[The Editors' Verdict] A Prediction Is Just a Prediction, It All Depends on Us

Economists Ridiculed for a Few Dramatic Prediction Failures
The Future Depends More on Our Choices, Will, Trust, and Policies

Nam Seung-ryul, Head of Securities Capital Market Division

[Asia Economy Reporter Nam Seung-ryul] Chris Sutton, a commentator for the British BBC, has been called the "Human Octopus" for his high accuracy in predicting wins and losses during the 2022 Qatar World Cup. Before the World Cup began, he correctly identified the 12 teams that would advance to the Round of 16. He also accurately predicted the score of the Morocco vs. France match among the four quarterfinal games. His forecast that Argentina and France would reach the final was also correct.

Sutton did not predict the outcome of every match correctly. He expected South Korea to beat Ghana 1-0, but they lost 2-3. His predictions that Brazil would defeat Croatia and the Netherlands would beat Argentina also missed the mark. His accuracy rate was 54.1% in the group stage, 62.5% in the Round of 16, and only 50% in the quarterfinals.

However, dramatic correct predictions tend to be talked about and exaggerated. In fact, Sutton’s accuracy rate is not much different from the probability of repeatedly flipping a coin and getting heads or tails, yet many football fans regard him as a "spot-on prophet."

At this point, economists might feel unfairly treated. It is rare for the numerous economic growth rate, unemployment rate, or inflation forecasts and revised forecasts issued by many economists to be completely wrong. (Although the differences can be huge in reality,) the numbers often look similar. Yet economists frequently face criticism and ridicule. They are called "experts who find out tomorrow why yesterday’s predictions did not happen today" or "meteorologists know the current weather, but economists don’t even know the current economic situation."

There is a reason economists receive such treatment. There have been many dramatic prediction failures at critical moments. Few economic experts foresaw the Great Depression in the 1920s, the oil shocks of the 1970s, or the 2008 global financial crisis. Even Paul Krugman, a Nobel laureate in economics, published a large mea culpa in the New York Times last July admitting his forecasts were wrong. However, his incorrect prediction that "there would be no inflation in the U.S. despite massive stimulus" remains unchanged.

Economists have many excuses as well. The most representative is that "the economy is a living, moving organism surrounded by uncertainty and complexity." It is difficult to predict where and how economic agents will move or to foresee crises with extremely low probability based only on past experience and statistics. Especially, it is nearly impossible to anticipate and prepare for sudden events like the COVID-19 pandemic or the war between Russia and Ukraine.

Despite being wrong at times, predictions also have positive functions. Even when facing the same crisis, how one responds can reduce damage to some extent. Therefore, it is necessary to prepare various scenarios based on diverse forecasts.

Of course, extreme predictions that exploit market anxiety or fear should be approached with caution. As the economic environment becomes increasingly complex and uncertainty grows, extreme forecasts are rampant.

However, whether rational or extreme, predictions are just predictions. The future is more influenced by our choices, will, trust, and policies. This is especially true for the economy. Looking back at the processes of overcoming numerous crises such as the foreign exchange crisis and financial crisis, or the stages of remarkable growth, the saying "it depends on oneself" fits quite well. In particular, the fate can diverge drastically depending on how the three economic agents?households, companies, and government?play the "triangle game." Next year, which everyone agrees will be difficult, is just around the corner.

Nam Seung-ryul, Head of Securities and Capital Markets Department

This content was produced with the assistance of AI translation services.