The outputs of economic forecasting—predictions for national economic indicators such as GDP, unemployment rates and inflation—are all highly visible. The production of these forecasts is a much more private affair, however, typically being thought of as the work of individual forecasters or forecast teams using their economic model to produce a forecast that is then made public. This conception over-emphasises the individual and the technical whilst silencing the broader social context through which economic forecasters develop (...) the expertise that is essential for the credibility of their predictions. In particular, economic forecasts are given meaning and fine-tuned through the social and institutional networks that give forecasters access to the expertise of a heterogeneous mix of academics, policy-makers and business people. Within these broader groups, individual forecasters often create private forecast ‘clubs’, where subscribers have privileged access to the expertise of the economist, but where the forecasters also have privileged access to their clients’ own expert knowledge. In examining these aspects of the forecasters’ work I show that the visible and audible activities of modelling and forecasting are made possible and plausible by virtue of the modeller’s invisible interaction with a wider network.Keywords: Expertise; Economic forecasting; Periodic table of expertise; Judgement. (shrink)

The Bayesian vector autoregressive model introduces the statistical properties of variables as the prior distribution of the parameters into the traditional vector autoregressive model, which can overcome the problem of too little freedom. The BVAR model established in this paper can overcome the problem of short time series data by using prior statistical information. In theory, it should have a good effect in China’s regional economic forecasting. Most regional forecasting model literature lacks out-of-sample forecasting error evaluation (...) research in the real sense, but our early forecasts of major economic indicators provide an excellent opportunity for this paper to evaluate the actual forecast errors of the BVAR model in detail. The analysis in this paper shows that the prediction error of the BVAR model is very small and the prediction ability is very satisfactory. At the same time, this article also analyzes and points out the direction of efforts to further improve the prediction accuracy of the BVAR model. (shrink)

A startup ecosystem is a dynamic environment in which several actors, such as investors, venture capitalists, angels, and facilitators, are the protagonists of a complex interplay. Most of these interactions involve the flow of capital whose size and direction help to map the intricate system of relationships. This quantity is also considered a good proxy of economic success. Given the complexity of such systems, it would be more desirable to supplement this information with other informative features, and a natural (...) choice is to adopt mathematical measures. In this work, we will specifically consider network centrality measures, borrowed by network theory. In particular, using the largest publicly available dataset for startups, the Crunchbase dataset, we show how centrality measures highlight the importance of particular players, such as angels and accelerators, whose role could be underestimated by focusing on collected funds only. We also provide a quantitative criterion to establish which firms should be considered strategic and rank them. Finally, as funding is a widespread measure for success in economic settings, we investigate to which extent this measure is in agreement with network metrics; the model accurately forecasts which firms will receive the highest funding in future years. (shrink)

Purpose of the article is to predict the interrelationship between the change of financial institutions loan portfolio and activities of the main economic sectors in Lithuania. Coherence between financial intermediation and economic growth cause a great interest of economists during the late decade. Prevailed opinion that banking sector is the reflection of economic growth and expansion and that its role - to intermediate in the saving and investing needs, reallocating funds between economic activities, was replaced by (...) sentiment that strong and stable banking sector could be not only the result of economic development, but also the cause of this growth. The purpose of the article is to accomplish forecast of the influence of financial institutions loan portfolio change to the main economic sectors in Lithuania for 2013-2017 period. Methodology/methods Analysis of variation of loan portfolio according economic sectors shows the tendencies of financing of various activities in the past. Regression - correlation analysis helps to identify the influence of loan portfolio changes and their impact for GDP and employment in separate economic sectors. The forecasting of different economic sectors was made using extrapolation methods and econometric method. Scientific aim: Economic situation in Lithuania forces to estimate decisions made by banking sector that influence not only individual countries but also the global economy. In this regard, there is a natural question of whether the process of underway stagnation should be judged as a timely economic development stage, or perhaps as the result of policies pursued by financial institutions? Prerequisites for the problem situation forces to overhaul loan portfolio managed by financial institutions, evaluate its change on the country's economy sectors, and to investigate these relationships forecasts. Findings: There is a strong link between financial sector development and economic growth. The results showed that the volume of loans has a very close interdependence with the GDP. Data obtained for loan portfolio forecasting for 2013-2017 showed that the growth of loans can be seen in all sectors except construction. Employment should grow only in public and retail sectors. Conclusions : The most relationship with GDP was established in retail and public sectors. Determining the correlation coefficients and regression equations between loans and employment the strongest relationship found in retail, industrial and construction sectors. The study encountered lack of data for 2012, since the information about the composition of the loan portfolio in different sectors since November 2011 is no longer provided to the Bank of Lithuania. (shrink)

