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By Jeffrey Peel - Last month the watchdog that monitors the International Monetary Fund criticised the institution for failing to predict the global economic meltdown. The regulator pointed to a ‘group-think’ mentality militating against sensible thinking. However, it begs the question, are economists any better at predicting the future than anybody else? Or are they, in fact, quacks?
An entire cohort of professional economists, paid by governments, businesses, NGOs and global banks to predict the future are little better than the IMF’s own economists. Indeed, according to Philip Tetlock, in his book “Expert Political Judgment: How Good Is It? How Can We Know?” pundits and forecasters are little better at predicting the future than Joe Soap. Tetlock goes even further and suggests that the more quoted and famous a forecaster is the more likely that his or her predictions will be wrong.
In this review of Tetlock’s book by the New Yorker Magazine, Louis Menand comments,
“People who follow current events by reading the papers and news magazines regularly can guess what is likely to happen about as accurately as the specialists whom the papers quote. Our system of expertise is completely inside out: it rewards bad judgments over good ones.”
However, in my view, the best polemicist on the subject of professional forecasters in Nassim Nicholas Taleb, author of The Black Swan. Here he is at his best on the subject of punditry, forecasting and serious people who wear ties and charge lots of money for their “expertise”:
It’s not a good idea to take a forecast from someone wearing a tie. If possible, tease people who take themselves and their knowledge too seriously.
We cannot truly plan, because we do not understand the future – but this is not necessarily a bad news. We could plan while bearing in mind such limitations. It just takes guts.
It is my hope some day to see science and decision makers rediscover what the ancients have always known, namely that our highest currency is respect.