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Why We Can't Trust Experts
Especially the ones armed with spreadsheets
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Today, a story about experts.
Those people weāre told we have to listen toā¦
As we stand in awe & reverence, staggered by the depth of their knowledge.
Something like that anyway.
See, when weāre looking for answers, we tend to seek out experts.
Seems logical, right?
Thereās two problems with this.
The first is a marketing one.
If an expert is easy to find, chances are theyāre a professional expert.
Which is often different to being an actual expert (expertise, but no marketing budget).
The second problem is an uncomfortable truth.
Experts are humans, just like the rest of us.
Which means theyāre biased, and they make mistakesā¦
See, after the Great Financial Crisis, governments became obsessed with debt being too high.
This probably seems absurd in the current context, where rules must be adhered to, but definitions can be changed š
Incredible.
REVEALED!!!! ONE SIMPLE TRICK to convert a -Ā£22bn black hole into a +Ā£50bn slush investment fund
Youāll have to trust us. Debt being too high was a real thing that governments genuinely worried about 10 to 15 years agoā¦
Actually it was more than just worry.
They were TERRIFIED.
This expert study played a huge role š
January 2010: Professor Carmen Reinhart and the former chief economist of the International Monetary Fund, Ken Rogoff, are presenting a research paper called Growth in a Time of Debt.
At a time of economic crisis, their finding resonates - economic growth slows dramatically when the size of a country's debt rises above 90% of Gross Domestic Product, the overall size of the economy.
Word about this paper spread. Policymakers wanted to know more.
The work was referenced by countless policymakers across the world to justify austerity.
Spending was cut, jobs were lost.
People were struggling & miserable.
Until a few years later whenā¦
A Harvard student tried to replicate the results š
Herndon ā¦. spotted a basic error in the spreadsheet.
The professors had accidentally only included 15 of the 20 countries under analysis in their key calculation (of average GDP growth in countries with high public debt).
Australia, Austria, Belgium, Canada and Denmark were missing.
Oops š¬
Not only thatā¦
The rest of the paper turned out to be a complete clusterf**k too.
Remember, this was co-authored by someone who had Chief Economist at the International Monetary Fund on their CV!
Not only were some countries missing entirely...
Data was weighted incorrectlyā¦
One outlier year was given the same weight as two DECADES of high debt with robust growth. And so on.
The eventual conclusion, after all the kinks had been ironed out?
High debt is correlated with somewhat lower growth, but the relationship is much gentler and there are lots of exceptions to the rule.
And thatās how a decade of austerity was caused by a simple spreadsheet error.
Thatās a mistake made by proper* experts.
The ones with all the credentials and social proofā¦
Now, weāre experiencing an epidemic of āexpertsā
Those people who speak confidently about subjects that they donāt fully understand, but have VERY strong opinions about.
Especially if thereās a highly emotive angleā¦ š
140 billion wiped from UK economy. Tax on that alone would fill the āblack holeā.
The loss is estimated to keep growing.
None of us want tax rises or cuts. None of us need exorbitant food bills.
Not all of us voted for it.
When can we collectively agree Brexit has failed?
ā Jemma Forte (@jemmaforte)
9:35 AM ā¢ Oct 21, 2024
Nobody knows what it means, but itās provocativeā¦ gets the people going
Meanwhile, reality keeps chugging along, hiding away in the boring shadowsā¦
See, if you work in and around the City, you know that not much has changed.
And the physical location of āclearingā in a digitised world is irrelevant.
The City STILL dwarfs Europeās financial industryā¦
Another stat from the same report:
London listed companies have a total value of almost Ā£5 trillion, Ā£2.3 trillion more than the next largest European exchange.
The difference is ENORMOUS.
But this stuff doesnāt get the coverage.
Change sells.
Bad news sells.
Letās go back to that 140 billion pound figure.
Itās not the first time weāve seen itā¦
Guess what?
That figure was calculated by experts.
Khanā¦ based his statement on a report he commissioned from economic consultants Cambridge Econometrics, who estimated how fast the economy would have grown if Britain had voted to stay in the EU
Calling it a calculation is a dis-service to maths.
These guys are trying to estimate something that doesnāt existā¦
Two little words let them get away with pretty much anythingā¦
ceteris paribus
The latin for all other things being equalā¦
So, after a global pandemic that changed behaviours in a thousand different ways, and with a looming AI revolution, weāll just assume that nothing would have changed and extrapolate the past into the futureā¦
Basically, we have an expert study, thatās flawed from the outset, being used by people cosplaying as experts to prove a point.
The main problem with these studies is that they try to treat economies like physics, instead of dynamic systems comprising billions of highly emotional & adaptive humansā¦
āImagine how much harder physics would be if electrons had feelingsā
Because these āexpertsā obsess over the āobjectively measurableā stuff, they miss everything else.
In other words, they miss the expertise.
All that messy stuff thatās hiding in the irrational brains of people in the real world.
Out there experiencing things, understanding the incentives of the actors involvedā¦
Like this guy š
This is classic waffly, vague, unempirical Remoaner spin from Tony Blair fanboy Cohen. New hires are now "strongly focused." What's the evidence? In this THREAD I will show the real numbers & add some topical details
ā Henri d'Anselme (@semperfidem2004)
11:23 AM ā¢ Apr 28, 2024
A lot of people would be massively turned off by the language used thereā¦
But if youāve followed his musings for the past eight years, youāll know this is someone who works in the City...
Getting increasingly frustrated by the coverageā¦
When this person has been highlighting precisely why Brexit would only have a tiny impact on the UKās finance industry since 2016.
From spreadsheet errors to wild guesses dressed in complexity costumes (and lots of algebra), we canāt blindly trust the experts.
Until they open themselves up to the chaos of the real world, the experts will remain perpetually baffled...