Economists are struggling, as they mourn their ‘Michael Fish moment’
If economists are to be believed then recently has been a dark time for their profession. Since the 2008 financial crash it’s fair to say that the UK, and most of the Western world, has been more than a little suspicious of the experts. This is the problem, though, when the experts who are supposed to prevent disaster are left on the sidelines powerless as wages, living standards and incomes fall.
The head economist for The Bank of England has, in recent days admitted that confidence in economists is approaching crisis point. Andrew Haldane, The Bank of England’s chief economist, described the collapse of Lehman Brothers as the economics profession’s “Michael Fish moment” (a reference to when the BBC weather forecaster predicted in 1987 that the UK would avoid a hurricane that went on to devastate large parts of southern England). He was speaking at a government conference.
The bank has come under intense criticism for predicting a dramatic slowdown in the UK’s fortunes in the event of a vote for Brexit only for the economy to bounce back strongly and remain one of the best performing in the developed world. Economists at the bank are said to be extremely concerned that in this new age of scepticism following Brexit that future forecasts could be dismissed out of hand if errors in forecasting persist.
With the UK economy now looking healthy and robust moving in to 2017 there are real trust issues emerging between the public and economists at the bank as multiple predictions and forecasts have been proved incorrect. Haldane blamed the profession’s reliance on models that were built for an age when consumers and businesses, and especially banks, “behaved rationally”. Since 2008, consumers have maintained their spending when the classic economic models would have expected them to be more reserved.
Regardless of what 2017 brings, economists seem keen to get their predictions right for the sake of the future of their profession.