Forecasting is hard because it’s easy to skip the question, “And then what?”
Saying, “higher gas prices will cause people to drive less,” seems logical.
But then what?
Well, people have to drive, so maybe they’ll look for more fuel-efficient vehicles. They’ll complain to politicians, who will offer tax breaks to buy those vehicles. Oil company CEOs are hauled before Congress; OPEC is asked to drill more. Energy entrepreneurs innovate. And the oil industry knows two speeds: boom and bust. So they’ll probably pump too much. Then prices fall, all while people own more efficient vehicles. Then maybe the suburbs become more popular – and people end up driving even more than before.
So who knows.
The point is that every event creates its own offspring, which impact the world in their own special ways.
Forecasting, “If this happens, then that will happen,” rarely works, because this event gives rise to another trend, which incentivizes a different behavior, which sparks a new industry, which lobbies against this, which can cancel that, and so on endlessly.
To see how powerful these chain reactions can be, look at history, where it’s easy to skip the question, “And why is that?”
Take the question, “Why are student loans so high?”
Well, in part because millions of people ran to college when job prospects were dim in the mid-2000s.
Why were job prospects dim?
Well, there was a financial crisis in 2008.
Well, there was a housing bubble.