"Obamacare's rollout will be great."
"Anthony Weiner will win."
"Life will be found on Mars."
These were among the worst predictions of 2013, Blake Hounshell decreed in Politico Magazine. Predictions are hard, especially about the future, goes the saying. But predictions are also easy and, more importantly, they are free—both to the reader (they're effortless to read) and to the prognosticator (outside of meteorology, there is no cost to being a relentlessly bad forecaster in journalism). But it's not just the fourth estate that's biased toward future forecasting. Government can't get enough of it, either.
Last week, the Bureau of Labor Statistics published its own opus on the future, predicting the next ten years in jobs. As you see below, the fastest-growing occupations are projected in health care and construction.
Every decade, the BLS makes these predictions, and every decade, the BLS is wrong. And that's okay. In being wrong, the Bureau tells an important story about the economy—and about predictions, in general. Here's the BLS's 2002 prediction of last year's jobs (2002 predictions in BLUE) compared to what actually happened (2012 reality in RED), via Danny Vinik.
In a word: whoops.
What did BLS get right? At least two things: the unstoppable growth in health-care jobs (which it expects to continue) and the steady growth in leisure and hospitality.
What did it miss? Everything else, in particular (a) the boom in mining, led by the natural-gas revolution, (b) the utter collapse of the publishing industry, and (c) the Great Recession, which wiped out half-a-decade of economic growth. BLS thought we'd create 20 million non-farm jobs last decade. We created about six million. That's a 13-million-job gap.
Essentially, the BLS failed to anticipate the real-world surprises, which is another way of saying it is not psychic. It extrapolated the recent past (health care was expanding, housing was booming, the economy was recovering from a mild recession), baked in global and demographic trends, and voila, put out a plausible projection of the next ten years. This is a perfectly sensible way to predict the future. But then the real world intervened.
This isn't supposed to be a post about how the BLS forecasting models are bad. It's supposed to be a post about how predicting the future is impossible, even though predictions play a starring role in discussions about finance and government.
Take, for example, the so-called "runaway" growth in health care costs. In 2010, conservative deficit hawks called for as much as $1 trillion in cuts to Medicare to prevent an imminent debt crisis. But between 2010 and 2013, CBO's projections of Medicare spending in the next decade fell by ... more than $1 trillion. As Amitabh Chandra, Jonathan Holmes, and Jonathan Skinner wrote in a new paper, the unforeseen slowdown in health-care cost growth wasn't just the result of the Great Recession. It also came from an increase in high-deductible insurance plans, state efforts to control Medicaid spending, and fewer new, expensive technologies.
As I wrote earlier this year, if all predictions about the future of government spending turn out to be true, it would make sense to treat 10-year forecasts as roadmaps rather than guesswork. But the real world is one where where the most exquisitely delicate change in hospital-costs inflation suddenly saves hundreds of billions of dollars and where factors intervene that fall outside the scope of the Excel sheets that paint these convincing pictures of the future.
You see folks on cable shows and op-ed pages worry about inflation scares, devalued dollars, debilitating health-care cost growth, and debt crises. These are things we think might happen, and we pay attention to these impressionistic projections to the exclusion of things like long-term unemployment and slow job creation—things that we know are actually happening right now.
There's no need to call for a ban on forecasts at the BLS, or in debt debates, or in end-of-year media reporting. Projections can be fun and informative. But to the extent that they consume the national discussion and drive policy, I'd like make a meta-forecast: Our appetite for predicting the future will always be greater than our capacity.