Why economists get it wrong | Gary Stevenson takes on former chancellor Nadhim Zahawi

00:06:18
https://www.youtube.com/watch?v=DrXROVDgcB0

Zusammenfassung

TLDRThe speaker, a successful former trader, discusses the unpredictability of economic forecasting and its implications for young economists, particularly those from disadvantaged backgrounds. They emphasize their own ability to predict economic trends accurately, which contrasts with the failures of traditional economists who have continually mispredicted interest rates. The speaker argues that the economic field needs reform, suggesting a system that better rewards accurate forecasting. They reflect on their academic experiences and express frustration with the pervasive errors within economic predictions, advocating for humility and acknowledgment of mistakes among economists.

Mitbringsel

  • 💼 The speaker became a multi-millionaire by accurately predicting the economy.
  • 📉 Traditional economists have a poor track record in forecasting interest rates.
  • 📊 Young economists from disadvantaged backgrounds face barriers to successful careers.
  • 🏦 Banks pay top salaries for economists with proven predictive accuracy.
  • 🔍 There's a disconnect between academic economics and real-world trading.
  • 🗣️ The speaker emphasizes the need for accountability in economic predictions.

Zeitleiste

  • 00:00:00 - 00:06:18

    The speaker, a successful trader with economics degrees, emphasizes the pitfalls of economic predictions, reflecting on a history of incorrect forecasts about interest rates. He argues that traditional academic routes in economics are inaccessible for those from poorer backgrounds, which skews the representation of successful economists. He highlights the value of practical experience in trading over academic theory, suggesting that decision-making in economics is more about understanding behavior than purely scientific measurement. He stresses the need to reward correct predictions and learn from mistakes, advocating for a more humble approach in economics that acknowledges the challenges of accurate forecasting.

Mind Map

Video-Fragen und Antworten

  • Why do banks pay high salaries to certain economists?

    Banks pay high salaries to economists who consistently make correct predictions when others do not.

  • What is the main criticism of traditional economic predictions?

    The speaker criticizes traditional economic predictions for their frequent inaccuracies, particularly in predicting interest rates.

  • How does the speaker describe their own prediction success?

    The speaker describes themselves as a multi-millionaire who continually predicts the economy accurately.

  • What is the main challenge for young economists from poor backgrounds?

    Young economists from poor backgrounds often cannot afford to pursue academic or policy careers due to financial constraints.

  • What should be done to improve economic predictions?

    The speaker advocates for rewarding accurate predictions and punishing false ones.

