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Forecasting the future

Crystal ball
More Or Less
Friday, 2 January 2009
BBC Radio 4, 1330 GMT

2008 contained so many surprises that any self-respecting forecaster might want to take care before venturing a confident prognostication.

So are expert forecasts ever any good?

Tim speaks to Philip Tetlock, a professor of psychology in the University of California, Berkeley and author of Expert Political Judgement: How Good Is It? How Do We Know .

Professional forecasters, according to Professor Tetlock, are only marginally better than monkeys at predicting the future.

More maths of the credit crunch

Paul Wilmott
Financial maths expert Paul Wilmott

Financial mathematics guru Paul Wilmott continues with his series explaining how mathematical blunders contributed to the credit crunch.

Financial traders are taught that the way to maximise profit and minimise risk is to diversify.

So why did so many end up doing the same trades? The answer, according to Paul, might lie in the maths of the bonus system.

The Lake Wobegon Effect

Why do most parents think their child is in the top 20% for academic ability? Perhaps it is the same reason that most drivers think they are in the top 20% for safety.

Ruth Alexander investigates the power of the "above average effect", our tendency to overestimate our relative performance when it comes to desirable qualities and skills.

It is also known as the Lake Wobegon effect after the fictional community "where all the women are strong, all the men are good looking and all the children are above average".

What is an average wage?

Paper money and wage envelope
What's the most appropriate measure of average wages?

Listener Bill MacDonald has heard the average wage in the UK described as around £24,000.

He thought that seemed a bit high and asked us to find out how it is calculated and whether it fairly reflects typical earnings.

Our reporter Oliver Hawkins explains the importance of selecting the most appropriate measure of the average.

Brain teaser

Tim asked:

A number of bankers are having dinner and start discussing their bonuses.

They want to calculate the average bonus but they are too embarrassed to disclose their own individual bonuses.

How can they determine the average bonus of their group?

They do not have a computer or even a pen and paper to take notes.


The answer is:

The first banker thinks of a random number, which he keeps to himself.

Then he adds his bonus to the random number and whispers the result to the banker next to him.

The second banker adds his bonus and then whispers the running total to the next banker.

The total accumulates all round the table until it comes back round to the first banker.

He subtracts the random number he first thought of and is left with the total of all the bonuses, from which he can easily calculate the average bonus - the mean, of course, not the median.

And none of the bankers knows what any of the individual bonuses are.

More on the Strictly Come Dancing Scoring System

Following our item on 19th December on the maths of the Strictly Come Dancing scoring fiasco, several listeners wrote in to say that the problem would have been solved if the couple who came joint first were awarded 2.5 points each rather than 3 marks each.

Is this correct?

Yes and no. But mostly no. That point scheme would have allowed the public vote to put Tom and Camilla into an outright second place instead of tying for second.

But these couples were all competing for first place; second place was no use at all because it would still have meant competing in the dance off.

If 2.5 points had been awarded to the couples tied in first after the judges' awards, Tom and Camilla would have needed to beat both of them by 2 points to win and by 1.5 point to draw.

This would not have allowed viewers participating in the telephone vote to rescue Tom and Camilla from last place.

See our reporter Oliver Hawkins explaining the Maths of Strictly.

BBC Radio 4's More or Less is broadcast on Friday, 2 January at 1330 GMT and repeated on Sunday, 4 January at 2000 GMT.

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SEE ALSO
Darling 'to lower 2008 forecasts'
05 Oct 07 |  Business
IMF cuts economic growth forecast
06 Nov 08 |  Business
Below average wages for residents
03 Feb 08 |  Staffordshire

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