Harford on economic forecasts

Writing in the FT he says:

I think forecasting in a complex world is a poor test of expertise because luck is the overwhelming success factor. … The wonderful thing about a forecast is that both the forecaster and his audience feel that something profound has been expressed. And nobody will remember the forecast anyway.

I’m not sure that’s wholly true: forecasters seem to spend a lot of time disavowing their predictions and claiming that the narrative is the important thing. Of course, they still publish headline figures and institutions such as the Bank of England, who only publish a range, get regularly criticised for being too vague. Even if you don’t believe Harford’s explanation, those facts need to be reconciled somehow.

3 replies
  1. Matt Nolan
    Matt Nolan says:

    I think that many economists who don’t work with the public misunderstand what a forecaster does – as you say its about narrative and providing information.

    The idea that they don’t remember your numbers, just the description is accurate – as the numbers are there to provide a context for the story. Such stories provide a context to help planning and provide information – and people pay for those as it helps them with their business decisions.

    I don’t understand how this is a negative unless the forecaster is pretending they can actually see the future … which reminds me, I need to write more on my paper about tarot card reading and economics 😉

    • jamesz
      jamesz says:

      My last couple of sentences really sum up how I feel about this. Forecasters say that the narrative provides the value, but the headlines are always about the numbers. The only major CB that provides no headline numbers actually gets criticised by economists for being too vague. So somebody’s not telling the whole truth!

      • Matt Nolan
        Matt Nolan says:

        The numbers help to inform the narrative – and in the case of a CB they also help to anchor expectations.

        I suspect the criticism of that CB is based mainly on the last point 😉

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