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Automatisches Blättern:
  • 00:00:00
    I'm a multi-millionaire now because I
  • 00:00:02
    continually predict the economy right do
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    you think you have an overall economic
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    are you driving that decision or is it
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    your hunch of thinking well we we can we
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    can determine the future of the economy
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    on B on that basis on a sort of
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    assessment why do you think banks pay
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    people like me2 million pound a
  • 00:00:20
    [Music]
  • 00:00:25
    year okay let's be clear about what's
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    happening here okay I've got one econom
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    degree from the LC one economics degree
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    from Oxford we never once mentioned
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    distribution I started work as a
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    interest rates Trader in
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    2008 everybody predicted rates to go up
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    in 2009 they were wrong in 2010 they
  • 00:00:45
    were wrong in 2011 they were wrong in
  • 00:00:47
    2012 13 14 15 16 17 18 19 they were
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    wrong in 20120 everybody finally agreed
  • 00:00:56
    interest rates and inflation would never
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    go up again and interest rates went to
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    7% okay it's very very clear we're bad
  • 00:01:03
    at this it's very very clear we are bad
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    at this now I want to put you in the
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    position of a 21-year-old economics
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    graduate from an elite University with
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    very very very good grades okay from a
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    poor background this was me right I walk
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    into my professor's office he says stay
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    here do a masters you got very good
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    grades okay what are my options Here I
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    stay in Academia and then I can work in
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    policy I can work for government I i'
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    have to do a master's a PhD 3 or four
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    years postdoc I'd have to work as an
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    intern for like three or four years
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    making no money maybe 15 years down the
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    line I'll make some money or you can go
  • 00:01:42
    into the city like I did and I was a
  • 00:01:44
    multi-millionaire at 25 okay kids from
  • 00:01:48
    poor backgrounds cannot afford to work
  • 00:01:50
    in Academia they cannot afford to work
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    in policy I could not name you a single
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    successful policy wonk economics
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    government minister
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    Economist from a poor background every
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    single year I was a professional Trader
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    the most successful Trader at the bank
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    was from a working-class background this
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    is what we've created we've created a
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    system which obviously takes all the
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    good economists and said we are going to
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    fill your mouth with money if you shut
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    the up um let me give you an
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    analogy so when I launched you govern
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    2000 um the industry then was led by uh
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    s Bob wer then Lord Wester of moray and
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    he had convinced the whole world that
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    what poing was about was scientific
  • 00:02:35
    measurement of human behavior we came
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    along the internet began and we said
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    actually that is a big lie right no
  • 00:02:43
    polling is based on scientific
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    measurement right we are all in the
  • 00:02:47
    business of modeling that doesn't mean
  • 00:02:50
    we need to counsel institutions like the
  • 00:02:52
    OB I think it's still worthy to be able
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    to build models and for decision makers
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    you know when I was in the treasury you
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    know I need information I need to be
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    able to look at that and then make a
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    judgment hold risk right and get
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    comfortable holding risk and you the one
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    thing you got to get comfortable with is
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    you will not get every dis decision
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    right Gary are you comfortable with a
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    sort of consensus from different points
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    of view here that we don't have an
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    economic theory and in principle we
  • 00:03:18
    can't have one that that is that is
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    accurate and precise you comfortable
  • 00:03:23
    with her I've spent a lot of my life
  • 00:03:25
    having very rich people tell me it's
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    impossible to predict the economy
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    I've done a pretty good job of
  • 00:03:33
    it I'm a multi-millionaire now I grew up
  • 00:03:38
    very very poor because I continually
  • 00:03:40
    predict the economy right do you think
  • 00:03:42
    you have an overall economic driving
  • 00:03:44
    that decision or is it your hunch of
  • 00:03:47
    thinking well I I just got a sense of
  • 00:03:49
    what's going on and you know we we can
  • 00:03:52
    we can determine the future of the
  • 00:03:54
    economy on B on that basis on a sort of
  • 00:03:56
    assessment why do you think banks pay
  • 00:03:58
    people like me 2 million pound a year
  • 00:04:01
    I don't know you tell because we've got
  • 00:04:02
    a very good long-term track record of
  • 00:04:05
    making correct predictions listen
  • 00:04:08
    economics is not a physical science we
  • 00:04:10
    can't do experiments so how do we know
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    who's good and who's bad well the banks
  • 00:04:14
    have got an idea that what you do is you
  • 00:04:16
    look for people who consistently make
  • 00:04:18
    correct predictions when other people
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    don't and and they pay those people a
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    ton of money and listen I want to tell
  • 00:04:26
    you a quick story okay when I was when I
  • 00:04:28
    was just finished working in the city I
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    went back to the university I did a
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    master oer 2017
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    2019 we had a lesson on interest rates I
  • 00:04:38
    went up to the professor afterwards and
  • 00:04:40
    I said why do you think we've been so
  • 00:04:41
    bad at predicting interest rates for so
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    long at that point we' incorrectly
  • 00:04:44
    predicted interest rate Rises 11 years
  • 00:04:46
    in a row he said no we always knew rat
  • 00:04:50
    to stay zero which is like categorically
  • 00:04:52
    provably wrong and I I was shocked and I
  • 00:04:56
    said no we didn't we kept saying it go
  • 00:04:58
    up and he was like no we knew so I went
  • 00:05:00
    back to my my flat and I sent him the
  • 00:05:02
    data and he was oh yeah we did get wrong
  • 00:05:04
    11 years in right this these guys are so
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    bad they are unable to know that they're
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    bad this is literally the situ and at
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    the same time you got rumors for the
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    people like me obsessing about what's
  • 00:05:18
    going to happen obsessing about what's
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    going to happen and we try and work out
  • 00:05:22
    how to predict things and and the way
  • 00:05:24
    you predict things well is you
  • 00:05:25
    understand them well you know I've said
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    it before you have to start rewarding
  • 00:05:30
    people for being right punishing people
  • 00:05:32
    for being wrong and giving the
  • 00:05:34
    microphone to people who are right look
  • 00:05:36
    you do it in in and again I go back to
  • 00:05:38
    poing we do after every general election
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    the pollsters through uh the British
  • 00:05:42
    poing Council will get together and try
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    and work out what mistakes they made in
  • 00:05:46
    their predictions they they predicted a
  • 00:05:48
    labor majority 20 points only came in at
  • 00:05:50
    just shy of 10 um and I
  • 00:05:53
    think humble enough to know that we're
  • 00:05:55
    in the business of modeling not
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    scientific measurement right to be able
  • 00:05:59
    to build better models I hope um uh for
  • 00:06:02
    the future but the one other thing that
  • 00:06:05
    I think did fuel inflation is obviously
  • 00:06:08
    the
Tags
  • economy
  • predictions
  • interest rates
  • economics education
  • inequality
  • trading success
  • economic modeling
  • rich vs poor
  • banking industry
  • economic theory