The deterministic economic system will also produce chaotic dynamic behaviour, so economic chaos is getting more and more attention, and the research of economic chaos forecasting methods has become an important topic at present. The traditional economic chaos forecasting models are mostly based on large samples, but in actual production activities, there are a large number of small-sample economic chaos problems, and there is still no effective solution. This paper proposes a combined (...) class='Hi'>forecasting model based on the traditional economic chaos forecasting method. First of all, through the decision tree classification, priority selection of features, rough prediction is achieved. Secondly, we use BP neural network to make secondary prediction. Because the initial weight is randomly selected, it is easy to fall into the defect of local minimum. This paper optimizes the BP neural network. Finally, the decision tree model and the BP neural network model optimized by the improved genetic algorithm are combined, and the combined model is optimized by the improved GA. This method can take advantage of many prediction models and combine the prediction information of multiple different prediction models to effectively improve the fitting ability of the model and improve the prediction accuracy. (shrink)

Developed from two reports to seminars organized by the Congress of Cultural Freedom, in 1962 and 1963, The Art of Conjecture constitues a programmatic document for the work of Futuribles, a team of intellectuals collecting materials on the role of the social sciences. The intellectual fabric of this work are woven with a fine mixture of hard-nosed mathematical analysis, derived from demographic and economic forecast, and less accurate, more imaginative, modelings for short and long term social forecast. Much of (...) the book is devoted to an analysis of common and special conceptions of the future. Here lies the greatest philosophical interest of this work. The method pivots around techniques of long term economic forecasting. The political and human aspects are ever present in the course of the study. Toward the end the author asks himself, and us, the question: should forecast be based on technological sources alone? The question has already been answered in such brilliant chapters as, "The Conditions of Political Foreseeability," "The Ecology of Social Ideas," "The Social Career of Ideas," "The Force of Moral Ideas," and "Empirical Relations between Ideas."—A. M. (shrink)

The paper considers the conjecture that forecasts from preferred economic models or theories d-separate forecasts from less preferred models or theories from the Actual realization of the variable for which a scientific explanation is sought. D-separation provides a succinct notion to represent forecast dominance of one set of forecasts over another; it provides, as well, a criterion for model preference as a fundamental device for progress in economic science. We demonstrate these ideas with examples from three areas of (...) economic modeling. (shrink)

The Econometric Society holds a World Congress every five years. The program of these congresses has traditionally included a series of invited symposia, where speakers survey important recent advances in economic theory and econometrics. This volume, with its focus on economic theory and its companion volumes on econometrics contain papers delivered at the Fifth World Congress held in 1985. Designed to make material accessible to a general audience of economists, these articles should be helpful to anyone with (...) training in economics, who wishes to review past ideas and tendencies in the subject. Advances in Economic Theory - Fifth World Congress, edited by Professor Truman F. Bewley, includes a wide variety of topics, comprising empirical and policy orientated subjects as well as theoretical ones. (shrink)

This is a set of three volumes containing edited versions of papers and commentaries presented in invited symposium sessions of the Eighth World Congress of the Econometric Society. The papers summarize and interpret recent key developments and discuss future directions in a wide range of topics in economics and econometrics. The papers cover both theory and applications. Written by leading specialists in their fields, these volumes provide a unique survey of progress in the discipline.

This is the first of three volumes containing edited versions of papers and commentaries presented in invited symposium sessions of the Eighth World Congress of the Econometric Society. The papers summarize and interpret recent key developments and discuss future directions in a wide range of topics in economics and econometrics. The papers cover both theory and applications. Written by leading specialists in their fields these volumes provide a unique survey of progress in the discipline.

