I feel quite sorry for George Osborne. Not that I take much notice of politicians normally, but he’s been made the poster boy for the blind stupidity of politicians everywhere with the reports of his “I’m going to Ireland to listen and learn” comment. He even got a few minutes of mockery in, “Have I Got News For You”.
I don’t comment much on international economics because it isn’t my area, I focus on personal finance. That’s the bit that I know something about and that I assume is of interest to the average person who looks at the site. After all, it is hard enough to control your own mind and money, how are you going to make any difference to national or international policy?
But the story of Mr Osborne is interesting because it follows the standard pattern of everybody failing dismally to predict the future, then assuming in hindsight that they understand what happens and are entitled to mock those who also failed to predict.
George thought the Irish economy was doing well. Just like all the journalists, economists, fund managers etc. he thought he could read the signs. But he didn’t have a crystal ball and, like everybody else, his investment (in his case, his reputation) went down rather than up. Now the journalists are mocking him and saying that he should have realised that the problem was the failure to regulate the banks. The journalists think they can understand exactly what went wrong, regulation was weak, so they think their crystal ball will work and they can predict what will happen in future.
The trouble is, the future can’t be read from the past any more than it can be read from a crystal ball. Regulation won’t work, until we get some recognition that the way people think about their money is more important than the money itself, the regulations about the money or what the politicians or journalists say about the money.
And until we get some recognition of the fact that the thinking styles, decision making processes, biases, psychological hang ups (like refusing to accept that their crystal ball isn’t uniquely accurate) of regulators is just as important as the “man on the Clapham” omnibus – in other words that everybody’s thinking is the same and “experts” aren’t somehow better than all of us, we’re going to carry on having problems.