Pick of the day: Why Do Economic Forecasters Get It Wrong?

Mario Pianta

Alessandro Bramucci

One more blog post on economics. This time taking apart economic predictions about Italy:

“What can we learn from these numbers? The crisis has shown how wrong the assumptions and relationships at the core of mainstream economics were. They were at the root of economic policies that have proven to be disastrous. But the same assumptions and relationships are incorporated in the models used by the international organizations to make their estimates on the future.”

Read the whole article in Social Europe Journal here: Why Do Economic Forecasters Get It Wrong?.

About Ares

Ares Kalandides holds a PhD in Urban and Regional Studies from the National Technical University of Athens. He is the founder and CEO of Inpolis, an international consultancy based in Berlin, Germany and has implement several projects around the world. Ares teaches Urban Economics at the Technical University in Berlin and Metropolitan Studies at NYU Berlin.
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6 Responses to Pick of the day: Why Do Economic Forecasters Get It Wrong?

  1. Or perhaps the question should be, ‘Why do they try to get it right?’
    Mmm …

    • Ares says:

      I think the answer to that one is easy: because any policy is generally based on forecasts…

  2. Ah, yes. Hope … forecasts …
    Accessible, high-quality data measurement and reporting should inform the policy.
    I’ve seen many polices with forecasts that can’t be properly measured.

    • Ares says:

      I don’t think that any forecasts can be properly measured, but the problem remains. You need to make assumptions about the future.

  3. What I mean, Ares, is that we should forecast in areas where we have measurement tools.

    For example, we want more people walking in the city. We should only write policy with this forecast if we install people counting technology in the streets.

    If we cannot measure an outcome, we shouldn’t put it in a policy. Government time is too valuable.

    If we can’t measure it – move on …

    Or not ..?

    • Ares says:

      Yes and no. First of all there are so many things we can not measure in numbers, but yet we have good qualitative methods of at least understanding them. Secondly, almost everything in policy-making is based on extrapolating past experience in the future – i.e. trying to predict what will happen based on past development. As you say, if we install technology to count people in the streets we will know a lot about the present and can make predictions about our future. But the latter will always be based on the assumptions that people will behave the same way tomorrow. And if tomorrow is partly predictable, policy (e.g. investing in real estate) is often about the next 5, 10 or more years… And hardly anything is predictable then…

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