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reaction t o company announcements and perfor- mance may be more fully understood by the uninitiated. Finally, part four concludes with an identification of the features of profit forecasting in the U.S.A., Canada and the E.E.C.

Although many of the contributions are neces- sarily brief, the book is wide ranging and this is its most appealing feature. It is not recommended for those who are particularly concerned with the specification of forecasting equations, or sophisti- cated computer modelling. The section concerned with the actual statistical procedures is necessarily limited, though useful to the newcomer. In con- clusion, the book is readable and provides a welcome contribution to the library of the professional manager and business academic.

KEVIN WILSON Manchester Business School England

FINANCIAL MODELLING WITH COM- PUTERS: EIU SPECIAL REPORT NO. 120, Bhaskar, K., Pope, P. and Morris, R., London: Economist Intelligence Unit, 1982. Price: E40.00. Pages: 138.

The aim of this report is to try to provide for managers an appreciation, avoiding specialist terms, of corporate financial modelling. The report covers, in its series of short chapters, the principles of simple financial modelling, the use of computers in the process, simulation models. optimizing models, forecasting models, probabilistic models, and areas where such models might be applied.

Of course, all financial models are dependent on the quality of the forecasts of variables such as future sales or interest rates. Some sixteen pages are devoted to forecasting. This chapter is a hopelessly ambitious attempt to survey both time series and causal forecasting methods. It also discusses such

modelling package would be best for their purpose. Moreover, the report does not even comprehensively review the wide range of systems available. The treatments in the various chapters devoted to specific mathematical techniques are similarly lacking in depth. Overall the report seems an extremely expensive and poor quality simple guide to corporate modelling. There are many superior books in the area, available a t a third of the price, which would meet the needs either of the specialist or the beginner. This report is a rip off and is well below the high standards normally expected from the Economist Intelligence Unit.

DEREK F. CHANNON Manchester Business School England

T H E GLOBAL 2000 REPORT T O THE PRESI- DENT, edited by Barney, Gerald 0. (Study Director). A Report Prepared by the Council on Environmental Quality and the Department of State, London: Penguin Books, 1982. Price: f7.95,’ $10.00 (paper), Pages: 766.

In three volumes, the Global 2000 study summarizes, presents, and describes, respectively, the methodo- logical and data basis for forecasts to the year 2000 in 12 areas: population, G N P , climate, technology, food, fisheries, forestry, water, energy, fuel minerals, non-fuel minerals, and the environment. The three volumes are: Entering the Twenty-First Century (an executive summary), The Technical .Report and The Goternrnent’s Global Model. Originally released by the U.S. Government Printing Office (USGPO), the first two volumes have been collected by Penguin into the single one reviewed here. Volume 3 is available (as are 1 and 2) from the USGPO (1981, S/N 041-01 1-000513, 401 pages, $8.00).

The generally pessimistic tenor of the report is caDtured bv its conclusions:

special topics as multicollinearity and Box-Jenkins models a t a very superficial level. No reader who was unaware of these issues would gain anything from the discussion, whereas no reader who knew of these topics would find the comments helpful.

The treatment of all the topics considered is very simplistic and would not allow managers to actually build models, although it might improve com- munication with specialists. There is nothing at all new in the report and, in describing the experience of others, it relies on the earlier work of Grinyer and Wooller. The chapter describing

The world in 2000 will be different from the world today in important ways. There will be more people.. . . The gap between the richest and the poorest will have in- increased. . . . There will be fewer resources to go around.. . . The environment will have lost important life-supporting capa- bilities.. . . Prices will be higher.. . . The world will be more vulnerable both to natural disaster and to disruptions from human causes. (p. 39)

modelling software and associated hardware gives no This review will focus on the study’s methodology real advice to potential users on what system type, which is described in detail in volumes 2 and 3. For size or cost would be appropriate and which the most part the methodology is reliant on

3 16 Journal of Forecasting Vol. 2, Iss. N o . 3

computer-based forecasts. Volume 2 presents de- tailed alternative scenarios in each issue area, often from several forecasting sources; volume 3 provides original source documentation on the computer models used in the preparation of many of the forecasts.