This is the second of three volumes containing edited versions of papers and commentaries presented in invited symposium sessions of the Eighth World Congress of the Econometric Society. The papers summarize and interpret key developments and discuss future directions in a wide range of topics in economics and econometrics. The papers cover both theory and applications. Written by leading specialists in their fields, these volumes provide a unique survey of progress in the discipline.

This is the third of three volumes containing edited versions of papers and commentaries presented in invited symposium sessions of the Eighth World Congress of the Econometric Society. The papers summarize and interpret recent developments and discuss future directions in a wide range of topics in economics and econometrics. The papers cover both theory and applications. Written by leading specialists in their fields, these volumes provide a unique survey of progress in the discipline.

This book comprises the second volume of papers presented at the Sixth World congress of the Econometric Society in Barcelona in August 1990. With papers from the world's leading specialists, it gives the reader a unique survey of the most recent advances in economic theory.

This three volume set contains papers presented at the Seventh World Congress of the Econometric Society. The first volume contains three papers presented at the Seventh World Congress of the Econometric Society which summarize and interpret key recent developments and discuss current and future directions in a wide range of topics in economics and econometrics. They cover both theory and applications. Authored by leading specialists in their fields, these volumes provide a unique survey of progress in the discipline. The second (...) volume comprising three papers which examine the latest developments in economic theory, applied economics and econometrics presented at the Seventh World Congress of the Econometric Society in Tokyo in August 1995. The topics were carefully selected to represent the most active fields in the discipline over the past five years. Written by the leading authorities in their fields, each paper provides a unique survey of the current state of knowledge in economics. Designed to make the material accessible to a general audience of economists, these volumes should be helpful to anyone with a good undergraduate training in economics who wishes to follow new ideas and tendencies in the subject. The third of three volumes contains papers presented at the Seventh World Congress of the Econometric Society. The papers summarize and interpret key recent developments and discuss current and future directions in a wide range of topics in economics and econometrics. They cover both theory and applications. Authored by leading specialists in their fields, these volumes provide a unique survey of progress in the discipline. (shrink)

Precipitation deficit causes meteorological drought, and its continuation appears as other different types of droughts including hydrological, agricultural, economic, and social droughts. Multivariate Standardized Precipitation Index can show the drought status from the perspective of different drought types simultaneously. Forecasting multivariate droughts can provide good information about the future status of a region and will be applicable for the planners of different water divisions. In this study, the MLP model and its hybrid form with the Imperialistic Competitive Algorithm (...) have been investigated for the first time in multivariate drought studies. For this purpose, two semi-arid stations of western Iran were selected, and their precipitation data were provided from the Iranian Meteorological Organization, during the period of 1988–2017. MSPI was calculated in 5-time windows of the multivariate drought, including MSPI3–6, MSPI6–12, MSPI3–12, MSPI12–24, and MSPI24–48. The results showed acceptable performances in forecasting multivariate droughts. In both stations, the larger time windows had better predictions than the smaller ones. Generally, it can be reported that, by decreasing the size of the time window, the gradual changes of the index give way to sudden jumps. This causes weaker autocorrelation and consequently weaker predictions, e.g., forecasting droughts from the perspective of soil moisture and surface hydrology simultaneously. The hybrid MLP-ICA shows stronger prediction results than the simple MLP model in all comparisons. The ICA optimizer could averagely improve MLP’s accuracy by 28.5%, which is a significant improvement. According to the evaluations, the results are hopeful for simultaneous forecasting of different drought types and can be tested for other similar areas. (shrink)

