The Ultimate Foundation of Economic Science

In forecasting what may or will happen in the future, man can either be right or mistaken. But his anticipation of future events cannot influence the course of nature. Whatever man may expect, nature will go its own way unaffected by any human expectations, desires, wishes, and hopes.

It is different in the sphere in which human action can operate. Forecasting may prove mistaken if it induces men to proceed successfully in a way that is designed to avoid the happening of the forecast events. What impels people to listen to the opinions of soothsayers or to consult with them is frequently the desire to avoid the emergence of undesirable events that, according to these prophecies, the future has in store for them. If, on the other hand, what the oracle promised them agreed with their wishes, they could react to the prophecy in two ways. Trusting to the oracle, they could either become indolent and neglect doing what had to be done in order to bring about the end forecast. Or they could, full of confidence, double their effort to attain the goal desired. In all such cases the content of the prophecy had the power to divert the course of affairs from the lines that it would have pursued in the absence of an allegedly authoritative forecast.

We may illustrate the issue by referring to business forecasting. If people are told in May that the boom going on will continue for several months and will not end in a crash before December, they will try to sell as soon as possible, at any rate before December. Then the boom will come to an end before the day indicated by the prediction.