Under the leadership of project director, Gerald Barney, the report relies heavily upon projections prepared for the study by a variety of U.S. government agencies and departments, including the Census Bureau, the Agency for International Development, the Departments of Agriculture and Energy, and the Central Intelligence Agency (CIA). I n some cases these organizations were able to turn to in-house. quite well known computer models such as the U.S. Department of Agriculture’s (USDA’s) Grains-Oilseeds-Livestock (GOL) or the Department of Energy’s (DOES) International Energy Evalua- tion System (IEES). Those who know something about such models will immediately understand some of the problems that the project faced. GOL is not a dynamic model in its basic form (although it has been integrated with the Mesarovic-Pestel world model to allow dynamic forecasts). IEES is really an optimizing model more than a forecasting or simulation tool.

Despite the initial desire to make the project a governmental one, the authors turned to the outside because of known weaknesses in some governmental forecasts and forecast tools in some areas. For instance, the Community and Family Study Center in Chicago was asked to make alternative population forecasts (which proved notably lower than the government’s); the World Bank’s SIMLINK model was used for global G N P forecasts; much of the energy forecasting came from the Workshop on Alternative Energy Strategies (WAES) report and from the World Energy Conference (WEC), and for the environment the study turned entirely to ‘experts outside the government’. Some of these sources, too, have known weaknesses. The World Bank has abandoned SIMLINK, which never was a complete world model, and reliance on completed past studies suchas WAES(Wilson, 1977)and WEC(1974,1977) means that the report’s authors cannot make forecasts based on assumptions other than those in the original studies. One can understand this limitation better when one notes, for example, that the high oil price scenario of WAES was a per barrel oil price of $17.50 in 2000.

For the most part, the study team was quite open in admitting these methodological difficulties. The study itself identifies two categories of important methodological problems: a lack of consistency and a failure to ‘close the loops’ in government forecasts. With respect to the first problem, there is no reason to believe, for instance, that agricultural forecasts from USDA, or energy forecasts from DOE, or

population forecasts from the Census Bureau rely upon even similar economic forecasts, as important as economic forecasts would be to all of them. The Global 2000 report attempted to deal with this by providing the participants with standard base assumptions.

The second and related problem is that the agencies often d o not seriously consider the forecasts produced by each other. Energy prices forecast by DOE are not necessarily input to USDA models; climate projections may not find their way into energy or food models. The report’s authors attempted to deal with this by an iterative process in which early results of each group were made available to all. This had obvious limitations, because the models and other forecasting procedures may not be constructed to accept the kinds of information provided by other agencies, and since ‘dead’ projects like WAES can hardly react. As a further step, the project authors turned to outside global models which were constructed specifically to provide just such a ‘closing of the loops’, e.g. World 3 (Meadows, 1972) and Mesarovic-Pestel(l974). They found that such models generally produced more pessimistic results than did the government groups individually. In fact they found that when linkages among the elements of the integrated models were severed, results like those of the government groups were produced. The implication drawn by the study is that the government may normally be producing overly optimistic projections.

However, it must again be stressed that the study team consciously chose to rely most heavily on government sources and forecasts, not on outside ones. Barney’s point of view is that all decision- making and action requires models of some kind. Thus U.S. global policy implies the existence of a global model. But the ‘government’s global model’, as it is called in the third volume, is recognized to be a poor one:

One striking finding of this study is that, collectively, the executive agencies of the government are currently incapable of pre- senting the President with a mutually con- sistent set of projections of world trends in population resources, and the environment. While the projections presented in the chapters that follow are probably the most internally consistent ever developed with the long-range, global models now used by the agencies, they are still plagued with inadequacies and inconsistencies (Volume 2, P. 5).

