100th Issue of the Review : Forecasting and Economic Policy

In recent years economic forecasting has come under increasing attack for two main reasons. The first is that since 1973 the economic outlook for the United Kingdom has been worse than most people in the economy would have liked. As the purveyors of bad tidings, economic forecasters have been thought, albeit largely unconsciously, to bear some responsibility for the outcome they expect. It is implied that if it is possible to point out the dire consequences of any current policy it should be equally possible to point to a better alternative policy, and hence enable the policymaker to avoid the undesirable outcomes. This very plainly has not happened; judged by the criteria of economic growth, price inflation and unemployment the United Kingdom has done worse since 1973 than in any period of comparable length since the second world war. Indeed comparisons have been made between the last few years, 1979–81, and those of the slump in 1929–33. On that occasion, however, there was no corresponding fear of rising prices. The second source of attack has been on grounds of accuracy. Despite the great advances in technique and the considerably enhanced complexity of macroeconometric models, forecast errors have not fallen markedly during the last decade and have in some instances increased.