How much stock should advisors put in estimates and projections about the future?

Advisors are natural-born skeptics. So can we trust that the demographic projections used by government agencies are accurate? After all, there’s a long history of “experts” who have made wildly inaccurate projections about the future.

The most famous fail of demographic prognosticators was Thomas Malthus, who in 1798 published his “Essay on the Principle of Population,” in which he argued that the world’s food supply, in particular the amount of arable land, would not keep up with its population growth. Simplifying, Malthus was wrong on the demographics because the industrial revolution increased trade, which increased food supplies, and economic growth improved living standards, which then could accommodate more people.

In the 1970s, similar fears were raised about the lack of food for a ballooning world population, but again technology came to the rescue in the form of the “green revolution” in agriculture.

Yes, government policies and that favorite of dystopian novels and movies, epidemics, can change demographic projections, as was the case with the Black Death in Europe in the Middle Ages or, more recently, China’s one-child policy. Many studies have shown that increased education, starting with literacy and particularly among women, eventually lead to lower and thus more sustainable birth rates.

As for the Census Bureau — and the Social Security Administration, for that matter — the demographers projecting future populations are very careful in their calculations. In the case of Social Security funding, the trustees always present three different projections to give policymakers a range of possible outcomes based on potential changes to revenue and benefits.

In the Census Bureau’s “Projections of the Size and Composition of the U.S. Population: 2014 to 2060,” cited in this article, the authors say the following about their projections:

“Projections illustrate possible courses of population change based on assumptions about future births, deaths and net international migration. The projected values presented throughout this report are one possible outcome for the future that would occur only if all the assumptions hold true. All assumptions about the components of change are based on historical trends. Factors that might influence the levels of population components, policy decisions for example, cannot be predicted with any degree of certainty. Therefore, no attempts are made to incorporate these into the assumptions that produce the projections. The accuracy of the projections will depend on how closely actual trends in fertility, mortality and migration are consistent with these assumptions.”

Words matter, by the way. In a footnote in the same report, the authors also describe the difference between “projections” and “estimates.”

Estimates are for the past and present, while projections are based on assumptions about future demographic trends. Estimates generally use existing data collected from various sources, while projections make assumptions about what demographic trends will be in the future.