Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Brexit, experts, courts and EU competition law

with 8 comments

Gove - Experts

One of the most distressing aspects of the EU referendum campaign in the UK was the way in which expert advice was ridiculed by Vote Leave. Hard facts, evidence and serious research were dismissed and derided as irrelevant ‘scaremongering’. This high-point of this feast of anti-intellectualism was no doubt reached when Michael Gove, one of the leaders of Vote Leave, infamously declared that ‘people in this country have had enough of experts’.

As President Obama puts it, when ‘experts are dismissed as elitist, then we’ve got a problem’. This trend is now making the headlines the world over (thanks, Mr Trump), but it has a familiar flavour to us competition lawyers and economists. Expert-bashing has long been fashionable in our field. Some lawyers and academics believe it is cool to dismiss economic expertise as irrelevant at best and suspicious at worst. We have all heard that ‘economists use too much math’, ‘they make comically unrealistic assumptions’ and that, in any event, ‘the only thing they want is their consulting business to grow’.

The problem with expert-bashing is that it is systematically given considerable prominence in public debates. Serious economic research tends to be put on a par with nonsense, intuition, or outright falsehoods. As a result, the two are presented as being equally respectable. A serious paper published in Econometrica is worth as much as someone’s lay opinion, which may not be grounded on formal analysis. And the latter may be wittier, more controversial or more spectacular (i.e. a la Boris Johnson, with or without the hair).

I often think about it, and I worry. But when I look beyond the short run I tend to be more optimistic. My impression is that the ‘white heat’ of science and progress, to paraphrase Harold Wilson, irradiates everything in the end. As far as EU competition law is concerned, my optimism comes from the attitude of the EU courts, which, at critical moments, have always sided with formal analysis and consensus positions. Just think of AKZO, Airtours, Tetra Laval or Wood Pulp. This is not a coincidence. The core task of courts reviewing administrative action is after all to protect citizens against charlatans, megalomaniacs and, to be sure, the occasional errors made by authorities. And this task cannot be meaningfully achieved without listening to experts.

Written by Pablo Ibanez Colomo

25 July 2016 at 10:10 am

Posted in Uncategorized

8 Responses

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  1. I hope you’re right. Of course, for those of us who are likely to be beyond the ECJ’s jurisdiction at some indeterminate point in the future, the court’s rationalism will not help us…

  2. On experts, do you really think so? The Brexit case was not an attack on experts per se. But if someone in 2002 had attempted to predict household income in 2016 (using the number of households in 2002!) you might think they were a bit hopeful, if not charlatans. Yet that is exactly what Mr Osborne did in his predictions for 2030. The truth is that most predictions are not really “expert” predictions at all but merely guesses, even about next year, and all the evidence suggests that the errors are likely to be quite high, as recent events seem to be showing. You may not like Brexit, which is fine, but I am sure you have better arguments than this! Most of the economists I have worked with over the last 30 years are not in the macro-prediction business and would be upset to be bracketed with those that were. Careful microeconomics can be invaluable but not always Wertfreiheit. Best Tom Sharpe

    Thomas Sharpe

    26 July 2016 at 1:07 pm

  3. On experts, do you really think so? The Brexit case was not an attack on experts per se. But if someone in 2002 had attempted to predict household income in 2016 (using the number of households in 2002!) you might think they were a bit hopeful, if not charlatans. Yet that is exactly what Mr Osborne did in his predictions for 2030. The truth is that most predictions are not really “expert” predictions at all but merely guesses, even about next year, and all the evidence suggests that the errors are likely to be quite high, as recent events seem to be showing. You may not like Brexit, which is fine, but I am sure you have better arguments than this! Most of the economists I have worked with over the last 30 years are not in the macro-prediction business and would be upset to be bracketed with those that were. Careful microeconomics can be invaluable but not always Wertfreiheit.
    Best
    Tom Sharpe

    Thomas Sharpe QC

    26 July 2016 at 1:08 pm

    • Something similar came to my mind. Just think of the financial crisis. Macro-economists were unable to predict it happening, or at least they did not place enough emphasis on certain signs that it might happen. It is much easier to be clever ex-post. When I studied macroeconomics (less than 10 years ago) inflation targeting system was the golden rule. It has been seriously devalued since. The development of the theory of macroeconomics is not a straight line. In fact, reality always showed so far that macro-economists lack the expertise/data/models/etc. to come up with reliable estimates. How am I (and others) supposed to believe in macro expertise?

