Not a post about a certain byelection, but a reaction to reading this:
“A more serious incident was the forecast by the Office for Budget Responsibility in the UK, which said last week that Brexit would have severe economic consequences. Coming only a few months after the economics profession discredited itself with a doomy forecast about the consequences of Brexit, this is an astonishing reminder of the inadequacy of economic forecasting models.
The truth about the impact of Brexit is that it is uncertain, beyond the ability of any human being to forecast and almost entirely dependent on how the process will be managed. “Don’t know” is the technically correct answer. Before the referendum, Project Fear was merely a monumental tactical miscalculation. Today it is stupidity. One of the debates was whether people should be listening to experts. We have moved beyond that. Because of a tendency to exaggerate, macroeconomists are no longer considered experts on the macroeconomy.”
Shrug your shoulders and move on? If it had appeared in the partisan press that would be a sensible reaction, but this was written by a widely respected journalist in the UK’s internationally renown financial newspaper. Furthermore - lest my motives be misunderstood - written by someone whose knowledge on the Eurozone is beyond dispute and whose views I often agree with. Well on this occasion this particular member of a discredited profession who is no longer apparently considered an expert on macroeconomics is not prepared to take this kind of stuff anymore, whoever it may come from.
It is difficult to know where to start with such apparent and complete ignorance. Nonsense expressed as platitudes. You can only make sense of “beyond the ability of any human to forecast” if you either think we know nothing about the impact of trade restrictions, which is false, or that forecasts are non-probabilistic. No journalist has any excuse nowadays for misunderstanding the probabilistic nature of forecasts (Bank of England fan charts), and any academic economist who knows anything about forecasting will tell you that unconditional macro forecasts are only slightly better than intelligent guesswork. They exist because it is worth being slightly better than guesswork when the stakes are so high.
You can also only make sense of these two paragraph if the writer is unaware or is just choosing to ignore the difference between conditional and unconditional forecasts. These are long words for a very simple concept. You would not dream of asking your doctor to forecast the number of times you would catch a cold over the next year (an unconditional forecast), but if you gave them all your relevant data they could probably make a better guess than your own. Their forecast would be probabilistic, but if you took the mean as ‘the forecast’ then in any particular year your doctor would generally be wrong. It would be absurd for you to then say that, having ‘discredited the profession with this inaccuracy’ you were now going to ignore their advice about how to avoid catching colds (advice based on conditional forecasts). But this is the logic of these two paragraphs.
As for a tendency to exaggerate, the simplest response involves a black kettle. But on this particular occasion I think there is a more honest response. In the Brexit campaign I felt the temptation to exaggerate (I don’t think I ever succumbed), because the media was failing to get the message from economists across. Our collective knowledge about the impact of trade restrictions was treated as just one more opinion, or described as Project Fear. When you are effectively being ignored you tend to shout louder.
But this is all defensive. Trying to explain yet again some basic economic ideas, and to be honest about what you can or cannot do and any failings you have. I’m just tired of doing this stuff over and over again, so it is time not just to defend. There are many good journalists out there, who when they write about macroeconomics do try to check with academics that what they are writing makes sense. (It was one of those journalists who drew my attention to the article I quote above.) It simply lets them down when others think they can write this sort of stuff without any of the kind of basic fact checking that journalists are supposed to do. It brings the profession of journalism into disrepute.
And they can only get away with it because academic economists only get a media voice by the grace and favour of journalists. If anyone should be doing some serious introspection after the Brexit result it should be journalists and the media. Warning of the dangers of trade restrictions was not a ‘tactical mistake’. What was a mistake was for journalists to allow those warnings, that knowledge, to be characterised as Project Fear, all in the name of ‘balance’ or cheap copy. But this was not a temporary lapse in an otherwise good record, but just another example of a growing tendency for the media to allow politicians to define economic facts and truths, a record I described in my lecture.
To have the nerve to blame economists for the Brexit result, to suggest that using their knowledge was a ‘tactical mistake’, to imply that the OBR should pretend they know nothing about Brexit, all that is itself amazing malevolent chutzpah. But it goes beyond audacity to criticise a profession and subject matter you appear not to understand when it is this lack of understanding that has contributed so much to the damage over the last few years.