3.3.5.2 Unpredictable External Events
There are unpredictable external events which affect an economy, including technical innovations, geopolitical events and extreme weather.
All economic forecasting depends upon assumptions about the future, but the number of unpredictable factors (and the enormous number and variety of transactions) make precise forecasts impossible:
● Innovation can lead to new products and completely new markets.
● Geopolitical events cannot always be predicted with certainty. For example, Britain’s decision to leave the EU in a ‘Brexit’ was not forecast in the opinion polls or by most commentators – as reported in Uptin Saiid’s article, Here’s why the majority of Brexit polls were wrong; he wrote that:
“The U.K. EU referendum vote prompted a global massive market selloff as markets were priced in expecting a remain outcome. More than two trillion dollars were wiped out globally, the largest drop on record.”
● Wars are unpredictable external events. Russia’s invasion of Ukraine affected fuel prices, for example.
● The weather has an economic impact. A prolonged drought can increase food prices for example.
Such factors are compounded by the complexity of international trade agreements.
This page is intended to form part of Edition 4 of the Patterns of Power series of books. An archived copy of it is held at https://www.patternsofpower.org/edition04/3352.htm.