Big Ben from London Eye

Economists have lost the public’s trust by meddling in politics

Michael Gove famously said during the Brexit campaign that people “have had enough of experts”. Certainly, the outcome suggests that many were sceptical of the doom-laden economic projections of Project Fear.

But what do the public think about economists themselves? An intriguing survey released last week by ING bank and the Bristol University Economics Network sheds light on how this particular group of experts is viewed. The findings were presented at a seminar held in the Treasury last week.

Some key results were reassuringly as expected. For example, an overwhelming majority of respondents, in the poll conducted by You Gov, think that economics is important.

There is a widespread misconception of what economists actually do. A great deal of media focus on economics is about macro economic forecasts, what will happen to GDP, inflation, interest rates and the like. In fact, very few academic economists work on forecasting problems, and even within the Treasury and the Bank of England, the teams directly involved with this are small.

Most economists work on micro problems, trying to figure out, for example, the impact of changing tax rates on incentives, or trying to assess the costs and benefits of an infrastructure problem.

In principle this is useful work. But, regrettably, the survey did not disclose to the respondents just how many economists are employed in the public sector. In 1964, the incoming Labour government of Harold Wilson doubled the number of economists in the civil service from six to twelve.

Now there are 1,400, not counting those working in the Bank of England and the numerous regulatory authorities. Much of the expansion took place under Gordon Brown. It is hard to believe that diminishing marginal returns, to use a jargon economics phrase, have not set in. In plain English, there are far too many of them.

An important feature of the survey is that there is a big problem of trust in the opinions of economists. This is particularly the case with older people and with Leave voters. Many believe that economists express views based on personal and apolitical opinion than on verifiable data and analysis.

A striking illustration of this is of course Brexit itself. It cannot be said too often that the Treasury forecasts of the consequences of a Leave vote predicted a massive rise in unemployment of 500,000 by the end of 2016. It has of course fallen.

At least 90 per cent of professional economists in the UK supported the Remain campaign. Some brave souls in university departments who favoured Leave found themselves virtually ostracised. The shameful attacks on Leave voters, accusing them of being dupes and incapable of understanding the arguments, are based on the misplaced intellectual certainty of the economics mainstream on this topic.

Economics is far from being an empty box, and it can usefully illuminate many practical problems. But the profession needs to be more honest with the public. Some parts of the discipline do have strong empirical backing. Others seem based more on groupthink than on objective science.

Paul Ormerod 

As published in City AM Wednesday 10th May 2017

Image: Big Ben from London Eye by Zen Whisk is licensed under CC by 2.0

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ELLIE EVANS

Partner

e: eevans@volterra.co.uk
t: +44 020 8878 6333

Ellie is a partner at Volterra, specialising in the economic impact of developments and proposals, and manages many of the company’s projects on economic impact, regeneration, transport and development.

With thirteen years experience at Volterra delivering high quality projects to clients across the public and private sector, Ellie has expertise in developing methods of estimating economic impact where complex issues exist with regards to deadweight, displacement and additionality.

Ellie has significant experience in estimating the economic impact across all types of property development including residential, leisure, office and mixed use schemes.

Project management of recent high profile schemes include the luxury hotel London Peninsula, Battersea Power Station and the Nova scheme at London Victoria. Ellie has also led studies across the country estimating the economic and regeneration impact of proposed transport investments, including studies on HS2 and Crossrail.

Ellie holds a degree in Mathematics and Economics from the University of Cambridge.