The Swamp logo

Government Economic Forecasting, Mythology, or Science?

Why We Should Never Believe Economic Forecasts From Politicians

By Peter RosePublished 6 years ago 3 min read
Like

As a retired estimating and costing engineer, I see so much reliance based on estimates that cannot possibly have a shred of accuracy; by accuracy I mean the engineering estimators allowance of + or – 2%. One quote I saw today is, unfortunately, true: the economic forecasting from British bureaucrats makes astrology look a science.

Any honest statistician can tell you that actual costings can only be done when ALL of the data is in and has been checked and double checked and confirmed as 100% accurate. Getting this 100% accurate data is hard in a well-run business, while in such a complex and multifaceted study, such as the entire British economy, it will take over a year to get the data and even then the figures will be, if you read the small print, adjusted and interpreted in some places.

Forecasting is even worse since there are so many worldwide variables that can never be accurately assessed. Even the weather in five years time will affect long range estimates of economic activity. Does anyone expect the weather forecasters to accurately predict what the weather will be in 5 years time? World wide economic activity is not controlled by British civil servants. A change of policy in China or an act of lunacy in North Korea. A change of leadership in Russia or a large middle east nation and all the expectations are binned. A new invention that creates demand or even the euphoria that comes with some national sports success can make differences to the economy. A change of political direction will negate even very short term economic forecast. By very short term I mean six months. I say short term to mean one year, long term five years, and very long term 25 years.

Do not believe ANY national economic forecast to be worth more than an even bet. Do not even trust short term prophesies, as any skilled mathematician can make any set of known figures seem to support whatever they want them to support.

Forecasts where no one can check the data used are just propaganda. Any one can make them show whatever they want them to.

The British Office for National Statistics is one of the best in the world and they seem to be as unbiased as it is possible to be, BUT they still can only be as accurate as the data they get. They still have to make adjustments and interpret some figures. They still have to publish corrections to past figures that are a year old. What most people read, in the media, are politically selective extracts and interpretations, not the figures produced by the ONS.

Can you say with absolute certainty exactly what your own personal finances will be in five years time, accurate to the nearest £1? Do you know what the price of bread or petrol will be in a year's time? Why believe a politically biased and adjusted forecast with ten thousand more variables than you have in your own situation.

For any government to make long term policy decisions based on forecasts provided by one source is plain stupid. Every source of information will have unconscious bias built into it. The vast majority of information suppliers will have deliberate policies to present figures to fit in with their own agenda.

A large commercial organization that relies only on its in house forecasting team is flirting with danger. This is why they have non executive board members, people with experience who should point out that basing multi-million decisions on one set of data is a risk too far.

In the political frenzy that exists in democracies, during the build up to an election, truth is non-existent. From any side. The media distort what was already largely guess work that was slanted toward a pre-existing point of view. To choose a government based on these reports of economic forecasts is about as realistic as closing your eyes, turning round three times, and sticking a pin in a list of candidates.

finance
Like

About the Creator

Peter Rose

Collections of "my" vocal essays with additions, are available as printed books ASIN 197680615 and 1980878536 also some fictional works and some e books available at Amazon;-

amazon.com/author/healthandfunpeterrose

.

Reader insights

Be the first to share your insights about this piece.

How does it work?

Add your insights

Comments

There are no comments for this story

Be the first to respond and start the conversation.

Sign in to comment

    Find us on social media

    Miscellaneous links

    • Explore
    • Contact
    • Privacy Policy
    • Terms of Use
    • Support

    © 2024 Creatd, Inc. All Rights Reserved.