The Philosophical Failings of Forecasting

This time of year is peak forecasting season -- holiday retail sales, lists of stocks you should buy this year and, of course, market forecasts all keep economists, strategists and analysts busy. I always make time to mock some of the sillier approaches to prediction-making. Indeed, I have been doing this for so long that some pushback has developed against the idea of critiquing the annual forecasting follies.

For today, let’s skip the usual bashing of forecasting; it is too easy. Instead, I want to look at the underlying cognitive and philosophical failings that are associated with the forecasting industry. This context should provide a framework for understanding the problems and investing risks of forecasting.