Why is nobody listening to economists?

17/6/2016

By Wolfgang Munchau

This must be a hard time for the economics profession. They come up with one report after another showing the damage of Brexit, and nobody listens to them - other than other economists. We noted a comment by George Magnus asking the desperate question: why do Brexiteers just refuse to accept hard evidence?

The answer is: because it's not hard evidence. They are projections. We think it is a delusion of the profession to believe that its credibility is so strong that people would confuse the two.

Another comment that revealed the profession's delusions was Simon Wren-Lewis's latest article, in which he expresses disbelief and despair about the way the campaign is going. So do we, but his reasons are entirely different. He is despairing because nobody is listening to economists.

    "There is despair because economists and others who think Brexit will make people worse off have no way of getting their message across to those that really need that information. I know Gove has said he is fed up with experts, but I’m not convinced most people are."

We think he is wrong on the latter point. Among the wider public, the profession has lost much of its credibility during the global financial crisis. Economists failed to see it coming, and, as a profession, they failed to see the aftermath. After a short period of self-criticism, they went back to business as usual, and kept on producing economic forecasts that were out of line with subsequent reality. There is a saying that the deep purpose of economic forecasting is to make astrology look good by comparison. This was bit of an inside joke. What is different now is that the wider public knows this, too.

As for Brexit, almost everybody accepts that there will be a possibly significant short-term hit to the British economy. You don't need an economic model to see that. But it would be utterly immoral in our view to base a decision on the long-term political future of a country on a conjunctural effect. The long-term economic effects, by contrast, would be a legitimate issue, but these are much harder to gauge because they depend on factors unknown to us, including, but not only, the exit deal. The attempt to model the long-term impact is intellectually dishonest.

Electorates may not understand economic arguments in fine detail, but they do know that their real incomes have been stagnating for a long time. And many of them have decided, rightly or wrongly, to blame globalisation and European integration, for this fact. We think the link is wrong, but the concern about real incomes is genuine, and needs to be address by policies, not through arrogant "we know better" type responses.

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