Gary Stevenson, Abby Innes, and Nadhim Zahawi debate the failures of modern economic theories.
Are economic forecasts as fanciful as astrology?
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Governments, bankers and economists spend a great deal of time predicting the economy. Their forecasts have a profound effect on policy. The forecasts though are often wrong, and critics argue we just don't have a credible theory of how the economy works. In 2023, 70% of economists polled predicted a US recession which never happened. In 2021, 16 of the 36 living American Nobel economists declared “there was no threat of inflation”. In Britain, the government body tasked with forecasting, the OBR, has admitted 'genuine errors' in its forecasts of inflation. Not surprisingly one of the world's leading economic research institutes concludes 'pretty much everything we could have got wrong, we got wrong'.
Should we conclude that 70 years after Keynes, and 40 years after monetarism, we lack a robust overall economic theory and urgently need one? Can we eradicate the impact of political beliefs and assumptions in economic forecasting? Or are forecasts from economic models always going to fail to make precise predictions and we just have to recognise that reality?
#economics #costofliving #finance #politics
Nadhim Zahawi is a politician who served in various ministerial positions under Prime Ministers Theresa May, Boris Johnson, Liz Truss, and Rishi Sunak. Gary Stevenson is a former financial trader who became an activist against inequality and a prominent YouTuber. Abby Innes is an Associate Professor in Political Economy at LSE focusing on how the UK’s economy mirrors the Soviet Union. Hosted by Hilary Lawson.
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00:00 "The average person today has a living standard that exceeds that of an 18th century monarch"
00:37 Abby Innes on why economics isn't a science - and why our faith in neoclassical models has led to our downfall
03:54 Nadhim Zahawi defends monetarism and economic predictions
08:12 Gary Stevenson on the failures of economists and the successes of financial traders
11:49 Do we have an economic theory that actually makes sense of the economy?
15:12 Machine models of the economy are flawed
16:22 The difficulty with trying to predict how humans will behave
20:21 Economics is not a hard science
23:01 Traders make money when economists get it wrong
25:11 Factoring the ecological crisis into economics
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