PPA 691 Seminar in Public

Policy Analysis
Lecture 5 Forecasting Policy
Futures

Forecasting in Policy Analysis

Forecasting is a procedure for producing factual

information about future states of society on the

basis of prior information about policy problems.
Forms of forecasting.
Projection.
A forecast based on the extrapolation of current and historical
trends into the future.

Prediction.
A forecast based on explicit theoretical assumptions.

Conjecture.
A forecast based on informed or expert judgments about future
states of society.

Forecasting in Policy Analysis

Aims of forecasting.
Forecasts provide information about future
changes in policies and their consequences.
Forecasting permits greater control through
understanding past policies and their
consequences, implying that the future is
determined by the past.
Forecasting also enables us to shape the future
in an active manner, irrespective of what has
happened in the past.

Forecasting in Policy Analysis

Limitations of forecasting.
Forecast accuracy.
Recent simple forecasting models have had huge errors in recent
years (as much as 50%) in econometric forecasting.

Comparative yield.
Both simple and complex theoretical models have been no more
accurate than simple extrapolative models and informed expert
judgment.

Context.
Institutional (nonprofit more accurate than business and government).
Temporal (long-term less accurate than short-term).
Historical (modern complexity reduces accuracy).

Assumption drag.

Forecasting in Policy Analysis

Types of futures.
Potential futures.
Future societal states that may occur.

Plausible futures.
Future states that, on the basis of assumptions about causation
in nature and society, are believed to be likely if policymakers
do not intervene to redirect the course of events.

Normative futures.
Potential and plausible futures which are consistent with an
analysts conception of future needs, values, and opportunities.
The specification of normative futures narrows the range of
potential and plausible futures, thus linking forecasts to
specific goals and objectives.

Forecasting in Policy Analysis

Table 1. Contrast between goals and objectives
CHARACTERISTIC

GOALS

OBJECTIVES

Broadly stated (. . . To
upgrade the quality of
health care)

Concrete (. . . Increase
the number of physicians
by 10 percent)

Definition of terms

Formal ( . . . The quality

of health care refers to
the accessibility of
medical services)

Operational ( . . . The
quality of health care
refers to the number of
physicians per 100,000
persons . . .)

Time period

Unspecified ( . . . In the
future)

Specified ( . . . In the
period 2006-2016)

Nonquantitative
(adequate health care
insurance)

Frequently quantitative
( . . . The number persons
covered per 1,000
persons)

Broadly defined ( . . .
People in need of care)

Specifically defined ( . . .
Families with incomes
below $19,000)

Specification of purposes

Measurement procedure

Treatment of target groups

Forecasting in Policy Analysis

Sources of goals, objectives, and alternatives.
Authority.
Insight.
Method.
Scientific theories.
Motivation.
Parallel case.
Analogy.
Ethical systems.

Approaches to Forecasting
Approaches to forecasting.
Decide what to forecast, or determine the object
of the forecast.
Decide how to make the forecast, or select one
or more bases for the forecast.
Choose techniques that are most appropriate for
the object and base selected.

Approaches to Forecasting
Objects.
The object of a forecast is the point of reference
of a projection, prediction, or conjecture.
Objects of forecasting.

Consequences of existing policies.

Consequences of new policies.
Contents of new policies.
Behavior of policy stakeholders.

Approaches to Forecasting
Bases.
The basis of a forecast is the set of assumptions
or data used to establish the plausibility of
estimates of consequences of existing or new
policies, the content of new policies, or the
behavior of policy stakeholders.

Approaches to Forecasting
Bases (contd.).
Bases for forecasts.
Trend extrapolation (projection).
The extension into the future of trends observed in the past.
Based on inductive logic.
Theoretical assumptions (prediction).
Systematically structured and empirically testable sets of laws
or propositions that make predictions about the occurrence of
one event based on another.
Based on deductive logic.
Informed judgments (conjecture).
Knowledge based on experience and insight, rather than
inductive or deductive reasoning.
Based on retroductive logic.

Methods and Techniques of

Forecasting
APPROACH
BASIS
APPROPRIATE

PRODUCT

TECHNIQUES
Extrapolative
forecasting

Trend extrapolation

Classical time-series analysis

Linear trend estimation
Exponential weighting
Data transformation
Catastrophe methodology

Projections

Theoretical forecasting

Theory

Theory mapping
Causal modeling
Regression analysis
Point and interval estimation
Correlational analysis

Predictions

Judgmental forecasting

Informed judgment

Conventional Delphi
Policy Delphi
Cross-impact analysis
Feasibility assessment

Conjectures

Methods and Techniques of

Forecasting
Classical time-series analysis.
Time series are made up four components.

Secular trend.
Seasonal variation.
Cyclical fluctuations.
Irregular movements.

Linear trend estimation.

Nonlinear time series.

Oscillations.
Cycles.
Growth curves.
Decline curves.
Catastrophes.

Time Series Example

Methods and Techniques of

Forecasting
Linear forecasting example.
Major disaster data set, 1953-2007.
Disaster Declarations = 9.851 + .803 * years; R 2 = .592.
Where 1953 is set to zero.

1953 1971: Disaster Declarations = 13.516 + 0.340 * years;

R2 = .103.
1972 - 1988: Disaster Declarations = 71.419 - 1.551 * years;
R2 = .497.
1989 - 2007: Disaster Declarations = -9.368 + 1.281* years; R 2
= .329.
Projection for 2008 (55) using whole data set: 54.0.
Projection for 2008 (55) using post-1988 set: 61.1.

Methods and Techniques of

Forecasting
Theoretical forecasting.
Theory mapping.

Types of causal arguments.

Convergent arguments.
Divergent arguments.
Serial arguments.
Cyclic arguments.
Procedures for uncovering the structure of an argument.
Separate and number each assumption.
Underline the words that indicate claims (therefore, thus,
hence).
When specific words are omitted, but implied, supply the appropriate
logical indicators in brackets.
Arrange number assumptions and claims in an arrow diagram that
illustrates the causal argument or theory.

Methods and Techniques of

Forecasting
Example for theory mapping from Daniels

and Clark-Daniels.
http://www.csub.edu/~rdaniels/Pages%20from
%20DanielsClarkDanielsIJMED.pdf
.

Methods and Techniques of

Forecasting

Causal modeling and regression analysis.

The creation of theoretical models on the basis
of previous research and logic.
The testing of these models with causal analysis
methods such as path analysis and structural
equation modeling.
Example:
http://www.csub.edu/~rdaniels/Model%20of%20Pre
sidential%20Disaster%20Decision-Making.xls
.

Methods and Techniques of

Forecasting
Judgmental forecasting.
Delphi technique.
Principles.

Selective anonymity.
Iteration.
Informed multiple advocacy.
Polarized statistical response.
Structured conflict.
Computer conferencing.

Methods and Techniques of

Forecasting
Judgmental forecasting (contd.).
Delphi technique (contd.).

Steps.
Issue specification.
Selection of advocates.
Questionnaire design.
Forecasting items (probability of occurrence).
Issue items (ranking of importance).
Goal items (desirability and feasibility).
Option items (alternatives).
Analysis of first-round results.
Development of subsequent questionnaires.
Organization of group meetings.
Preparation of final report.

Methods and Techniques of

Forecasting
Delphi article.
http://www.csub.edu/~rdaniels/ch3b1.pdf.