Saturday, February 04, 2023

Don't believe the experts!

 Arvind Subramanian, former Chief Economic Advisor in the Finance Ministry, has a cheeky take in today's BS on the judgements on experts on sundry matters:

  • China’s zero- Covid policy was hailed as a success until the recent spurt in Covid infections threaten to trigger an insurrection of sorts.
  • The US was said to have fared badly in its handling of Covid because it’s a polarised society in contrast to the egalitarian Sweden- “until Sweden became a cautionary tale”.
  • In the US, the doves ruled on monetary policy until a few months ago. With the persistence of inflation, the hawks took over. Now with signs of inflation abating, the doves “are flying again”· 
  • Economists warned that the confluence of the conflict in Ukraine, soaring inflation and rivalry between US and China would plunge the world into recession. The clouds are receding in recent weeks and it appears, well, we may not end up with a recession, after all.
  • Anybody remembers how many times the Chinese credit bubble was supposed to collapse and wreck the Chinese economy?

Subramanian thinks the problem is the media: they are looking for snappy comments all the time and experts are happy to give them quotes for their two minutes of fame.

 The problem runs deeper, methinks. Experts simply lack an awareness of grassroots realities. They are mostly armchair pundits who prefer to operate from the comforts of their air-conditioned offices. How else do we explain the high rate of failure of economic forecasts? It is said that economists can’t even forecast the past correctly. Then, there are the stock price and stock market forecasts, earnings forecasts.

 Political forecasts are worse- I have lost count of the number of times President Putin has been pronounced as seriously or terminally ill- seems fit enough to preside over the conflict in Ukraine. We were told that the Mr Putin would be deposed in a coup, the people of Russia would rise in revolt against the suffering inflicted on them, Russian economy would collapse…. and Ukraine was poised to triumphantly retake the Crimea from Russia. So much hot air.

 Mr Subramanian says experts should stick to their area of domain expertise. Alas, they don’t seem to do wonderfully even in that area. No better example that Mr Subramanian warning that a 5 per cent fiscal stimulus was needed to save the Indian economy from the impact of the pandemic- we seem to have managed quite well with a stimulus of under 2 per cent.


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