On Forecasting The Future

There are several methods of forecasting the future. The oldest, no longer taken seriously in the West, is to rely on the positions of the stars, the entrails of a sheep, the flight of a bird, or some version of the Oracle at Delphi. One wonders how such ideas got started, but they were well established in various times and places. All of these methods had the advantage of ambiguity, so that a powerful 'client' could hear what he wanted to hear. In 546 BC King Croesus of Lydia, in Anatolia, asked for advice from the Oracle at Delphi in regard to a possible conflict with the Persians. The Oracle replied 'If King Croesus goes to war he will destroy a great empire.' Accordingly, Croesus attacked the Persians under King Cyrus, and was utterly defeated. The Lydian empire (such as it was) was duly destroyed. The most famous example of comparatively recent times was the French doctor Nostradamus, who wrote his predictions in a book. Nostradamus' trick was much like the Oracle's, namely to make his pronouncements so ambiguous that they could be interpreted at will. Yet Nostradamus still has believers.

The modern version of a seer is a 'futurologist' or simply an expert in some field of interest. Examples of bad predictions by experts abound. A fascinating collection of embarrassing pronouncements by experts can be found in a little book entitled Profiles of the Future by Arthur C. Clarke (Clarke 1958). Clarke unhesitatingly added several of his own. A more 'scientific' use of experts, known as 'Delphi Forecasting' was introduced by Olaf Helmer at RAND Corp. in the mid-1960s. The method amounts to voting. A panel of experts in the field of interest is asked to put a likely date on some future event of interest, along with measures of uncertainty. The idea is that some of the experts will be too optimistic, others will be too pessimistic and the errors will tend to cancel out. The problem is that the panel of experts often share the same assumptions, perhaps without knowing it. If they do, all of them can be equally wrong.

A Delphic forecast was carried out at RAND in 1966, in which all of the scientists were asked about the future of nuclear technology. Every single one of those polled predicted that thermonuclear fusion power would be in use by electric utilities before the year 2000 (Helmer 1967). A similar poll today would probably put the probable date of fusion power adoption by utilities around 2050 or so, and that could turn out to be equally optimistic.

Economists often use the Delphic approach, in effect, by assembling a panel of experts, for example, to forecast short-term growth rates, interest rates and so on. Panel forecasts are probably slightly more reliable than individual expert forecasts, but panels usually miss important changes of direction.

In any case we prefer a different approach.

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