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the art of forecasting

This week issue of The Economist is rich in forecasting charts; two of them are on the right, rollover for another two. In those charts the data are from the cited sources but the forecast is of The Economist, obviously.

Economic forecasting is not new for The Economist: for years I was amused by their forecasting, a year ahead, of economic and financial indicators for over forty countries, week by week, done by The Economist poll or Economist Intelligence Unit. Amused because, in general "prediction is very difficult, especially if it's about the future" (Niels Bohr, Nobel laureate in physics). Forecasting starts with certain assumptions based on the forecaster’s experience, knowl- edge, and judgment. "The most reliable way to forecast the future is to try to understand the present" (John Naisbitt, American author and public speaker). Clearly statistical techniques are not sufficient for a forecast; it is necessary to understand how the players in economic life hung together. The underlying complexity of economic life, however, makes it look like "the only function of economic forecasting is to make astrology look respectable" (John Kenneth Galbraith, Canadian-American economist). The last quote is probably too pessimistic but with a message nevertheless. It’s plausible to assume that The Economist got a message of that type: the issue of Aug 20, 2011 was the last one with the above mentioned forecasting, a year ahead, of economic and financial indicators.

And now, in this week issue, a flood of forecasting charts. Why? Maybe the Economist Intelligence Unit is following the motto "my interest is in the future because I am going to spend the rest of my life there" (C.F. Kettering, 1876-1958, American inventor, engineer, businessman, and the holder of 186 patents).

Please, don’t get me wrong: my comments on the forecast- ing charts are not here to diminish the quality and the sub- stance of the Economist’s charts. On the contrary, the numerous and well built charts are the flagship of  Economist way of reporting. On many instances, just looking at a chart invokes most of the substance of the accompanying article. Look, for instance, on this week charts describing the depen- dence on Iranian oil, the value profile for an Apple iPad, and the rise of state capitalism.

[MORE CHARTS]

The Economist: forecasting charts

 2012-01-22 

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Krešimir J. Adamić