Sunday, May 25, 2008
There has been a curious discussion over at Iain Dale about economic forecasting. Iain had observes the wild inaccuracy of the government's published oil price predictions and comments, 'You'd think this document needs radical updating.' Assuming he means updating to take into account the present price of oil, this is a profoundly irrational remark. The inaccuracy of the predictions is conceptual; it does not arise not from a lack of information. Predicting the oil price is impossible and always has been. Nick Drew, in the comments, points out that Galbraith, Keynes and Drucker have all made this point about economic forecasting in general. It doesn't work and never has. But people still blithely assume we just need more information. In fact, there is plenty of evidence to show that more information leads either to worse forecasts or to increased confidence in forecasts, which is even worse. The really interesting question here is: why do we continue to produce such forecasts - and pay people large sums of money to make them - when they are always wrong, or at least wrong enough of the time to make them useless? Government will say forecasts are needed for planning. Again, profoundly irrational - what use are plans based on inaccurate forecasts? The contemporary imagination seems to have problems accepting the unknowable future. Forecasts are comfort blankets; they don't actually protect you from monsters.
Posted by Bryan Appleyard at 11:09 am