Why forecasts are needed

This book is concerned with forecasting. Forecasts are required for two basic reasons: the future is uncertain and the full impact of many decisions taken now is not felt until later. Consequently, accurate predictions of the future improve the efficiency of the decision-making process. For example, at the simplest level, in most countries weather forecasts are produced which are publicised by the media. These are of interest to the general public, farmers and travellers. If the weather was always the same from day to day, forecasts would not be produced. It is only because the weather changes that forecasting becomes relevant.

Most decisions are made with a view to influencing where one will be in the future: a firm builds a new factory to meet expected future demand for its product; workers decide to save part of their incomes in order to pay for holidays later in the year or to make provision for their retirement; a stock market investor buys some shares now in the hope of receiving a worthwhile return, in dividends and/or capital gains, in the future; a banker buys foreign currency on the forward market to reduce risks of losses from movements in exchange rates. All these activities require some idea or forecast of the future behaviour of key environmental variables so that an assessment can be made of what will happen if nothing is done now, and what is likely to happen if certain steps are taken.