The Nature of Forecasting

Abstract

I wish to make it clear from the outset that I am not going to discuss the mechanics or the techniques of forecasting. I know little of such techniques as cost benefit analysis, discounted cash flows, etc. My experience is limited to what I may call global forecasting in connection with the national income and balance of payments. I am more concerned with the character of forecasting and its validity, which I regard as something prior and more basic than the actual techniques used. It is these aspects that I wish to discuss. What I have to say is probably very obvious but nevertheless I think it of fundamental importance to try and clarify the issues involved. Although these things may appear to be obvious I get the feeling from time to time when people discuss forecasting and matters involving forecasting that these obvious points seem to be submerged or lost sight of and the discussion tends to be unrealistic for this reason. Perhaps we should start by asking why we should forecast in the first place. As I see it, forecasting in a simple Garden of Eden society is unnecessary. Nature is the provider and one lives with the present in a state of bliss but go North or South where winters and seasons are meaningful and apples on trees are there only once a year, then decisions about tomorrow become essential for survival. As society becomes more complex, more urbanised and industrialised and dependent on trade with other countries decisions about tomorrow are essential and become an intrinsic part of today’s life.