By our best estimate …
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I’m estimating that it will take 57 minutes to write this column. I also assume that this number is nowhere near correct. After all, it was only an estimate.
Estimates are the modern and much-better-paying version of the prophecies that used to be issued by guys with tattered clothes, wild eyes and placards. Forecasts like: “The world will end tomorrow.” Hey, if you’re right once, you’re a genius.
Fish gotta swim, high school girls gotta overspend on prom dresses, but detail-oriented experts really don’t have to be all that accurate when they hand in their forward-looking opinions. Especially when it comes to economics.
A panel of top economists might be able to agree on what you’ll pay for a candy bar this afternoon, but only after a thorough debate and a spate of white papers. When they take on a topic more complex than that, they argue, break into factions and wind up hurling spot commodities at each other.
A couple of recent evaluations of the ethanol industry serve as examples.
Iowa State University economist Dave Swenson worked the numbers and said that when the ethanol plants currently under construction in Iowa start operating, the industry will provide 1,865 Iowa jobs. Throw in the supporting industries, and he figures the state will have 8,169 ethanol-related jobs.
On the other hand, economist John Urbanchuk came to the second annual Iowa Renewable Fuels Summit and announced that biofuels support the creation or retention of more than 96,000 jobs in this state.
The difference between 8,169 jobs and 96,000 jobs is what statisticians would call “a lot.”
We’re prejudiced in Swenson’s favor because he has a peculiar tendency to say what he really thinks. (What’s a guy like that doing in 21st-century America, anyway?) Also because Urbanchuk’s clients include the Renewable Fuels Association, the National Corn Growers Association, the American Soybean Association and the National Biodiesel Board. If you worked for those guys, you would round the numbers up, too.
In our estimation, the ethanol industry will support 96,000 Iowa jobs only if you count all of the people selling coffee to keep farmers awake and maybe the kids waving as the tractors go by.
Some estimation problems relate to topics that are even more important than corn production, if you can imagine such a thing.
Former White House economist Lawrence Lindsey recently wrote in Fortune magazine about estimating that war with Iraq would cost the United States $100 billion to $200 billion. The word “former” became part of his resume less than three months later.
His bosses didn’t want to hear Lindsey’s opinion, because they liked their own estimate of $50 billion better.
It should be noted that Lindsey was wrong. The cost of the war so far is approaching $500 billion. “My hypothetical estimate got the annual cost about right,” Lindsey wrote, “but I misjudged an important factor: how long we would be involved.”
Details, details.
It’s hard to get an estimate right when you don’t have all of the necessary facts at hand. When Boston settled on Bechtel Corp. to lead the way on the “Big Dig” project, the idea was to rely on a company possessing world-class engineering expertise, like the ability to read a map. And yet the Bechtel folks didn’t notice that the FleetCenter was standing right in the way. It seats more than 18,000 for Celtics games and has been doing so since 1995, but Bechtel’s planners thought it was a vacant lot. Maybe it was foggy the day they drove past.
A Boston Globe investigation found at least $1.1 billion in cost overruns due to Bechtel misestimations, but don’t worry, the city pulled out its checkbook and paid for them. See? Even if an estimate is wrong, everything can still turn out fine.
It’s good to have that lesson fresh in mind as we circle back to our original estimate on newspaper column production. Computer records show that this one was started on Day One but not finished until Day Two. Hmm. We can assume that the subconscious stayed on task while the writer drove and slept, so instead of the 57 minutes we estimated – and which might strike you as an awfully generous figure, considering the quality of the result – the actual time required was, let’s say, 26 hours.
No problem. My bosses are pretty sophisticated; they must understand how estimates work. r