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Climatic Change

, Volume 104, Issue 3–4, pp 473–479 | Cite as

Is accurate forecasting of economic systems possible?

An editorial comment
  • Irene Scher
  • Jonathan G. Koomey
Article

Abstract

Structural constancy, both across time and across variable conditions, is a necessary precondition for accurate forecasting. Physical systems exhibit structural constancy, but economic and social systems generally do not. In this paper we examine the effects of policy, technology, and price volatility in commodity markets on the relationship between soybean oil and petroleum prices. An early Energy Information Administration (EIA) forecast of soy-based biodiesel price projected a simple relationship between soybean oil demand and price into the future—a relationship that has little explanatory power over the recent price volatility in oilseed markets. We propose that structural inconstancy and new trading behavior better explain price movements in soybean oil, and we further argue that forecasters must invent new ways of addressing the fundamental epistemological challenge of structural inconstancy in economic and social systems.

Keywords

Gross Domestic Product Commodity Market Energy Information Administration Energy Information Administration Trading Behavior 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer Science+Business Media B.V. 2010

Authors and Affiliations

  1. 1.Yale University School of Forestry and Environmental StudiesNew HavenUSA
  2. 2.Stanford UniversityOaklandUSA

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