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Christopher Snowdon writes in The Spectator
IEA Head of Lifestyle Economics Christopher Snowdon has written in The Spectator discussing his successful bet against economist Jonathan Portes in 2018 that child poverty would not rise above 37 per cent by 2023.
Christopher wrote:
“This humiliating defeat is particularly awkward for Professor Portes as he has spent the last few years telling me that I know nothing and he knows it all. As you can imagine, this is gratifying for me, not least because it wipes out gambling debts racked up during the World Cup in which I was badly let down by Belgium. My only regret is that I didn’t specify that the prize be adjusted for inflation. Thanks to the neo-Keynesian economic policies Professor Portes promotes, £1,000 in 2018 is only worth £828 today.
“To the handful of lemon-suckers who say it is in bad taste to bet on child poverty, I say that we were not betting on child poverty. We were betting on the validity of economic forecasting. Portes’ prediction was a totem for all economic forecasting, most of which is little better than guesswork and should not be taken seriously. For example, in February, just four months after Liz Truss had to be restrained from ‘blowing’ a £30 billion ‘hole’ in the public finances, the Office for Budget Responsibility admitted that tax receipts were £30 billion higher than it had predicted.
“As a rule of thumb, the greater the political implications of a prediction, the worse the prediction will be. We saw this with the Covid-19 models in 2021 and we see it with economic forecasting all the time. The pessimism – or, more rarely, optimism – of the authors spills over onto the spreadsheet. The reason the Covid-19 models were wrong is the same reason economic models are usually wrong. They are unable to predict how people behave when incentives change.”
Both Christopher and Jonathan Portes were willing to put a personal stake behind their predictions – perhaps more economists should put their models to the test in the same way.
The full piece can be read here.
Christopher originally wrote this piece for the IEA blog.
Christopher wrote:
“This humiliating defeat is particularly awkward for Professor Portes as he has spent the last few years telling me that I know nothing and he knows it all. As you can imagine, this is gratifying for me, not least because it wipes out gambling debts racked up during the World Cup in which I was badly let down by Belgium. My only regret is that I didn’t specify that the prize be adjusted for inflation. Thanks to the neo-Keynesian economic policies Professor Portes promotes, £1,000 in 2018 is only worth £828 today.
“To the handful of lemon-suckers who say it is in bad taste to bet on child poverty, I say that we were not betting on child poverty. We were betting on the validity of economic forecasting. Portes’ prediction was a totem for all economic forecasting, most of which is little better than guesswork and should not be taken seriously. For example, in February, just four months after Liz Truss had to be restrained from ‘blowing’ a £30 billion ‘hole’ in the public finances, the Office for Budget Responsibility admitted that tax receipts were £30 billion higher than it had predicted.
“As a rule of thumb, the greater the political implications of a prediction, the worse the prediction will be. We saw this with the Covid-19 models in 2021 and we see it with economic forecasting all the time. The pessimism – or, more rarely, optimism – of the authors spills over onto the spreadsheet. The reason the Covid-19 models were wrong is the same reason economic models are usually wrong. They are unable to predict how people behave when incentives change.”
Both Christopher and Jonathan Portes were willing to put a personal stake behind their predictions – perhaps more economists should put their models to the test in the same way.
The full piece can be read here.
Christopher originally wrote this piece for the IEA blog.
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