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Forecasting: Humans Are Prone-to-Predicting Animals

In: Why and How Humans Trade, Predict, Aggregate, and Innovate

Author

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  • Maurizio Bovi

    (Italian National Institute of Statistics)

Abstract

Bovi examines the predictions of humans on others’ behavior and economic objects (GDP, inflation, etc.), stressing that both are high-stakes games. Forecasting others’ behavior is essential to the social interactions that make up our personal and professional lives—we strategically tune our behavior according to what we expect others will do, the outcome of our choices depends on the actions and beliefs of others. Individuals, firms, and governments must then take several intertemporal decisions and predict the price/quantity developments of several economic objects. Crucially, the gains from forecasting objects also have a systemwide dimension. If expectations diverge too much and/or for too long from fundamentals, the system dangerously overdrives. The chapter lastly stresses why and how humans often forecast mixing rationality and emotions, objective computations and heuristics.

Suggested Citation

  • Maurizio Bovi, 2022. "Forecasting: Humans Are Prone-to-Predicting Animals," Contributions to Economics, in: Why and How Humans Trade, Predict, Aggregate, and Innovate, chapter 3, pages 55-79, Springer.
    • Handle: RePEc:spr:conchp:978-3-030-93885-7_3
    DOI: 10.1007/978-3-030-93885-7_3
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