      People who write/read your blog entries are more active in/their work is more related to the field of microeconomics. Unlike macroeconomics, the theory of microeconomics does not suffer serious adversities (maybe by definition as the level of playing field is always only within the relevant market so making wrong predictions don’t affect the whole world, I don’t know). In any case, I tend to believe that microeconomic theory has a coherent framework (firms do follow the long-term profit-maximization objective and they do act on the basis of rational expectations), today’s development can firmly rely on yesterday’s theories.

      Perhaps what I wanted to say with my comment is that one cannot equate expert reports prepared for a special court case on, let’s say, abuse of dominance with expert reports attempting to predict macroeconomic development. The former is much more robust.

      Akos

      27 July 2016 at 3:19 pm

  4. Thanks to all for your comments!

    Becket: the UK certainly has outstanding judges!

    Tom and Akos: I understand you are both criticising and/or dismissing macroeconomics as a discipline. If so, your comments look like an example of Vote Leave’s attitude vis-a-vis experts (and some competition lawyers’ attitude vis-a-vis microeconomists). As I explain in the post, I see this attitude with concern.

    I am uncomfortable when non-experts feel confident enough to pontificate about a discipline that is not theirs. We should not forget that there is a large number of very bright, honest and hard-working people devoting their professional lives to the understanding of these admittedly complex phenomena. I know some macroeconomists personally and I am always humbled by their intelligence, work ethic and, to be sure, by the depth and rigour of their research. And there should be no doubt that they have made immensely valuable contributions from which society as a whole has benefited.

    But I do not think the above is the fundamental issue. When I read these criticisms, I always ask myself: what is exactly the point? Does your criticism mean that experts in macroeconomics should not given any deference or credit? Is the opinion of a layman as valid as the opinion of a Ben Bernanke or an Olivier Blanchard? Can anybody (e.g. Boris Johnson) be the Governor of the Bank of England? Is that what follows from your comments? Should we feel confident enough to dismiss the consensus in the field?

    Pablo Ibanez Colomo

    27 July 2016 at 9:46 pm

    • Pablo
      I am certainly not criticising macroeconomics as a discipline. I am criticising forecasters (which is hardly the same thing) and I do so because their record of accuracy is so poor. This is especially true of the Bank of England and IMF, over many years past. I doubt if there are any real experts on the future, whether its the economy in 2030 or the yield from taxes in 2018 or the weather next month. You might care to read U of Pennsylvania’s Philip Tetlock’s works on the accuracy of forecasts. He took a data set of 28,000 specific predictions from 284 experts over 20 years and found they were only slightly more reliable than chance, and simple extrapolation was usually more accurate.
      As for the Brexit calculations, this involved two sets of forecasts, the UK economy with and without Brexit, that is, the difference between two large numbers both of which were fraught with uncertainty and took no account of policy responses to changing situations. Only a Remain propagandist would regard such an exercise as respectable, and it fooled few people, I think. I should add we are hearing less and less about an economic apocalypse, but it is early days. If things get bad, UK growth might equal Germany’s or unemployment be more than a quarter of Spain’s. I am afraid I am a less devoted admirer of Blanchard and Carney as you seem to be.
      Perhaps its not necessary to address the ad hominem aspect of your comment, but in fairness I did not do too badly in my economics degree and taught the subject with law at Oxford, and for a time enjoyed the (part time) role as Executive Director of the IFS, when the then director was even more scathing about economic forecasting as I have been. This may not amount to much but all of us are entitled to have a very healthy scepticism about forecasters and perhaps to think things through for ourselves.
      Best
      Tom

      Thomas Sharpe QC

      27 July 2016 at 10:12 pm

  5. Thank you very much for your comment, Tom.

    I do not believe we disagree. Serious macroeconomists are very clear in saying that they cannot predict the future (that’s for fortune tellers). More importantly, they emphasise that their job is not to predict the future. They are also clear about the limitations of their models. In this sense, people who criticise macroeconomists for, say, failing to predict the financial crisis are pretty much attacking a straw man (and I know you have not made this point, it is just an example).

    As to the rest: I have long admired your professional and academic background!

    Pablo Ibanez Colomo

    28 July 2016 at 1:05 pm

    • Pablo
      We don’t disagree and thank you for such a full reply and your kind sentiments. I appreciate the blog: its the most timely and incisive one, and the wittiest!
      Tom

      Thomas Sharpe

      28 July 2016 at 3:33 pm


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