Summary

A number of topics are discussed concerning how economic forecasts can be improved in quality or at least in presentation. These include the following: using 50% uncertainty intervals rather than 95%; noting that even though forecasters use many different techniques, they are all occasionally incorrect in the same direction; that there is a tendency to underestimate changes; that some expectations and recently available data are used insufficiently; lagged forecasts errors can help compensate for structural breaks; series that are more forecastable could be emphasized and that present methods of evaluating forecasts do not capture the useful properties of some methods compared to alternatives.

CRITICISMS OF FORECASTS

It is easy to find criticisms of economic forecasts, both of their perceived quality and of the methods used in their construction. Some of the criticism is from academics, such as by Keating (1985), and more appear in the business press. Examples of the latter are Robert Chote (New Scientist, 31 October 1992), “Why the chancellor is always wrong,” with sub-head “No one takes the governments forecasts of economic upturns seriously. The problem lies with the Treasury's computer model,” and by Robert Samuelson (Newsweek, 13 February 1995), “Soothsayers on the decline”, “Economists know less than they – or most Americans – think.” A great deal of this criticism is probably deserved.