Forecasting involves an underlying conceptualization of probability. It is this that gives sense to the notion of precision in number that makes us think of economic forecasting as more than simply complicated guesswork. We think of it as well-founded statement, a science and not an art of numbers. However, this understanding is at odds with the nature of social reality and the attributes of the forecaster. We should think differently about how we both anticipate and make the (...) future and what this means. Foresight is perhaps a more appropriate term. This paper addresses two issues that rarely receive attention in the field of economics. First, why is there a continued high demand for economic forecasts despite their lack of success in anticipating significant turning points in any given system? Second, what are forecasts actually assuming about the nature of a system and the future state of the world? In the paper I approach these issues indirectly. My intention is to highlight their significance by setting out a series of arguments that encapsulate the characteristics of a forecaster required to match a common understanding of what forecasting is intended to do. The structure of this paper is unusual for a contribution in the field of economics. It follows a format more commonly used in analytical philosophy when the author wants to focus on a problem and where the intention is to provoke further questioning, rather than supply ready answers. As such, it should not be read as a comprehensive account of all possible approaches to methods or philosophies of forecasting and attendant issues of probability. Three points are worth stating at the outset as a guide to what follows: Forecasting tends to forget that it is conjecture and what that really means. Its scientism overburdens how it is articulated and how it is perceived. We tend to think of forecasting as degrees of precision in prediction and of successful prediction as successful description of phenomena at some future point. There is, as the following discussion demonstrates, something basically inconsistent within the implications of this minimalism. Since the greater part of the credibility of, and authority of, economics resides in its claims to effective forecasting these points are highly relevant to the state of the discipline. Read the Open Peer Discussion on this paper ». (shrink)

ArgumentIt seems theoretically convenient to construe knowledge practices in financial markets and organizations as “applied economics.” Alternatively or additionally, one might argue that practitioners draw on economic knowledge in order to systematically orient their actions towards profit-maximization; models, then, are understood as devices that make calculative rationality possible. However, empirical studies do not entirely confirm these theoretical positions: Practitioners’ actual calculations are often not “framed” by models; organizations and institutions influence the choice and adoption of models; and different professional (...) groups in financial markets have diverging attitudes towards model calculations. In order to account for this diversity, this article proposes the concept ofcultures of economic and financial expertise; the concept focuses on the patterns of knowledge practices and knowledge-related self-definitions of groups within financial organizations and markets; it also facilitates an analysis of the relations between and, more specifically, the hierarchies among different practices and identities. The article then goes on to explore the process of foreign exchange forecasting in a particular bank. The description immediately reveals that two groups are involved in this process: economists and analysts. These groups maintain quite different practices and self-descriptions in relation to models: While the economists in the bank use the models as organizational resources for consistent forecasting procedures and observe data with the help of simple model structures, analysts approach model forecasts from the perspective of critics: They see limits in the variable-centered, as opposed to a “thematic” approach and they disregard a model's imposed temporality. Nevertheless, analysts use model forecasts as anchors for developing their own “paths” and stories about possible future expectation changes in the markets. The specific division of labor between economists and analysts, and specifically the dominant role of analysts in the forecasting process, fit into a larger picture: The rise of institutional investors in the foreign exchange markets and their demand for genuine market knowledge for speculative investment projects has contributed to the rise and dominance of analysts’ culture. (shrink)

Economics today cannot predict the likely outcome of specific events any better than it could in the time of Adam Smith. This is Alexander Rosenberg's controversial challenge to the scientific status of economics. Rosenberg explains that the defining characteristic of any science is predictive improvability--the capacity to create more precise forecasts by evaluating the success of earlier predictions--and he forcefully argues that because economics has not been able to increase its predictive power for over two centuries, it is not a (...) science. (shrink)

Since the breakdown of the Bretton Woods system in the early 1970s, the foreign exchange market has become an important focus of both academic and practical research. There are many reasons why FX is important, but one of most important aspects is the determination of foreign investment values. Therefore, FX serves as the backbone of international investments and global trading. Additionally, because fluctuations in FX affect the value of imported and exported goods and services, such fluctuations have an important impact (...) on the economic competitiveness of multinational corporations and countries. Therefore, the volatility of FX rates is a major concern for scholars and practitioners. Forecasting FX volatility is a crucial financial problem that is attracting significant attention based on its diverse implications. Recently, various deep learning models based on artificial neural networks have been widely employed in finance and economics, particularly for forecasting volatility. The main goal of this study was to predict FX volatility effectively using ANN models. To this end, we propose a hybrid model that combines the long short-term memory and autoencoder models. These deep learning models are known to perform well in time-series prediction for forecasting FX volatility. Therefore, we expect that our approach will be suitable for FX volatility prediction because it combines the merits of these two models. Methodologically, we employ the Foreign Exchange Volatility Index as a measure of FX volatility. In particular, the three major FXVIX indices from 2010 to 2019 are considered, and we predict future prices using the proposed hybrid model. Our hybrid model utilizes an LSTM model as an encoder and decoder inside an autoencoder network. Additionally, we investigate FXVIX indices through subperiod analysis to examine how the proposed model’s forecasting performance is influenced by data distributions and outliers. Based on the empirical results, we can conclude that the proposed hybrid method, which we call the autoencoder-LSTM model, outperforms the traditional LSTM method. Additionally, the ability to learn the magnitude of data spread and singularities determines the accuracy of predictions made using deep learning models. In summary, this study established that FX volatility can be accurately predicted using a combination of deep learning models. Our findings have important implications for practitioners. Because forecasting volatility is an essential task for financial decision-making, this study will enable traders and policymakers to hedge or invest efficiently and make policy decisions based on volatility forecasting. (shrink)

