Wednesday, January 28, 2015

Nothing to Apologize For: The Blizzard that Didn’t Hit NYC

Nothing to Apologize For:  The Blizzard that Didn’t Hit NYC

From the headlines in the New York Post to commenters on the New York Times website, the conclusion is clear:  meteorologists blew their forecast.  And, bowing to public pressure, many commercial weather forecasters are apologizing to New Yorkers.  In fact, most of the comments and analysis are wrong.  The National Weather Service nailed this forecast about as accurately as science will allow.  True, the storm didn’t take dead aim at New York City and Westchester County.  However, the meteorologists correctly predicted that a low-pressure system cruising across the upper Midwest would merge with another low-pressure system that had yet to form in the Atlantic Ocean and then barrel up the east coast.  As it turned out the storm track was 50 miles or so further east than expected.

Governor Cuomo and Mayor DiBlasio acted appropriately, and both the forecast and the actual storm vindicate their decision.  The governor and the mayor did what former Governor Blanco of Louisiana and former-Mayor Nagin of New Orleans failed to do: they took decisive action based on science to protect their citizens from a potential dangerous storm.  I know shutting down the subway and highways is a massive inconvenience.  However, modern meteorology is accurate enough to warrant taking public action.  I suppose we could adopt the policy of only taking action when a forecast turns out to be accurate, even though that would be absurd.

There’s an investment lesson in all of this.  Money managers and economists have a far poorer track record in making forecasts than weather forecasters.  While weather systems are complex, they are more amenable to science and modeling than economies or financial markets.  Nonetheless, financial experts are continually plying us with forecasts that are wrong more often than they are right.  For some reason, we’re inclined to deride weather forecasters and even ignore their prognostications after one of their predictions fails to be entirely accurate.  When the next blizzard warnings goes up in New York City, a lot of people will probably ignore the warning.  Even though financial experts make incorrect predictions on a daily basis, we still seek their advice and keep our money under their care.  Go figure.

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