If only we listened to the experts

Jason Krupp
Insights Newsletter
24 February, 2017

Economist and commentator Shamubeel Eaqub recently wrote an impassioned column, urging experts to bridge the communication gap lest the disaster of majoritarian rule ensue.

Undercutting his piece was the message that if experts just used smaller words, or spoke slower, disasters like the Global Financial Crisis and Brexit could have been avoided.

With all due respect to Mr Eaqub, who I know on a first name basis, a great dollop of humility might be a better tonic. That’s because experts get forecasts wrong way more often than they get things right.

Let’s take the examples used in his column, which focuses on economists.

Nouriel Roubini is famed for spotting the US housing crisis and the resulting financial collapse in 2008. But Mr Roubini has made a myriad of predictions, the vast majority of which have landed on the wrong side of the fence. His one successful prediction seems to be heavily aided by hindsight.

Then there is Brexit. Ahead of the referendum it seemed as if every financial institution and their dog predicted Britain would be doomed if the public voted to leave the single market. The consensus was that as soon as the trigger was pulled, the economy would head the way of Greece and Argentina.

How awkward for the gargle of letters (IMF, ECB, WEF, etcetera.) that Britain’s economy not only failed to tank immediately, but showed a marked improvement in the wake of the vote.

The Wall Street Journal’s dart board has also consistently outperformed the best economic forecasters and stock prognosticators for decades.

Which brings me back to Mr Eaqub’s point.

Of course experts play an important role in public discourse. Indeed, by definition, they do have greater insight into technical topics than the layperson. Undoubtedly clearer communication and broader social awareness on their part would help their cause too.

But if laypeople and politicians are to trust these voices more, experts need to admit when they get things wrong. They also need to be candid about economic predictions, which for all intents and purposes are in equal halves computer modelling and entrail reading.

I’d suggest taking a leaf from Mark Carney. The Government of the Bank of England recently admitted in public he got his Brexit forecasts badly wrong. But then he added that it was his job to be a dour, glass half-full, shepherd of the British economy. Now there is an expert I’ve got time for.

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