Mindworks’ Weblog

Thinking Matters

Why didn’t they tell us before?

Posted by Andrew Cooper on September 14, 2008

Some unpredictably nice weather

Some unpredictably nice weather

I’ve been wondering a bit recently why economists are so bad at forecasting things.  After all, the one thing you really want to economists to be good at is forecasting, isn’t it?  Perhaps something is going seriously wrong in our universities.  The one thing you’d want architects to be good at is designing buildings which have roofs that don’t leak, but all the large building projects around here recently (such as our PFI funded FE college and Vodafone’s Global HQ) have featured leaky roofs from day one.

Anyway, returning to economics, Alastair Darling, in his infamous interview with Decca Aitkenhead, confessed that the credit cruch had come as a complete suprise: I believe he said that the first time he knew about it he was on hoilday when he read about it in a newspaper.  

On holiday?  Read about it in a newspaper?  There he was, probably the best equipped person in the land when it comes to getting economic advice, and he has to read about it in a newspaper just like the rest of us. After all, who could possibly predicted, except in general terms, that the combination of runaway personal debt and massive increases in property prices would all end in tears?  And if they did, why didn’t they do anything about it?

On reflection it’s not surprising that economists are bad at telling us what’s about to happen.  I mentioned my former boss’s ‘for every economist there’s an equal and opposite economist’ crack in an earlier post and that probably explains some of it. Also, the global economy is very much like the climate: pretty much unpredictable if you try to look further ahead than next Tuesday.  Unless you count ‘cooler in the winter and warmer in the summer’ as a prediction.

I came across this guy recently.  As you’ll see, he’s the world’s first stand up economist.  An academic economist who is also a stand up comedian.  It sounds like an oxymoron but he’s very funny and, coincidentally, mentions one of my Desert Island Quotes in his first Youtube clip so he must be OK.  He says ‘microeconomists are wrong about specific things while macroeconomists are wrong about things in general’.  LOL!  Believe me, if you’ve ever worked in a building populated almost entirely by economists, as I have (see biog, it was the same building in which A Darling is currently working, although possibly not for much longer) you’ll think that that’s very funny indeed.  

I’ll try to remember to say something about pscychological research into the phenomenon of hindsight in a future post.  The main reason that economists are always wrong about the future is, in fact, all to do with psychology.  But you knew that already because in a previous post I pointed out that psychology is relevant to everything.  This is a bit ironic because some economists are trying to argue that all psychology is economics.  They are, without doubt, wrong about that: I’d draw you a Venn diagram if I had a whiteboard.

The photograph, incidentally, was taken durng a holiday in Cornwall in 2004.  Those of you who know Cornwall may be able to recognise the spot.

Here’s another photo, taken from the excellent and environmentally friendly National Trust cafe at Kynance.

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2 Responses to “Why didn’t they tell us before?”

  1. PS – there’s a good article by fellow West Berkshire resident Max Hastings about the possible financial melt-down here. Not sure that I agree completely with his conclusions. As Marx acknowledged, I think, capitalism is a massively powerful system. Like the climate, it isn’t something that can really be ‘controlled’. They, and we, just hang onto its coat tails while the money (notional and otherwise) surges around the globe in the financial equivalent of jet streams. Possibly. You’d need to ask an economist to find out whether that makes any sense whatsoever. Just make sure that you ask an equal and opposite one as well.

  2. PPS – could I just point out that I wrote the post and the comment before the Lehman collapse was announced. The world has changed somewhat since then. Only one thing is certain: no one has the faintest idea what will happen next.

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