Prediction bias

“Predictions are hard, especially about the future.” Often attributed to Yoga Berra, it appears that the original author is unknown. ( Nonetheless, this statement is clearly true.

This graph of world GDP growth contains 42 predictions, almost all too high. This consistent prediction bias does not happen without incentives. The outcome is so consistent that its presenters must believe that optimism is more important than accuracy.

The graph is drawn to show that the 5 year predictions are all 4.5+, when the reality is usually about 3.5. In some cases even the one year predictions are significantly high.

Another way to look at the data is to observe the predictions that are made in any one year. That is to read the graph vertically rather than following the lines. This is another way to see that the predictions for farther in the future are more optimistic.

Including predictions and actuals for years before 2011 would be interesting, even if the graph still begins with 2006. Similarly it would be interesting to see if predictions for years beyond 2017 are still so optimistic.

Source: The predictions were developed by the International Monetary Fund (IMF) and published in their semi-annual World Economic Outlook.