The perils of prediction
Peter Murtagh was a relative novice as a journalist with The Irish Times in March 1982 when he met then Taoiseach, Charles Haughey strolling through the corridors of Leinster House. Anxious to press his case for a full interview with the great man, Murtagh fell into lockstep with Haughey and made conversation as best he could.
As was his wont with journalists he did not already know, Haughey prodded him with a few probing verbal jabs before asking:
Who writes the editorials for The Irish Times?
Without waiting for an answer, the Taoiseach continued:
They sound like they were written by an old woman in a bath, with the water going cold around her fanny.
In its edition of 2 June, The Economist served up an editorial that shivered with gloomy nervousness about the prospects for a recession in the United States. The three headlines over it set the tone:
The coming downturn
A recession in America by 2024 looks likely
It could be mild — but fear its consequences
The piece started by listing the present clouds swirling over the US economy: surging inflation (especially food and energy), supply chain problems (because of war in Ukraine and China’s zero COVID policy), a red hot labour market and rising interest rates.
However, The Economist suggested, though a recession is likely, “it should be a relatively shallow one”. Consumers have plenty of cash. Businesses are still profitable. The housing market is already easing. The banks are strong. Yes, inflation is high. But it is not deeply embedded, so should be easy enough to purge.
Gloom quickly regained the upper hand.
The war in Ukraine has hit the rest of the world in two ways, increasing the price of energy and food and raising the risk of food supply shortages, especially in developing countries. A recession in America would add to these troubles by reducing exports to the US and rising dollar interest and exchange rates would increase their public debts.
Within the US itself, the stock market is still pricey despite the falls in share prices already this year.
…after over a decade of cheap money, no one can be sure how stratospheric asset prices will be affected by the combination of higher interest rates and a Fed-induced recession…
If something goes wrong, the Fed will find it hard to bail out Wall Street yet again, because it will at the same time be forcing Main Street to cope with higher rates and job losses.
Then there is America’s “hyper-partisan politics”
If the economy is shrinking, the race for the White House in 2024 is likely to be even more toxic than expected.
The glum tone ascends to a crescendo in the final paragraph.
If America’s economy does shrink in the next year or two, it could even alter the country’s long-term direction.
… recession may fuel populism and protectionism and even return Donald Trump to the presidency.
It winds up to this terrifying conclusion:
Measured by the technocratic yardstick of lost GDP, the next recession could be mild. But not when judged by its impact on the emerging world, asset markets and American politics. Do not underestimate the perils that lie ahead.
The sub-heading over that final paragraph read: “From the roaring 2020s to the raging 2020s.” As I sat in my bath, the few inches of water getting colder around me, I had a vague recollection of reading a similar headline in the not too distant past. And, indeed, I was able to unearth it.
In its edition of 16 January, 2021, The Economist presented us a leading article under the same tripartite headline structure:
The new era of innovation
Why a dawn of technological optimism is breaking
The 2010s were marked by pessimism about innovation. That is giving way to hope
Within the leader itself, we were offered this:
Today a dawn of technological optimism is breaking. The speed at which covid-19 vaccines have been produced has made scientists household names. Prominent breakthroughs, a tech investment boom and the adoption of digital technologies during the pandemic are combining to raise hopes of a new era of progress: optimists giddily predict a “roaring Twenties”.
To be fair, the publication did not predict that this benign vision would happen for sure, only that it could — with a reasonably fair wind. The leader concluded with this optimistic peroration.
If governments rise to the challenge, then faster growth and higher living standards will be within their reach, allowing them to defy the pessimists. The 2020s began with a cry of pain but, with the right policies, the decade could yet roar.
“Roaring twenties” or “raging twenties”, which is it to be? Was The Economist way off the mark 17 months ago? If so, why should we trust that it is on the money now? Is its crystal ball like a stopped clock, exactly right twice a day, but we never know when that is?
Moving swiftly along, let’s look at an instance of guesstimating the future that was much tighter in focus and shorter in duration.
On the eve of the first round of matches in the Leinster and Munster hurling championships in April, The Irish Times gave us the bookies’ odds on each county. Two months later, both championships have been completed, so we can see how well the bookies did and they did okay rather than brilliantly.
In Leinster, they were close enough. Galway were favourites at 11/8 with Kilkenny close behind on 13/8, Wexford and Dublin comparative outsiders at 9/2 and 6/1 respective. Kilkenny beat Galway in the final.
Munster was not quite so good for them. Eventual winners Limerick were odds on at 8/11. However, Clare, who made it to the final and ran Limerick close, were rank outsiders at 16/1. In between, Waterford, Cork and Tipperary were at 3/1, 5/1 and 12/1 respectively.
But those were much narrower and tighter frameworks for prediction than confronted The Economist. However, even within the narrowest sporting framework, a single contest, prediction can go seriously awry. Last Friday, odds-on favourites, Leinster (40/1 ON) were soundly beaten by the South African Stormers (14/1) in the URC semi-final.
Driving through the unseasonal rain to Thurles for the Munster hurling final last Sunday week, I listened to the “panel” discussion of the day’s newspapers on Brendan O’Connor’s RTE Radio 1 programme. It was one week after the disastrous queues at Dublin Airport had led to people missing flights, so the airport was still the main topic, but there was a strong supporting casts of issues vying to embed themselves as reasons to be fearful. These might loosely be grouped under the heading “cost of living”, with heavy emphasis on the need for the Government to help people cope with the consequent financial hardship.
Nobody on the panel paused to reflect on the fact that the problems at the airport arose from the airport authority’s underestimation of the pace of resurgence in people’s appetite to resume foreign travel for pleasure. Week-end travel is predominantly leisure travel and therefore discretionary expenditure.
Stand tickets for the match in Semple Stadium were €40, terrace tickets €30. The stadium was full. The game was televised live, so it was money spent that could have stayed in the pocket.
The week before the match, Bruce Springsteen’s programme of concerts at the RDS in Dublin next May was extended from two to three. The price for seats ranged from €96 to €156 per person. Standing accommodation was a uniform €131. All tickets for these concerts sold out immediately after going on the market. You could stream the Boss’s entire catalogue for a year for not much more — and you wouldn’t need a hotel room in Dublin and a full tank of fuel to get there for that.
That is not to imply that there is no financial hardship in Ireland. Of course there is, and those enduring hardship will suffer more as a consequence of inflated prices for essential purchases. But that is not the whole picture. Financial circumstances vary greatly across the spectrum of what might reasonably be called “ordinary” households. But nuance or grey, rather than black or white, does not make for riveting radio punditry, even if it more accurately portrays our everyday lives.
I can predict everything except the future. But I take comfort in the belief that tomorrow generally is more likely to resemble today than it is to differ from it. Change comes dropping slower than the pundits would have you believe. Calm and cool are better handrails to guide us into the unknown than either comfortable complacency or chronic caution. But, just in case, better to spread the eggs of your options across several baskets than load them all in only one. Protecting oneself against things going badly wrong is a better approach than trying to get things spectacularly right.
Excess of either optimism or pessimism are the enemies of sanity, serenity and, probably, success too. For most of us, life is and will remain a mix of the good and the bad with a tendency to revert to the mean over time. Time erodes the intensity of both the highs and the lows and that is at least as much a source of relief as it is one of regret.
Maybe the editor of The Economist should warm up her bathwater.