Bad Projections and the Presidential Debate

I was reading an article about ancestry.com and I came across this quote, “genealogy is a demographic projected to grow 36% by 2020.”  My first reaction was to laugh at their attempt to predict this sort of thing that far into the future, and as an economics major and a statistics geek, their estimate struck me as having little validity.  Since this article was found in a serious, reputable, finance-centric magazine, it was a little concerning to me.

I mean, how can you predict peoples choices about a minor preferences(such as how they spend a small portion of their free time and money) 8 years into the future?   The simple answer is that you can’t, because there are so many factors that contribute to the growth of an internet business, and so many major influences that will affect it over the coming 8 years.  Technology improves so quickly and consumer preferences and choices change so dramatically that predicting that far into the future is a fools errand.  You can surely make such a prediction, but with numerous unpredictable large (and many small too) events that massively affect the outcome, prediction is pointless.

For example, if you took a presidential poll for the 2020 election, what point would it serve?   Nassim Taleb wrote in Black Swan about how people underestimate the frequency of large influential events.  It is impossible this industry, along with many others, ignore these possibilities.   Perhaps they don’t want to look silly by including how confident they are that a particular prediction or graph will follow form.

With the first presidential debate tonight, you are going to begin hearing even more about the budget and the economy and future projections.  Most of what you hear will be rubbish.  Politicians promise that great things will happen in the future.  They might as well, most of the difficult cuts take place after they are long gone and the results occur when they are not responsible for them.  In addition, their scenarios assume that things will occur in a way that history has shown they are unlikely to do so.

For example, the Democrats assume that they will be able to raise taxes and cap emissions at will and that the Republicans accept their proposals, which recent history has shown to not be the case.  The Republicans are equally as bad in assuming that their trickle down economic theory that advocates tax cuts for the rich will work, without considering the slowdown in the economy from reduction of government jobs.  These things are for someone else to consider, and be responsible for, so that they don’t get their graphs dirty(or wrong).

The candidates job is to get elected and they are willing to say anything to do that, but that does not mean we have to believe them.  So tonight, when you hear Obama or Romney say that their plan will save $X billion dollars by 2030 you should be laughing(and crying too), because it is so disingenuous.

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