Economic forecasting is not having a good time. Inflation has consistently come in higher than expected and the governor of the Bank of England has admitted “there are big lessons about how we operate”. MPs and others have been highly critical and an external review of the Bank’s forecasting approach has been commissioned.
But it’s not just economists in the forecasting business. Indeed, new research takes the “rubbish forecasts” heat off them by focusing instead on rather more famous forecasters: meteorologists. Predictions of sun or rain, rather than GDP or inflation, are understandably much more important parts of our daily lives.
The headline finding is that inaccurate weather forecasts cost lives (or more positively, better forecasts would reduce mortality rates). Why? Because extreme heat or cold raises mortality levels, and we manage that by changing our behaviour when we see it coming. We all know weather forecasts make us change our plans (during a heatwave, you don’t book a hike) or what we wear, and this research also shows weather forecasts affect how we use our time and energy.
The authors show that forecast errors are particularly a problem when it’s very hot: extreme heat is even more deadly when we are not expecting it. To provide a sense of what’s at stake, they show that reducing forecast errors by 50% would save 2,200 lives a year in the US. And they estimate the public would be happy to pay $2bn (£1.56bn) a year for that benefit, which rises to $3bn given the growth in extreme weather induced by climate change.
So better forecasts are well worth aiming for. But obviously it’s easier to say better forecasts would be valuable than to actually make them happen. Just ask the Bank of England.
• Torsten Bell is chief executive of the Resolution Foundation. Read more at resolutionfoundation.org
