Consensus Forecasting

Collecting ideas for my 2011 strategy, I came to the concept of "pooled forecast". The wiki says that pooled forescasts are more accurate than individual "best" forecasts. The advantage seems to come from "diversification". (I have to study more that concept.)

...Even if one method is identified as the best, combining is still worthwhile if other methods can make some positive contribution to the forecast accuracy. Moreover, many factors can affect the independent forecast and these, along with any additional useful information, might be captured by using the consensus approach. Another argument in favour of this method is that individual forecasts may be subject to numerous behavioural bias, but these can be minimised by combining independent forecasts together. Hence, combining is seen as helping to improve forecast accuracy by reducing the forecast errors of individual forecasts. Furthermore, averaging forecasts is likely to be more useful when the data and the forecasting techniques that the component forecasts are drawn from differ substantially.

Within the framework of consensus forecasting technology, there is a place for the Oracle of Delphi. The Oracle went by the name of Pythia, as she was embodiment of the Pythian cult, based on the snake Python, son of Mother Earth. The Oracle would sit on a tripod over a fissure in the earth and bathed in rising vapors (of cloroform, it appears), go into a trance from which she could advise and warn. This kylix pictures Pythia peering into her bowl while Aegeas, King of Athens, asks about a heir. She gave him the cryptic advice: "Do not loosen the bulging mouth of the wineskin until you have reached the heights of Athens." Aegeas eventually celebrated his honeymoon in a drunken state, from which union luckless Theseus was born.

Israeli businessmen consult rabbis before embarking in risky enterprises. Apparently, it makes business sense to mix the economist's forecasts with the kabbalist's insight. Pic.: The Roentgen.