Forecasting and uncertainty in the economic and business world
Forecasts are crucial for practically all economic and business decisions. However, there is a mounting body of empirical evidence showing that accurate forecasting in the economic and business world is usually not possible. In addition, there is huge uncertainty, as practically all economic and business activities are subject to events we are unable to predict. The fact that forecasts can be inaccurate creates a serious dilemma for decision and policy makers. On the one hand, accepting the limits of forecasting accuracy implies being unable to assess the correctness of decisions and the surrounding uncertainty. On the other hand, believing that accurate forecasts are possible means succumbing to the illusion of control and experiencing surprises, often with negative consequences. We believe that the time has come for a new attitude towards dealing with the future. In this article, we discuss the limited predictability in the economic and business environment. We also provide a framework that allows decision and policy makers to face the future -- despite the inherent limitations of forecasting and the uncertainty, sometimes huge, surrounding most future-oriented decisions.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Antonio E. Bernardo & Ivo Welch, 2001.
"On the Evolution of Overconfidence and Entrepreneurs,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 10(3), pages 301-330, 09.
- Bernardo, Antonio & Welch, Ivo, 1997. "On the Evolution of Overconfidence and Entrepreneurs," University of California at Los Angeles, Anderson Graduate School of Management qt6668s4pz, Anderson Graduate School of Management, UCLA.
- Antonio E. Bernardo & Ivo Welch, 2001. "On the Evolution of Overconfidence and Entrepreneurs," Cowles Foundation Discussion Papers 1307, Cowles Foundation for Research in Economics, Yale University.
- Antonio Bernardo & Ivo Welch, 2001. "On the Evolution of Overconfidence and Entrepreneurs," Yale School of Management Working Papers ysm211, Yale School of Management, revised 01 Nov 2003.
- Daniel Kahneman & Dan Lovallo, 1993. "Timid Choices and Bold Forecasts: A Cognitive Perspective on Risk Taking," Management Science, INFORMS, vol. 39(1), pages 17-31, January.
- Johnson, Eric J & Hershey, John & Meszaros, Jacqueline & Kunreuther, Howard, 1993. "Framing, Probability Distortions, and Insurance Decisions," Journal of Risk and Uncertainty, Springer, vol. 7(1), pages 35-51, August.
- Orrell, David & McSharry, Patrick, 2009. "System economics: Overcoming the pitfalls of forecasting models via a multidisciplinary approach," International Journal of Forecasting, Elsevier, vol. 25(4), pages 734-743, October.
- Robin M. Hogarth & Spyros Makridakis, 1981. "Forecasting and Planning: An Evaluation," Management Science, INFORMS, vol. 27(2), pages 115-138, February.
- Makridakis, Spyros & Hibon, Michele, 2000. "The M3-Competition: results, conclusions and implications," International Journal of Forecasting, Elsevier, vol. 16(4), pages 451-476.
When requesting a correction, please mention this item's handle: RePEc:eee:intfor:v:25:y:2009:i:4:p:794-812. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.