Title: The psychology of economic forecasting

Authors: Karl Wennberg, Bjorn Nykvist

Addresses: Center for Entrepreneurship and Business Creation, Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden. ' Stockholm Environmental Institute, P.O. Box 2142, SE-103 14 Stockholm, Sweden

Abstract: Is the imprecision of economic forecasts due to the judgements of biased decision makers? This study explores decision making among expert forecasters in Sweden using semistructured interviews. The results indicate that forecasters| decision processes are characterised by intuitive, as well as calculating reasoning, gradually adopting mental models and conflicting goals. This indicates that forecasters are better described as ecologically rational rather than biased decision makers. A consequence is that behavioural forecasting research would benefit from taking into account the specific decision-making environment in which forecasters operate.

Keywords: psychology; economic forecasting; behavioural decision making; ecological rationality; biased judgements; Sweden.

DOI: 10.1504/GBER.2007.013702

Global Business and Economics Review, 2007 Vol.9 No.2/3, pp.211 - 226

Published online: 22 May 2007 *

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