Better Living Through Better Living Through MeteorologyMeteorology

Mark S. RoulstonMark S. RoulstonOxford University and Oxford University and

London School of EconomicsLondon School of Economics

Better Living Through Meteorology Better Living Through Meteorology

Economic impacts of weatherEconomic impacts of weather

• severe weather events biggest cost to insurance companies

• in U.K. 1OC drop in temperature increases electricity demand by over 200 MW

• modest anomalies as important to the economy as severe weather events

Better Living Through Meteorology Better Living Through Meteorology

Value of weather forecastsValue of weather forecasts

• weather impacts the economy• forecasts have skill out to over a week and

this horizon will increase

• how can forecasts benefit the economy?

Better Living Through Meteorology Better Living Through Meteorology

Better Living Through Meteorology Better Living Through Meteorology

How much soup should I make?How much soup should I make? CP = cost price of 1 bowl of soup SP = selling price of 1 bowl of soup Q = amount of soup I should make

stop making soup when…. expected marginal income = marginal cost

Prob(demand>Q) x SP = CP

choose Q so that Prob(demand>Q) =CP/SP

Better Living Through Meteorology Better Living Through Meteorology

a probability forecast is required for rational decision making

Better Living Through Meteorology Better Living Through Meteorology

Better Living Through Meteorology Better Living Through Meteorology

Better Living Through Meteorology Better Living Through Meteorology

Better Living Through Meteorology Better Living Through Meteorology

Better Living Through Meteorology Better Living Through Meteorology

Better Living Through Meteorology Better Living Through Meteorology

Better Living Through Meteorology Better Living Through Meteorology

Better Living Through Meteorology Better Living Through Meteorology

when averaging ensembles you should average utility, not weather variables

Better Living Through Meteorology Better Living Through Meteorology

Bank of England issues inflation and

GDP growth forecasts as fan-charts.

Better Living Through Meteorology Better Living Through Meteorology