A day does not go by without us hearing a prediction from an economist about the economy - inflation, GDP, deficit, Jobs etc. etc.
There is such a plethora of forecasts I wonder just how much information we take in, or in the case of the forecasts we do digest, is it worth the effort?
2016 will always be remembered as the year of Brexit and Trump’s presidential triumph. But cast your mind back to the economic forecasts before these ground breaking events and the reality today.
Andy Haldane, the Bank of England’s chief economist admits there was a disconnect about Brexit and the remarkable placid state of the market post Brexit 2016.
In 2016 Britain was the fastest growing of all advanced economies. The FTSE 100 has hit revealed an
historic all time high.
Haldane compared the pre Brexit predictions by economists as their “Michael Fish” error.
I attended an Awards Dinner last year with Giles Brandreth as MC. He related to a visit he had arranged for the Queen to be shown round the Bank of England in the early 1990’s following the economic recession that hit the UK in 1989. At the end of the visit the Queen asked the Governor of the Bank of England, ‘how many people are employed here?’ The answer was around 3,300 people. The Queen then expressed surprise that so many economists had not seen the recession coming!
Mind you, the model of the Perfect Economist is, I guess, not easy to come by. John Maynard Keynes defined a good economist in 1924 to be a mathematician, historian, statesman and philosopher. He further concluded that good economists were hard to come by. How true he was.
Back in the 1920’s Cambridge was the world’s leading school of economics. At this time students were expected to combine economic principles with a strong grasp of current affairs. Today it is said that a first year student can pass his or her exams without reading a single newspaper. Whilst knowledge is subsequently needed about some contemporary policy conundrums, most exams focus on an understanding of Algebra knowing models. The maths that needs to be mastered barely leaves time for history.
If we lose sight of the ideas of Keynes, I wonder whether we will or have already lost the dream of our economists seeking not merely to apply their ideas in a worldly way but to produce better ideas for us to reach a better world.