“You Don’t Know What You’re Doing...”

This might be a familiar refrain on matchday, as yet another referee gets it in the neck from a partisan crowd - as the chap who officiated the Germany-Scotland game did, no doubt. However, it's rare for economists to be humble enough to admit that, many's the time that we aren't always as certain of economic outcomes as we think we are.

Gerd Gigerenzer's excellent book "Risk Savvy: How To Make Good Decisions" looks at lots of instances of this, not least investing. If you ask 10,000 investors for their advice and give them a heads/tails type choice, then after 1 year 5,000 of them will have guessed correctly. After 2 years, it will be 2,500 and after a decade it will be around 10. However, we are wired to infer that their success is a function of skill and judgment and not luck.

Thus, it's refreshing to read a newspaper article that isn't afraid to buck this trend and argue that we economists have little clue as to what's going on, and that sometimes intuition and anecdotal evidence carries more weight than official statistics or formal economic models. However, Roger Bootle in today's Daily Telegraph does just that here.

Ironically, of course, the fact that we apparently know so little hasn't stopped Bootle from writing a series of books - from "The Death of inflation" for those of us of a certain vintage through to "the Trouble With Europe" most recently. However, it's nice that he admits that some of what we try to describe, analyse and forecast is beyond our comprehension.

This is a good place for those of you starting your economics courses to reflect on the nature of what you are studying: yes, it's a science of a sort, but it isn't a science in the pure sense, and it pays to be aware of that, particularly in the aftermath of the 2008 financial crisis.