How to Forecast: A Guide for Business

Originally published in 2002 in The Business Economist, volume 33, issue 1. The original publication day is unrecorded.

James Morrell, Gower Publishing Limited, 2001, xxi + 201 pages, £55.00.

From The Business Economist, volume 33, issue 1 (2002).

Jimmy Morrell was unquestionably the doyen of British forecasters over the past few decades, until his death in September 2000. He started forecasting in 1955, when computational aids were virtually unavailable. But, although Jimmy’s style was deceptively old-fashioned, he kept up with the rapid developments in the field and, over the years, consolidated his position as the leading practitioner of his craft. He was shrewd, had vast knowledge and, while maintaining the highest professional standards, never bamboozled his audiences with technical jargon.

Jimmy’s main concern was always the practical usage of the forecast. Unlike some economists, he was never worried if (to paraphrase a well-known ‘economists joke’) “things worked out in practice but not in theory”. He firmly believed that forecasting, in spite of the inherent risks, recurring errors, and the need for regular revisions and updates, remains a vital tool in making decisions. The book dismisses the fashionable tendency of some ‘practical businessmen’ to claim that economic forecasts are an expensive distraction.

Although relatively brief, the book covers a very wide range of topics in a thorough and methodical way. Part I, which concentrates on factors that are outside the firm’s control, examines in detail the usual macro variables, eg GDP and its components, monetary & fiscal policy, the exchange rate, and energy and other commodity prices. However, Jimmy goes well beyond this conventional analysis, and also highlights the importance of factors that many economists often disregard at their peril: demographic and social trends, lifestyles, climate changes, and trends in technology, communications, and education. Part II of the book focuses on variables that are under the firm’s control (eg the product range, the use of labour & capital, marketing, strategy and business objectives) and shows their interaction with the more general factors covered in Part I.

I am not sure whether, given its title, this book will appeal to the ‘educated layman’. But those who read it will gain a better understanding of, and perhaps develop a more sympathetic attitude towards, economists. Be that as it may, I believe the book should be widely read by professional Business Economists. The experienced practitioner will find here an excellent source of reference and, even those who believe that they have nothing more to learn will gain some useful tips. However, young forecasters, at the early stage of their career, will undoubtedly derive the greatest benefit from studying this book and referring to it as they gain experience. At the very least, they will then avoid the embarrassment of coming to a job in the belief that they can solve the world’s problems, only to find that they have no idea how to start tackling the mundane problems of their employer.

David Kern Consulting Economist, Kern Consulting

Archived source: 2002-05-09 website capture.