Analyzing and modeling interconnections between crucial factors of human development, rates of growth thereof and elasticity of the growth rates, the authors have defined specific periods of the development and have made a forecast for the dynamics of the human resources development. Those periods have been defined more exactly and arranged as follows: the first one – «Before Christ»; the second one – «Early Medieval» (1–1100 a.d.); the third one – «Advanced Medieval» (1101–1625); the forth one – «Pioneer’s Modernization» (1626–1970); (...) the fifth one – «Industrialization» (1871–2030) and the sixth one – «Informational society» – after 2030. The results received enable to make forecasts of the global factors dynamics, to find out unified solutions in socio-economic sphere, to define tendencies in social development and to build up unified strategic approaches for modeling global influence on human resources. (shrink)

The socio-economic “pro-democracy” revolutions which are currently sweeping the Soviet Union and Eastern Europe in the name of glasnost and perestroika have virtually stunned all but the best informed in the Western World. The demand for reform throughout the so-called “Soviet block,” and the concomitant impatience with the progress of these changes in the economic and basic social fabric of these societies, have come to exhibit an urgency which few observers, if any, had been able to forecast a (...) few short years ago. The declarations by some members of the U.S. Congress that these changes are indicative of the fact that the cold war has been won by the West, and that we are now witnessing the precipitous collapse of Marxist ideology, together with the widespread sentiment that there is “no going back” to the repressive Leninist-inspired regimes of Stalin, Khruschev, and Brezhniev are all synergistic to the creation of a sentiment of optimism that indeed we have turned the corner in East-West relations. To a world which has lived under the long night of thermonuclear extinction for over four decades, the feeling accompanying the prospect of a possible end to the nightmare of Armageddon further enhances the euphoric sentiment. (shrink)

Growing out of a conference on Expectations Formation and Economic Disequilibrium held in New York City in 1981, the papers in this volume provide a complex view of market processes in which individual rationality is no guarantee of convergence to the 'correct' model and the equilibrium coordination of agents' plans. They reject the 'optimality' argument for the rational expectations hypothesis, opening the door to other hypotheses of optimal expectations of agents in the decentralized market economy.

In the midst of the ultra modernity of stock exchanges and financial markets, certain practitioners are increasingly using forecasting models of changes in rates whose scientific rationality is particularly contested. We refer to ‘technical analysis’, or, in the jargon of finance, of ‘chartism’. The adherents of this practice affirm that their models offer the possibility of detecting and of reading, by means of stereotyped graphical configurations, rising or falling market trends. Now, for a large number of people who hold (...) scientific economic and financial theories to describe the ‘nature’ of changes in rates as so many random and unpredictable phenomena, these models arise above all from the sphere of ‘superstition’ and ‘beliefs’, in the worst sense of the term. To listen to them, one would think there was hardly any difference between sorcery, prophecy, and chartism, since in short: “it works because people believe in it”. These are remarks that can only arouse the curiosity of the anthropologist, because they actually serve merely to recall epistemologica! controversies that depend on the rationality and the irrationality of observed practices and debates in various cultures. At the heart of these contradictory debates, it is precisely prophecy as a cultural mode of managing unforeseen events that has been the subject of multiple anthropological, historical, and epistemological studies which can, in a comparative perspective, clarify the structure and functioning of forecasting tools employed by the chartists in the context of financial speculation. (shrink)

