Economists and sporting commentators have two things in common: They frequently make predictions about the future and they’re right about as often as a monkey with a dartboard…
Don’t get me wrong. I’m sure that both groups have more expertise in their chosen area than I do, but when it comes to predicting the future, the problem is that it hasn’t happened yet so the only way to do it is to presume that what happened in the past will be what happens in the future unless something changes and that’s where it becomes problematic.
Take predictions about interest rates, for example. The RBA can leave them where they are, lower them or raise them. Of course an economist can’t go on some program and say, “Look, I don’t see a change until we get some more data because, at the moment, it’s really hard to predict but when we get an indication of some change, then interest rates will either go up or down, and until then, I’m predicting that one of those three things will happen…”
No, it’s far better to make some outrageous prediction even if you’re wrong because – and here’s the really interesting bit – it doesn’t seem to matter that you’re wrong because the same program will probably interview you again next month and completely ignore that you told them a completely different story and accept the idea that you would have been right if it weren’t for the simple fact that you weren’t. But only because things didn’t happen the way they would have if you’d been right. Even racehorse tipsters don’t usually tell us that the horse they tipped would have won except there were a lot of horses in the race who all ran faster.
Recently in Australia, we had the surprise of the inflation rate being slightly lower than expected and a number of economists suggested that this would mean that an interest rate cut was likely in the second half of the year. Unfortunately, the next set of figures showed a slightly higher figure than expected which led them to all suggest that the next interest rate move would be up, with one respected figure suggesting that there would be three rate rises before than end of the year.
Like I said, I’m not an expert in the area but I would have thought that with the figures bouncing around like that then we have no way of really knowing whether next month’s figures will be what we expect or what we don’t expect or, indeed, something so unexpected that we didn’t expect it even though we were saying that we had no idea what to expect.
Still, as I’ve always said, there’s no such thing as good economic news.
- Unemployment has remained steady! Oh no, that means that we aren’t doing enough to get people into work…
- Unemployment has gone up! Oh no, this means that we could be heading for a recession…
- Unemployment has gone down! Oh no, this means that an interest rate rise is more likely...
Part of the difficulty is that media companies often have a particular agenda to push so they’ll put on the guests that help them push that agenda. It’s always intrigued me that people with vested interests are often given a soft interview, as though they’re a neutral expert. You know the sort of thing. “Good morning, Mr McGillicuddy, you’re telling us that the government’s proposal to hold you responsible for all the pollution your company is causing will be counterproductive and lead to the end of a profitable industry in this country. Would you like to expand on that uninterrupted for the next three minutes while I make notes of the things you’re saying so that I can harangue the relevant minister when I get them on the program?”
Speaking of agendas, I particularly liked the headline about an opinion poll which announced that Dutton was preferred PM in Queensland. While I didn’t read the article, I did find it interesting that this was the takeaway from the poll and not that the LNP were leading the Labor Party on a two-party preferred vote federally, which leads me to presume that this wasn’t the case or else the headline would have been just that.
Part of the problem is the media’s determination to find an answer to questions that would be better not asked until somebody actually knew something definite. Whether it’s interest rates or the opinion polls, some bits of the future are too far away to do more than take an educated guess. And when I say “educated” I’m not using the word in the sense of a formal qualification; more like you’ve been educated not to open your big mouth and to make a bold statement when it’s far too early to be sure of anything.
I’ve often pointed out that when people have written off an upcoming election that not a single vote has been cast yet. While some governments are extremely popular and others are on the nose, this can change quickly with an unexpected event. Howard, for example, may have lost in 2001 if not for the Tampa and 9/11.
So when people are saying that the best that Labor could hope for is a minority government, I have to wonder whether they’ve actually thought about it deeply or whether that just seems likely because the opinion polls showed them slipping, before the opinion polls showed them getting back to where they were before they slipped and then one poll showed that they were slipping, so Dutton may be PM before we know it and… whoops, this poll shows that he’s going to lose his seat to an Independent.
Yes, I guess no program is going to invite me on to explain that, not only do most people not know what’s going to happen, but I have even less idea than them!
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