“The function of economic forecasting is to make astrology look respectable.” So said Harvard professor John Kenneth Galbraith, among the most respected and influential economists of all time.
A rare academic-policymaker hybrid, Galbraith advised various US presidents – including Franklin D Roosevelt, John F Kennedy and Lyndon B Johnson. He later served as a diplomat, while writing a string of economics-themed bestsellers.
Steeped not just in arcane economic theory, but having lived and breathed the hurly-burly of politics and international affairs, Galbraith understood that technical economic forecasting, while full of scientific pretensions, is little more than souped-up guesswork.
For all the complex equations, such projections are almost always blown way off course – not least by “events”, including extreme weather and wars, to say nothing of the thrills and spills of commodity prices and financial markets.
Even if that wasn’t the case, the computer models that produce economic forecasts are themselves based on the assumptions and prejudices of the experts who build them. Such models can never begin to capture the infinite complexities of the human psyche – how tens of millions of people may, on average, react to changes in circumstances that can’t be foreseen.
Don’t get me wrong, I’m a card-carrying economist and have engaged in plenty of forecasting myself, in both an academic and commercial context. Thinking through and collecting relevant data on how an economy may respond to certain policy changes, how investment and living standards may be affected or the tax that might be raised is almost always a useful exercise.
Yet it is imperative that major public policy decisions, while considering detailed statistical analysis, are based on a range of other important factors as well – including public sentiment, political judgement and raw gut instinct.
Instead, with the UK locked in a high-tax, slow-growth trap, choices about our economic direction of travel, or at least attempts to improve lives and livelihoods in a challenging and unpredictable world, are increasingly in the hands not of political leaders accountable to the electorate but are instead steered by faceless technician-bureaucrats.
During the pandemic, disastrous decisions were driven by activist-academics wielding models and forecasts that turned out to be hopelessly inaccurate.
Some ministers, true, were only too happy to contract out difficult questions – such as whether we should lock down – to bespectacled boffins.
But MPs (and journalists) who rightly raised serious objections, not least the collateral damage of lockdown, were ostracised and muzzled, accused of disregarding the deaths predicted by doom dossiers produced by scientists-turned-forecasters.
Yet some now believe – given the enormous stresses of lockdown, the medical operations cancelled and the emotional turmoil caused – that lockdown probably killed more lives than it saved.
Then, there’s the long-term educational and psychological damage to a generation of children and students who endured two years of disrupted schooling.