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Colgan & the Crystal Ball


Economist Readies the Word for 2008


USM Corporate Partners PROFILE

January 2008



  Charlie Colgan doesn't do predictions - he does forecasts. He deals in a world of ever-incomplete statistics and uncontrollable group psychology, and is respectful of the need to get it as right as possible.

  "The first principle of forecasting is: Those who live by the crystal ball are condemned to eat glass," he says to prove the point.

  That does not mean at all that accuracy is beyond reach. A recent "very short-term" forecast of holiday traffic on the Turnpike - very short-term being Monday for Friday of the same week - was 3 percent off, but did have the direction right (it was up, not down). "We can do better," Colgan says.

  Charles S. Colgan, Colby B.A. '71 and U.Maine Ph.D. '92, will once again bring his highly popular economic forecast to the USM Corporate Partners Business Before Hours Breakfast Jan. 9 at the Abromson Community Education Center .

The annual January introduction of Colgan's view of the prospects for the year, variously called "The 2008 State of Maine Economic Forecast " and "Breakfast with Charlie," drew 400 listeners for last year's edition.


The word will be fresh

No advance word on the 2008 forecast was available when the interview was done in mid-December. "I don't know yet what I'm going to say," Colgan declared, referring to the volatility of the economic picture - much of it related to the troubles in the mortgage market and consumer uncertainty.

  Uncertainty in December by no means threatens the prospects for a useful and entertaining presentation in January, because Colgan has linkages to a variety of information sources, as well as an effective process for determining the most that can be concluded from what can be known at any particular time. The content will be up to the day, and the eye on the trends that control the analysis will be the same.

  Colgan teaches economics, policy analysis, economic development and analytic methods at USM's Muskie School of Public Policy.

  He also is associate director of the Maine Center for Business and Economic Research at USM and the university system's Center for Tourism Research and Outreach. He is a research fellow for the U.S. Bureau of Labor Statistics, chief economist for the National Ocean Economics Program and chair of the state Consensus Economic Forecasting Commission.

  And he is a former economist for the state, among other things. All of those connections include access to data and analytical records, as well as their contractual relationships with the big national forecasting organizations.


How do they do it?

  How does the economist see his job?

  "Our job in forecasting is to develop a picture of the future that (our clients) can use to make their own picture of the future," according to Colgan. "I want to tell them what I see, and provide them with good information on what I came up with and how I came up with it."

  A summer weekend Turnpike traffic forecast, for example, starts with gasoline prices, weather forecasts and other trends of that particular summer. "We pull these things together and have the data and expertise" to derive reasonably dependable expectations.

  The information can work in ways mysterious to the uninitiated. While gasoline price increases tend to have a negative impact on tourism in Maine , crude oil prices are opposite. That's because gasoline increases discourage day trippers - a big category of Maine visitors -- while news of crude oil price hikes cause people to postpone longer trips in favor of short ones.

  In Maine , different holidays have different effects. Labor Day and July 4 are favored by longer-time vacationers, while Memorial Day and Columbus day attract short vacationers.

  "We're able to gather information and do analyses that people can't do by reading the newspaper," Colgan notes. The source material is always different, and finding and tracking it is a true specialty.

  Some economic research is on a much more massive scale than that of holiday traffic forecasting.

The huge Plum Creek development project in the North Woods near Moosehead Lake is one of the most complicated Colgan has worked on. The struggle over the size, nature and location of the multifaceted development produced such changed proposals that there were four entirely different economic forecasts

  Similarly, the 25-year plan of the State Department of Transportation plan for highways, public transit and ports and rail was the centerpiece of a process in which various economic scenarios were used to help the Legislature revise its own investment decisions.


It's come a long way . . . Still does

  Technology has dramatically improved the range, depth and immediacy of today's economic work, Colgan says. "In 1982, when I did my first forecast with the State Planning Office, the forecasting model was in Fortran. It ran on tape, and we had to manipulate it with punch cards.

  "We could do just one forecast a day. We could only use the computer at 3 a.m., and do that one forecast. We had to wait. Now we can get together and do instant forecasts on our laptops. I have four software products I use to do forecasting."

The annual forecast that draws so much attention each January is on the shorter side of those Colgan is involved with, although it, like the holiday ones, is based on study of broad and deep trends. The annual forecast has been produced for more than 10 years.

The Maine Consensus Economic Forecasting Commission, made up of five people (including Colgan) appointed by the governor and the Legislature, produces four forecasts a year for the state to use in estimating revenue.

That is one of Colgan's sources for his annual presentation at the Corporate Partners Breakfast. Another source for that forecast is the New England Economic Partnership, a 35-year-old public-private consortium.

Intermediate-range forecasts go out five years, and those like the Plum Creek work aim 15 to 20 years into the future.


See you there   

Economics has been referred to as "the dismal science," to some extent because of its penchant for embarrassing its practitioners. For his part, Charlie Colgan has been known to acknowledge last year's misses as he serves up a new set of ideas about the upcoming year's Maine economy.

Still, he's been at it long enough that, as he notes, "Nothing surprises me any more." And somehow, whether he's ever had to savor the flavor of busted crystal ball on the half-shell, his January show has been anything but dismal.

  So the forecast for January 9 is for another record crowd and another program as entertaining as it is substantive in business value. See you there.

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