Which Dreams Come True? Endogeneity, Industry Structure and Forecasting Accuracy

Forecasts are plentiful. Accurate long-range forecasts are rare. But some forecasts are more accurate than others are and a few are very accurate. In this paper, the authors first explore the case of Moore's Law, a forecast that has proven quite accurate for almost 40 years. They illustrate how expectations that Moore's Law will continue to be accurate actually make it accurate. Based on the insights of this case, they hypothesize that two factors facilitate such self-fulfilling forecasts and so make accuracy more possible. They test these hypotheses on a set of 3142 forecasts about US manufacturing industries during the 1970s. They find that high industry concentration and high control over the predicted variable tend to increase the accuracy of forecasts.