It appears that the study’s methodological analysis has remained within the authors’ biases about the world.

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There is no question, however, that those authors had a view that structured their approach, expecta- tions, and presumably their conclusions. Gerald Barney is a member of the U.S. Association for the Club of Rome and the editor of The Unjnished Agenda( 1977) in which he said’. . . this book is about a world transition from abundance to scarcity, a transition that is already well undeway’(p. 155). It is not terribly surprising that he and his team reached similar conclusions in the Global 2000 report, any more than much more optimistic results of a government study directed by Herman Kahn (1976, 1979) would have shocked us.

General world views and expectations about the future clearly influence the study’s approaches and conclusions. The technology chapter in the second, or technical, volume is 7 pages long, compared to the 227 page long environment chapter. Herman Kahn’s Hudson Institute would almost certainly have had a different balance. The authors, recognizing the disparity, argue correctly that technology change is embedded in the assumptions of continued produc- tivity increases made in other chapters --for instance yield increases in agriculture; but there is reason to believe that the, often implicit, technological assumptions may sometimes be a bit (some would say a great deal) conservative. For instance, the authors note in their technology chapter, with respect to one of two projections of future water use, that:

The Kalinin projection admittedly neglects the possibilities of ( I ) decreasing water requirements per unit of industrial o r agri- cultural output (2) increasing water purifi- cation or desalination and (3) increasing direct use of unpurified and salt water (Volume 2, p. 70).

With respect to the environmental analysis of the food sector,

the productivity increases projected in the food analysis will involve no major break- throughs in genetic engineering of food crops (such as the development of nitrogen- fixing strains.. .) . . . (Volume 2, p. 72).

Such assumptions can easily by questioned. Unfortunately all future studies make literally thousands of such debatable assumptions, many of which are not made explicit, as these were. The world view of the study authors shapes the assumptions strongly in all these studies. The authors of Global 2000, although no less subject to the problem, must be credited with providing considerably better than average documentation of their assumptions.

In spite of the often admitted problems of consistency and intra-study linkage, and in spite of a world view which noticeably shapes important

assumptions, the study does constitute the most comprehensive source of carefully gathered projec- tions on global issues available anywhere. The voluminous tables of forecasts collected in the study draw upon nearly all major data sources and large numbers of past forecasting efforts. It is likely to be many years before so much information is again collected in one place. The study is a required reference source for the shelves of anyone with an interest in global futures.

BARRY HUGHES Graduate School of International Studies University of Denver Denver Colorado 80208, U.S.A.

REFERENCES

Barney, Gerald (ed.), The Unfinished Agenda, New York: The Rockefeller Fund, 1977.

Kahn, Herman, Brown, William and Martel, Leon. The Next 200 Years, New York: William Morrow, 1976.

Kahn, Herman, World Economic Development: 1979 and Beyond, New York: Morrow Quill Paperbacks, 1979.

Meadows, Donnella H. , Meadows, Dennis L., Randers, Jorgen and Behrens, William K., 111. Liniits to Growrh, New York: Universe Books, 1974.

Mesarovic, Mihajlo and Pestel, Eduard, Mankind at the Turning Point, New York: E. P. Dutton, 1972.

Wilsdn, Carroll (Workshop on Alternative Energy Strategies), Energy: Global Prospects 1985-2000, New York: McGraw-Hill, 1977.

TECHNIQUES OF SCENARIO PLANNING, Chandler, John and Cockle. Paul, Aldershot: McGraw-Hill, 1982. Price: f14.95/$29.95. Pages: 193.

This book has a misleading title; it does not provide a wide ranging description and assessment of the various techniques of scenario planning. You will find here no mention of Peter Schwartz’s scenario spectrum analysis approach, no reference to SRl’s divergence mapping technique, nothing about war games, nor about Eric Jantschs’ early review of scenario writing.

In fact, the book is not about the techniques of scenario planning at all but about a technique of