Bank of England chief economist Andy Haldane says economists are “to some degree in crisis” after failing to foresee the 2008 financial crisis and the impact of the Brexit vote.
In a speech at the Institute for Government in London yesterday, Haldane compared economists’ failure to predict the 2008 financial crisis to former BBC weather presenter Michael Fish’s inaccurate forecast before a storm hit the UK in 1987.
According to a BBC report, Haldane said the “rather narrow and rather fragile” economic models were fine while the economy was good but they had not coped when things were “tipped upside down” by the 2008 financial crash.
He said: “Could we find a way out of the trap? Of course we could. Let’s go back to a different crisis, which is the crisis, not in economic forecasting but in weather forecasting, that resulted from the 1987 storm.
“Remember that? Michael Fish getting up: ‘There’s no hurricane coming but it will be very windy in Spain.’ Very similar to the sort of reports central banks – naming no names – issued pre-crisis, ‘There is no hurricane coming but it might be very windy in the sub-prime sector’.”
Haldane pointed to how weather forecasting had changed following Fish’s 1987 forecast including the increased use of data that has transformed weather reporting.
He said: “And some of the self-same could be true if we move from weather forecasting to economic.”
Haldane said there were “reasonable grounds” to support that 2017 might be a difficult year for consumers as the drop in the pound started to impact prices.
The BBC reports that when asked if there was an “economic hurricane” forecast after the Brexit vote, Haldane said: “It’s true, again, fair cop. We had foreseen a sharper slowdown in the economy than has happened, in common with almost every other mainstream macro-forecaster.”