This paper examines why fundamental freedoms are so unevenly distributed across the earth. Climato-economic theorizing proposes that humans adapt needs, stresses, and choices of goals, means, and outcomes to the livability of their habitat. The evolutionary process at work is one of collectively meeting climatic demands of cold winters or hot summers by using monetary resources. Freedom is expected to be lowest in poor populations threatened by demanding thermal climates, intermediate in populations comforted by undemanding temperate climates irrespective of (...) income per head, and highest in rich populations challenged by demanding thermal climates. This core hypothesis is supported with new survey data across 85 countries and 15 Chinese provinces and with a reinterpretative review of results of prior studies comprising 174 countries and the 50 states in the United States. Empirical support covers freedom from want, freedom from fear, freedom of expression and participation, freedom from discrimination, and freedom to develop and realize one's human potential. Applying the theory to projections of temperature and income for 104 countries by 2112 forecasts that (a) poor populations in Asia, perhaps except Afghans and Pakistanis, will move up the international ladder of freedom, (b) poor populations in Africa will lose, rather than gain, relative levels of freedom unless climate protection and poverty reduction prevent this from happening, and (c) several rich populations will be challenged to defend current levels of freedom against worsening climato-economic livability. (shrink)

Penguins jumping off a cliff, economic forecasters and financial advisors speculating against a currency, and farmers using traditional methods in India are all practising social learning. Such learning from the behavior of others may and does lead to herds, crashes, and booms. These issues have become, over the last ten years, an exciting field of research in theoretical and applied economics, finance, and in other social sciences. This book provides both an informal introduction and in-depth insights into the subject. (...) Each chapter is devoted to a separate issue: individuals learn from the observations of actions, the outcomes of these actions, and from what others say. They may delay or make an immediate decision; they may compete against others or gain from cooperation; they make decisions about investment, crop choices, and financial investments. The book highlights the similarities and the differences between the various cases. (shrink)

Among multiple legal challenges to the Patient Protection and Affordable Care Act (PPACA) is the premise that PPACA's “individual mandate” (requiring all individuals to obtain health insurance by 2014 or face civil penalties) is inviolate of Congress' interstate commerce powers because Congress lacks the power to regulate commercial “inactivity.” Several courts initially considering this argument have rejected it, but federal district courts in Virginia and Florida have concurred, leading to numerous appeals and prospective review of the United States Supreme Court. (...) Despite creative arguments, the dispositive constitutional question is not whether Congress' interstate commerce power extends to commercial inactivity. Rather, it is whether Congress may regulate individual decisions with significant economic ramifications in the interests of protecting and promoting the public's health. This article offers a counter-interpretation of the scope of Congress' interstate commerce power to regulate in furtherance of the public's health. (shrink)

Alongside other types of mass atrocities, genocide has received extensive scholarly, policy, and practitioner attention. Missing, however, is the contribution of economists to better understand and prevent such crimes. This edited collection by 41 accomplished scholars examines economic aspects of genocides, other mass atrocities, and their prevention. Chapters include numerous case studies, probing literature reviews, and completely novel work based on extraordinary country-specific datasets. Also included are chapters on the demographic, gendered, and economic class nature of genocide. Replete (...) with research- and policy-relevant findings, new insights are derived from behavioral economics, law and economics, political economy, macroeconomic modeling, microeconomics, development economics, industrial organization, identity economics, and other fields. Analytical approaches include constrained optimization theory, game theory, and sophisticated statistical work in data-mining, econometrics, and forecasting.A foremost finding of the book concerns atrocity architects' purposeful, strategic use of violence, often manipulating nonrational proclivities among ordinary people to sway their participation in mass murder. Relatively understudied in the literature, the book also analyzes the options of victims before, during, and after mass violence. Further, the book shows how well-intended prevention efforts can backfire and increase violence, how wrong post-genocide design can entrench vested interests to reinforce exclusion of vulnerable peoples, and how businesses can become complicit in genocide. In addition to the necessity of healthy opportunities in employment, education, and key sectors in prevention work, the book shows why new genocide prevention laws and institutions must be based on reformulated incentives that consider insights from law and economics, behavioral economics, and collective action economics. (shrink)

