Extrapolations don't make good forecasts

Written by Web News Editor on . Posted in Features

Adverts for financial products say – though usually in tiny print at the bottom of the page – past performance is no guide to how things will be in future. Stuff happens, such as banks collapsing, stock markets imploding, wars, pestilence (and their opposites, too, booms and prolonged prosperity included).
Put the point in the sort of language statisticians use and you might say extrapolating from yesterday’s trends makes for a dubious forecast of what is to come.
So when we see projections of spending on health and social care biting a great chunk out of 2050′s GDP, we should be cautious. The King’s Fund, the distinguished health thinktank, has just done such an exercise with its chief economist John Appleby looking at spending on health and social care over the next 50 years.
If the past is a guide, the future is going to be difficult. Here’s a trend. During the past half century spending on the NHS (UK) increased from 3.4 per cent to 8.2 per cent of GDP. Follow the trendline for the next half century and by 2060 the NHS will be eating a fifth of GDP. Add in social care and private health spending and you get some hefty numbers. For the US, where total public and private health spending is already approaching 18 per cent of GDP, you get to a third of GDP going on health by 2035 and 100 per cent of GDP going on health by the 2080s.
Here’s a case of dumb numbers. It’s not going to happen. Ah, say the extrapolators, but where is the break point going to occur? Maybe the authors of such projections should spend more time thinking about thresholds. When does the proportion of household income being spent on health and social care, either through taxation or family spending, become insupportable? What sort of conversation is society capable of, if big issues around generational justice and the balance of health needs are going to be discussed and decided openly?

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