In 2002, the board of regents responsible for all public higher education funding in a large midwestern state hired a consultant to develop a series of enrollment forecasting models, one for each college. These models used historical data and exponential smoothing to forecast the following year's enrollments. Based on the model, which included a smoothing constant () for each school, each college's budget was set by the board. The head of the board personally selected each smoothing constant, based on what she called her "gut reactions and political acumen."
What do you think the advantages and disadvantages of this system are? Answer from the perspective of (a) the board of regents and (b) the president of each college. How can this model be abused and what could be done to remove any biases?
This exercise, derived from an actual situation, deals as much with ethics as with forecasting. Here are a few points to consider:
No one likes a system they don't understand, and most college presidents would feel uncomfortable with this ...