The Bank of England has revised up its forecast for the UK economy again. So much for the post-referendum recession they told us would definitely happen. But it does make you wonder: are economic forecasts worth anything at all?
Many pundits seem to treat social sciences as no different from the hard sciences. Economic predictions are reported as facts. But that's a mistake.
Empirical science is based on testing hypotheses. Experiments are controlled. Variables are isolated.
But a social science, like economics, can't possibly work that way. There are far too many variables. Instead, broad principles about economic growth are inferred from broadly similar experiences.
Yet economic predictions are based on the premise that those principles can be turned into universal equations. A few assumptions are seen as sufficient to make specific forecasts for future growth rates.
No wonder those forecasts are invariably wrong. How could they not be?
In the last 500 years, human knowledge has expanded enormously. The rate of progress has been extraordinary – so much so that 'experts' are often expected to know.
But there are many things we can't know. It will never be possible to predict the behaviour of millions of people accurately. It's a conceit to think it could be.
Yet forecasters trade on that conceit. Like oracles in the ancient world, they claim prophetic knowledge that no one else possesses.
Calling out these so-called experts isn't about dismissing science. It's about recognising the real limits of knowledge.
"A revolutionary text ... right up there with the Communist manifesto" - Dominic Lawson, Sunday Times
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