ArgumentThis paper is the first part of a two-part examination of computer modeling practice and philosophy. It discusses electrical engineer Jay Forrester's work on Industrial Dynamics, later called System Dynamics. Forrester developed Industrial Dynamics after being recruited to the newly-established School of Industrial Management at the Massachusetts Institute of Technology (MIT), which had been seeking a novel pedagogical program for management for five years before Forrester's arrival. We argue that Industrial Dynamics should be regarded in light of this institutional context. (...) Unlike economics, as well as operations research and management science (twin fields which were also gaining traction at that time), Industrial Dynamics was not meant to be applied by mathematicians and technical specialists in consultation with managers, but by managers themselves. This concern shifted the emphasis in modeling from the specialist act of analysis of a crucial problem to the managerial act of choosing which problems were crucial and developing effective policies around them. (shrink)

A probability forecast scored ex post using a probability scoring rule (e.g. Brier) is analogous to a risky financial security. With only superficial adaptation, the same economic logic by which securities are valued ex ante – in particular, portfolio theory and the capital asset pricing model (CAPM) – applies to the valuation of probability forecasts. Each available forecast of a given event is valued relative to each other and to the “market” (all available forecasts). A forecast is seen to (...) be more valuable the higher its expected score and the lower the covariance of its score with the market aggregate score. Forecasts that score highly in trials when others do poorly are appreciated more than those with equal success in “easy” trials where most forecasts score well. The CAPM defines economically rational (equilibrium) forecast prices at which forecasters can trade shares in each other’s ex post score – or associated monetary payoff – thereby balancing forecast risk against return and ultimately forming optimally hedged portfolios. Hedging this way offers risk averse forecasters an “honest” alternative to the ruse of reporting conservative probability assessments. (shrink)

Can modern economics adequately embrace ethical issues or does its theoretical apparatus prohibit such a relationship? In December 1994, social scientists from the fields of economics, philosophy, political science and anthropology attended a workshop to discuss the current state of the economics-ethics nexus by way of examining both past and contemporary practice. The proceedings of this conference presented a wide variety of attitudes and includes an examination of economics and ethics from an economist and a philosopher's perspective, in order to (...) assess the contemporary implications of the relationship, and in the late nineteenth century against the background of a long utilitarian tradition. This is a set of stimulating reflections by practitioners - including Chin Liew Ten, Bob Coats and Geoffrey Brennan - on the tricky associations between economics and ethics. (shrink)

Affective forecasting refers to the ability to predict future emotions, a skill that is essential to making decisions on a daily basis. Studies of the concept have determined that individuals are often inaccurate in making such affective forecasts. However, the mechanisms of these errors are not yet clear. In order to better understand why affective forecasting errors occur, this article seeks to trace the theoretical roots of this theory with a focus on its multidisciplinary history. The roots of (...) affective forecasting lie mainly in economics, with early claims positing that utility played a role in decision-making. Furthermore, the philosopher Jeremy Bentham’s descriptions of utilitarianism played a major role in our understanding of whether to define utility as a hedonic quality. The birth of behavioural economics resulted in a paradigm shift, introducing the concept of cognitive biases as influences on the accuracy of predicted utility. Daniel Gilbert and Timothy Wilson, the earliest researchers of affective forecasting errors, have proceeded with the concept of the accuracy of predicted affective utility to conduct experiments that seek to determine why our predictions of future affect are inaccurate and how such errors play a role in our decision-making. (shrink)

Philosophy and Economics An Introduction PETER KOSLOWSKI Philosophy and economics are both children of the same Greek spirit of rationalization of world ...

