldn’t it be useful to be able to tell a good forecast from a bad one? And even more so in these uncertain times. Future Savvy,” published by The American Management Association, is a user’s guide to making better decisions about predictions. It shows forecast consumers how to assess and discern quality in the future thinking they read and hear, step by step, with examples and case studies of interest to both industry and government decision-makers. It views expert foresight as a crucial resource, but puts sharp tools in the hands of forecast users. It is designed to be the business or policy manager’s core reference in evaluating what the media, consultants, investment brokers, industry analysts and other gurus and talking heads are saying about the future.”

    Future Savvy, Adam Gordon, (Amacom Press, NY, 2009) ISBN 978-0814409121

    thanks for interesting post,
    The Future Savvy Journal: