On the window of opportunity for forecasting

[MacovL@aol.com]

What if the forecasts are kept within boundaries predicted by past events.
For example, past events demonstrate a stable limit cycle or even chaos. Then
forecasting is possible if limited by known boundaries and accuracy becomes a
relative term yet useful for decision making.(?)

A more direct question: Are there useful and simple techniques for applying
stochasticity to a parameter? I have so far only used the Random function?
Are there other, better ways?

Lou
From: MacovL@aol.com

["Jay W. Forrester"]

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The use of forecasting for guiding decisions is restrained by
considerations in the attached figure. Assume we know the past path of a
variable up to the present decision time. The immediate future is
determined by the "momentum" of the system, that is, by the slowness with
which conditions can change. The future is also affected by random events
that are not subject to being modeled in terms of specific time and
direction. Continuity, or momentum, keeps the economy from diverging
quickly from the present path. In the figure, forecasting can be done
within the forecast time horizon because behavior in that time zone is
mostly determined by past and present conditions, and can not be changed
abruptly by random events.

However, in the forecast time horizon, changes in decisions likewise can
produce little change. Changes take time. A changed decision can be
viewed as a random event the effect of which will be most influential
beyond the forecast time horizon. Using forecasting for controlling the
system is caught in a time trap. One can forecast within the forecast time
horizon, but momentum of the system will keep decisions based on the
forecast from being effective within the time frame for which the forecast
is valid. Decisions become effective in the action region beyond the
horizon of the forecast.

To exaggerate only a little, one can forecast in the time frame where one
can not act, and one can act in the time frame in which one can not
forecast.

The limits on forecasting future events suggest that one should instead
focus on forecasting how policies will change the character of system
behavior as discussed in the accompanying email.

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---------------------------------------------------------
Jay W. Forrester
Professor of Management, Emeritus
and Senior Lecturer, Sloan School
Massachusetts Institute of Technology
Room E60-389
Cambridge, MA 02139
tel: 617-253-1571
fax: 617-258-9405
From: "Jay W. Forrester" <jforestr@MIT.EDU>

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