Andy Haldane, who was once heralded as one of the world’s 100 most influential people, described economists’ failure to accurately forecast the global financial crash “a fair cop.”
The BoE originally foresaw the British economy slumping dramatically after the Brexit, vote which turned out not to be the case. Heldane also blamed the inability of traditional economic models to cope with the “irrational behaviour” of modern investment.
“Out of this crisis, there could be a rebirth of economics. I’m not someone who would say that all that’s been done in the past is terrible. It’s just that the models we had were rather narrow and fragile. The problem came when the world was tipped upside down and those models were ill-equipped to making sense of behaviours that were deeply irrational.”
Although former UK Government Economic Service head Vicky Pryce does not agree that the economist profession is in crisis, she did say that forecasters often “really have no idea” how governments will react and impact the markets.
Britain’s economy responded surprisingly well after the Brexit referendum, with GDP rising at a rate of 0.6 percent between July and September.
Last week, Tory Michael Gove openly attacked economics experts, arguing they must be challenged.
“Sometimes we’re invited to take experts as though they were prophets, as though their words were carved in tablets of stone and that we had to simply meekly bow down before them and accept their verdict,” Gove said in a debate with former BBC economics editor Stephanie Flanders.
“I think the right response in a democracy, to assertions made by experts, is to say ‘show us the evidence, show us the facts’. And then, if experts or indeed anyone in the debate can make a strong case, draw on evidence and let us think again – then of course they deserve respect.”
