Monday, 8 September 2014

George's Crystal Balls

The Financial Times has an excellent article about Philip Tetlock and the business of predicting the future (-- How to see into the future - Tetlock is a Canadian psychologist whose devastating analysis of professional forecasters ("Expert Political Judgement", published 2005) showed just how wrong the experts can be. He is now leading a new project to establish how to make better predictions.

The article suggests that working together in teams, and simple training to identify and avoid personal biais,  improves or ability to predict accurately.

Chancellor of the Exchequer George Osborne works in a team (the Cabinet) with access at the Treasury to the best data. So it must be personal biais that is clouding his crystal ball.

Because he has made two bad calls this year. The first came in February 2014 when he  'ruled out' a currency union with Scotland. That the Scottish Government proposed a union of currencies was not new; the independence 'white paper', "Scotland's Future" had announced this intention in 2013. The idea of the currency union had been selected by a commission of leading economists as the best option for Scotland. But Osborne has a severe personal biais that favours London and the City. His 'no currency union' speech was clouded by that biais.  Despite (one hopes) risk assessments from the Treasury and the Bank of England he has continued to nail himself to this sinking ship, repeating on Sunday that Scotland could not have the pound.

As a direct consequence of his inability to predict the future, the pound is now falling. Dealers and investors have seen through the fog and are looking at a country with a £1.3 trillion debt that is at risk of losing the asset that props up that debt and that makes it payable: Scottish North Sea oil. They have worked out what the Chancellor could not; a union works for both Scotland and England. It allows England to say 'our currency is backed a solid asset' and it allows the new nation of Scotland to continue business as usual with its largest trading partner.

But Mr Osborne's vision was blinded by biais. And now he is playing a really dangerous game, for the pound is sliding downhill. How far can he let it slide before he takes up Nicola Sturgeon's invitation, issued on Sunday, to sit down for a sensible discussion about the currency union? I guess that if the pound falls below $1.45 (a 10% devaluation) he'll be forced to back-track and to admit that 'in certain circumstances' a currency union would work. And when he does that, perhaps two or the days before the poll, the last thin pit-prop in the 'Better Together' hole in the ground will collapse.

The second bad call came on Sunday during the Andrew Marr show. Mr Osborne said that within a couple of days new powers on tax and welfare would be announced for the Scottish Government. This is rash, late, political panic, and it again illustrates poor future judgment. By saying that Scotland could have these powers he's effectively admitting that Scotland needs these powers. And if Scotland needs them, why not have the whole show? Why not have independence?

And we get these undefined extra powers by voting No?


Here again Mr Osborne shows biais, but this time it's a nastier one; he appears to think that we are all stoopit, as stoopit as the #PatronisingBTlady. Because you'd have to be pretty stoopit to miss the lack of logic in this statement. The only chance of getting extra powers is to vote Yes, because a strong Yes just might persuade Westminster to legislate. Voting 'No' allows politicians off the hook: just like the last full Referendum in 1979 there will be no new powers if we vote No.

In the same interview on Sunday Mr Osborne said that there would be no resignations if Scotland voted Yes.

This could be his third and final bad call.

Because if I were a backbench Conservative MP I would be braying for Osborne's (crystal) balls.

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