Forecasting is, as we observed in last week's briefing, a perilous business. To stand a chance of being right about the future you need to understand where you are now.

So it makes sense to pay attention to what the latest data and news are saying. Certainly economists and journalists pore over every new piece of data looking for signs of where the economy is heading. 

The emergence of 24-hour financial markets and media has fuelled this industry, creating an insatiable appetite for opinions and news.

In an age of abundant, cheap communication there is a risk of over-interpreting every piece of information and extrapolating recent events into the future. Psychologists call it the recency bias.

Investors do it when they assume that a share that has risen in price will carry on rising. The recency bias also helps drive booms in house prices. 

More generally most of us are drawn to what is new. I cannot help feeling that the latest incoming email is somehow more important than an unread one from yesterday. At the end of the week I get through the gathered newspapers on my desk by scanning the latest ones and discarding the older ones. I rather assume that today's news is more important than yesterday's.

When it comes to economics there is an additional risk in being overly focussed on the latest numbers. A lot of economic data tends to be choppy, buffeted by seasonal or random movements. It makes no sense to attach significance to every such move. Worse, many of the official economic numbers are often subject to large revisions, sometimes years after the initial release. Thus the UK's "double dip" recession of 2011-12 was revised away 18 months later as the initial estimate of a contraction in activity was turned into an increase. 

So while we need to understand what is happening now, how do we avoid placing too much emphasis on the latest news and trends?

One obvious discipline is to make assessments based on a broad range of information.

It helps too to take a long view and to have people around who have  experienced a few ups and downs of the cycle. Memory provides prospective. One of the great correctives to investor euphoria about the next "great thing" is to have been around long enough to have lost money on a previous "great thing".

The tendency to have one's opinion formed by the weight of other peoples' opinions is strong. Occasionally putting some distance between oneself and the clamour of social media, the news media of financial markets can aid clear thinking.

I've long thought it would be interesting to run an experiment to test whether economists make better forecasters by keeping them in hermit-like seclusion from the media and other external noise. New economic data releases would be pushed under the door for analysis (Needless to say I don't feel inclined to undertake such an experience myself).

And finally, for anyone trying to make sense of the future it is a good idea to avoid reacting to every bit of new information. This isn't a winning strategy for those aiming to make their mark in journalism or Twitter, but it does free capacity for the reflection and research which is essential to clear thinking. 

P.S. Last week's Monday Briefing drew on the distinction made by the philosopher Isiah Berlin between thinkers who were "foxes" and those who are "hedgehogs". I described foxes as having a "wide and shallow" perspective, something for which a reader, quite rightly, pulled me up. What Berlin actually said was that foxes drew on wide experience and avoided the over-arching ideas or theories. Berlin's list of foxes included the likes of Shakespeare, Aristotle and Goethe, figures for whom the term "shallow" is, to put it mildly, wholly inappropriate.

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