Engaging on matters of guesswork
When consultations have to deal with predictions and probabilities…
Most people have heard the quote that ‘If you laid all the economists end to end, they still would not reach a conclusion’ though fewer may realise that it comes from the sardonic wit that was George Bernard Shaw. Over the years it has been used to emphasise how variable are the diverse views of economists and how difficult they find it to agree with each other, let alone the rest of us.
As we enter an uncertain period in politics and economics, those responsible for forecasting have started worrying. That is because of research published a few years ago by Prakash Loungani of the IMF. It suggested that of the last 150 economic recessions he studied in various countries, only two (yes two) had been properly forecast. In his own words, “The record of failure to predict recessions is virtually unblemished”. Somewhat disturbing news!
Many public consultations amount to a storyline that seeks people’s views on a future scenario where the precise circumstances are, by definition unknowable, and the debate is about assumptions, forecasts and risks. The story is If we adopt this policy, this is likely to happen. Those on either side of the divisive EU referendum occasionally claim they were ‘lied to’ but often they are referring not to factual assertions but to predictions of what the opposing sides claimed might occur following the vote in 2016. That often comes down to who you believe, and in politics, our default position is generally to believe those that we think are on our side and disbelieve any opponents. Yet if they were economists, and if we accept Loungani’s research, we would not believe any of them. How much confidence can we therefore have in predictions that form part of a public consultation?