Economic and Psychological Theories of Forecast Bias and Learning: Evidence from U.S. Business Managers' Forecasts

Economists and psychologists have each puzzled over the nature of decision making and the formation of expectations. Mainstream economists currently base their theory of expectation formation on the assumption of rationality Rationality implies unbiased forecasts and learning from past mistakes. Psychologists, however, see people as guided by processes other than the assumption of rationality. These processes often result in biased predictions and a failure to learn from past mistakes. This paper uses Conference Board data to examine the forecasts of business managers for evidence of bias and learning. Our analysis reveals systematically biased decision making by business executes in nearly every industry studied. The managers in the sample proved to be overly optimistic. In addition we find evidence of the learning that economists predict. However, this learning is of little consequence to the accuracy of managerial forecasts. These outcomes are analyzed using both the economics and cognitive psychology literature.Expectation; Forecast; Forecasts; Learning; Prediction; Rationality

Midwest Macro Conference

Abstract This paper takes a fresh look into Africa's growth experience by using the Bayesian Model Averaging (BMA) methodology. BMA enables us to consider a large number of potential explanatory variables and sort out which of these variable can e¤ectively explain Africa's growth experience. Posterior coe¢ cient estimates reveal that key engines of growth in Africa are substantially di¤erent from those in the rest of the world. More precisely, it is shown that mining, primary exports and initial primary education exerted di¤erential e¤ect on African growth. These results are examined in relation to the existing literature. JEL Classi…cation: O40, O47. Keywords: Africa, growth determinants, model uncertainty, Bayesian Model Averaging (BMA). We thank the editor Steven Durlauf and an anonymous referee for valuable comments and suggestions. We also thank seminar participants a

75 Years of Development Research Conference

Abstract This paper takes a fresh look into Africa's dismal growth performance by using the Bayesian Model Averaging (BMA) methodology. We estimate the posterior probability of a large number of potential explanatory variables and cross-country regression models. In large, we Þnd that determinants of growth in Africa are strikingly different from the rest of the world. In addition, growth regression models that best explain global growth do poorly in explaining African growth, and conversely

BMQ

BMQ: Boston Medical Quarterly was published from 1950-1966 by the Boston University School of Medicine and the Massachusetts Memorial Hospitals

How does neopatrimonialism affect the African state? The case of tax collection in Zambia

Following the neopatrimonialism paradigm, it can be hypothesised that in African states informal politics of the rulers infringe on the collection of taxes and in turn reduce state revenue. This article tests this proposition for the case of Zambia. Neopatrimonial continuity in the country is evidenced by three factors : the concentration of political power, the award of personal favours, and the misuse of state resources. Despite this continuity, the revenue performance increased considerably with the creation of the semi-autonomous Zambia Revenue Authority. Donor pressure has been the most important intervening variable accounting for this improvement. Yet, strengthening the collection of central state revenue has been consistent with a neopatrimonial rationale, and may even have fed neopatrimonialism overall, by providing increased resources for particularistic expenditure