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The limits of forecasting methods in anticipating rare events
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Goodwin, Paul and Wright, George (2010) The limits of forecasting methods in anticipating rare events. Technological Forecasting and Social Change, 77 (3). pp. 355-368. doi:10.1016/j.techfore.2009.10.008
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Official URL: http://dx.doi.org/10.1016/j.techfore.2009.10.008
Abstract
In this paper we review methods that aim to aid the anticipation of rare, high-impact, events. We evaluate these methods according to their ability to yield well-calibrated probabilities or point forecasts for such events. We first identify six factors that can lead to poor calibration and then examine how successful the methods are in mitigating these factors. We demonstrate that all the extant forecasting methods — including the use of expert judgment, statistical forecasting, Delphi and prediction markets — contain fundamental weaknesses. We contrast these methods with a non-forecasting method that is intended to aid planning for the future — scenario planning. We conclude that all the methods are problematic for aiding the anticipation of rare events and that the only remedies are to either (i) to provide protection for the organization against the occurrence of negatively-valenced events whilst allowing the organization to benefit from the occurrence of positively-valenced events, or (ii) to provide conditions to challenge one's own thinking — and hence improve anticipation. We outline how components of devil's advocacy and dialectical inquiry can be combined with Delphi and scenario planning to enhance anticipation of rare events.
| Item Type: | Journal Article | ||||
|---|---|---|---|---|---|
| Subjects: | H Social Sciences > HD Industries. Land use. Labor | ||||
| Divisions: | Faculty of Social Sciences > Warwick Business School > Operational Research & Management Sciences Faculty of Social Sciences > Warwick Business School |
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| Journal or Publication Title: | Technological Forecasting and Social Change | ||||
| Publisher: | Elsevier Science BV | ||||
| ISSN: | 0040-1625 | ||||
| Official Date: | March 2010 | ||||
| Dates: |
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| Volume: | 77 | ||||
| Number: | 3 | ||||
| Page Range: | pp. 355-368 | ||||
| DOI: | 10.1016/j.techfore.2009.10.008 | ||||
| Status: | Peer Reviewed | ||||
| Publication Status: | Published | ||||
| Access rights to Published version: | Restricted or Subscription Access |
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