#7 Macro Forecasting

Macro forecasting involves predicting and analyzing various economic indicators such as gross domestic product (GDP), inflation, interest rates, and employment, among others. It aims to provide a comprehensive outlook for the overall economic performance of a country or the global economy. The accuracy of macro forecasts can be impacted by various internal and external factors, including changes in government policies, geopolitical tensions, and technological advancements. Despite its limitations, macro forecasting remains an essential tool for businesses, governments, and individuals to plan and make informed decisions.

Forecasters are not dishonest, but rather bright and educated individuals who believe they are doing something valuable. However, self-interest and self-justification lead them to persist in their methods even when faced with evidence to the contrary. They may attribute unsuccessful forecasts to unexpected events, but the question remains:

Since it's impossible to know the future, the proper objective for investors is to make the best decisions possible in its absence. This involves focusing on areas where a knowledge advantage can be gained, such as companies, industries, and securities, and recognizing the difference between forecasting the future and understanding the present.

The more intriguing question is why forecasters persist in their work despite knowing its limitations. 

There is a professional motive to maintain the illusion that economics is a science through sophisticated models, which grant prestige, status, and influence. Furthermore, the perceived objectivity of "economic science" provides unwavering ideological protection against criticism that focuses on power, inequality, and politics.

Forecasts are essential for decision-making and planning, not because they are always accurate, but because they provide a story about the past and what it suggests for the future. The story can be refined with different scenarios and adjusted as events unfold. A well-constructed forecast with a solid story is what makes it valuable, and it is unhelpful to dismiss the effort of forecasters. Forecasting is a necessary tool.