Simulation evidence obtained within a Bayesian model of price-setting in a betting market, where anonymous gamblers queue to bet against a risk-neutral bookmaker, suggests that a gambler who wants to maximize future profits should trade on the advice of the analyst cum probability forecaster who records the best probability score, rather than the highest trading profits, during the preceding observation period. In general, probability scoring rules, specifically the log score and better known “Brier” (quadratic) score, are found to have higher (...) probability of ranking rival analysts in predetermined “correct” order than either (i) the more usual method of counting categorical forecast errors (misclassifications), or (ii) an economic measure of forecasting success, described here as the “Kelly score” and defined as the trading profits accumulated by making log optimal bets (i.e. Kelly betting) against the market maker based on the probability forecasts of the analyst being assessed. This runs counter to the conventional wisdom that financial forecasts are more aptly evaluated in terms of their financial consequences than by an abstract non-monetary measure of statistical accuracy such as the number of misclassifications or a probability score. (shrink)

The research fieldwork dedicated to trend analysis and foresight/forecast scenarios building, represents an unusual raid in an area where economic and social sciences have invested many efforts. Nevertheless, the semiotic dimension of this subject is not sufficiently thorough; many issues are at stake:We are going to investigate this area of analysis, for its relevance in post-Greimassian studies, for its interface with social sciences, as well as for its relevance for the legitimacy of semiotics in contemporary discussions of innovation and (...) evolution. (shrink)

The connection between economics and ethics is as old as economics itself, and central to both disciplines. It is an issue that has recently attracted much interest from economists and philosophers. The connection is, in part, a result of the desire of economists to make policy prescriptions, which clearly require some normative criteria. More deeply, much economic theory is founded on the assumption of utility maximization, thereby creating an immediate connection between the foundations of economics and the philosophical literature (...) on utilitarianism and reasons for action. In fact, some influential contemporary approaches to ethics advocate decision-theoretic or game-theoretic foundations of some sort for moral principles, while several economic theorists are now prepared to take into account the ethical dimensions of rational decisions. As a result, it appears that economics and ethics are somehow inextricably linked through theories of rational decision-making. Most of us would probably find it disturbing to concede that there are contradictions between the prescriptions of rationality and the requirements of moral `rightness'. The essays included in the present volume provide a detailed analysis of the connections between ethics and economics as viewed from several different - sometimes conflicting - perspectives. This book, the outcome of a joint meeting of philosophers and economists, has three main themes: the validity of utilitarianism much used by economists, the notion of fairness and equity, and the coherence of the rationality postulate of economics. The book does not reach any final conclusions, but it greatly illuminates the exact areas of possible disagreement and indeed the open-ended nature of ethical reasoning. There is much that economists, and especially welfare economists, can learn from these papers - not least circumspection. (shrink)

This article examines the most controversial of the activities of the India Meteorological Department : long-term seasonal forecasting for the South Asian subcontinent. Under the pressure of recurrent famines, in 1886 the imperial IMD commenced annual issue of monsoon predictions several months in advance, focused on one variable: rainfall. This state service was new to global late nineteenth-century meteorology, attempted first and most rigorously in India. Successive IMD leaders adapted the forecast in light of scientific and infrastructural developments, continuously (...) revising the underlying methods of its production. All methods failed to achieve accurate prevision. Nevertheless, the imperatives of economic administration, empire and public demand compelled IMD scientists to continue annual publication of this unreliable product. This article contends that the seasonal forecast is best understood as an enduring ritual of good governance in a monsoonal environment. Through analysis of newspaper controversies, it suggests that although the seasonal forecast was the most compelling justification for the IMD's imperial and global importance, its limitations undercut popular trust in modern meteorology. Finally, this case illustrates the centrality of ‘tropical meteorology’ to the historical development of modern atmospheric science. (shrink)

The phenomenon of global warming suggests that today’s dominant economic paradigm is bumping up against physical and biological limits. As will likely become ever clearer in coming decades, endlessly growing populations, consumption and economic activity are incompatible with human happiness, the flourishing of other species, and maintaining the basic ecosystem services on which these depend. The world’s peoples need to shift to an economic paradigm focused on providing sufficient resources for a limited number of people, rather than (...) ever more resources for ever more people. For at least 2500 years, philosophers East and West, religious and secular, have claimed that wealth is not the key to happiness and that goodness is better than greatness. This talk argues that philosophers should redouble these efforts and join environmentalists in working to convince our societies to grow up and develop nobler, less materialistic, more sustainable goals and definitions of human flourishing as the necessary and the only alternative to trying to shoehorn a few more decades of economic growth into already overstressed ecological systems. (shrink)