I'm Gary Stevenson former trader and people's economist  

this is Gary's Economics and today  we're here at Oxford University to  

talk about the big question everybody's  asking; why are economists always wrong?

in 2005 when i was 18 i started studying  economics at the London School of Economics  

that's one of the top economics universities  in the world i studied economic theory there  

for three years before going into the city  in 2008 when a financial crisis happened  

when i was there our job was to predict when will  the economy recover now in 2008 we predicted 2009  

in 2009 we predicted 2010, in 2010 we predicted  2011 and at the beginning of 2020 last year  

we were still predicting a recovery later that  year and it wasn't just the traders in the markets  

the economists here at Oxford University  were predicting the same thing  

so economists all over the world in all the  governments and at the Bank of England too  

now this is a really really big problem right  economists are the guys whose job it is to fix  

economic problems now if we've got an economic  problem that keeps getting worse and worse and  

worse but these guys constantly think things are  about to get better then they are not going to fix  

that problem right that means things will  continue to get worse for ordinary people  

so this is a big problem which we need  to address so we've come here today  

to Oxford University to address this question  why is it that economists are always wrong?

this is the Oxford University Economics  department, I studied here from 2017 to 2 019.  

now when i was here we had the lecturer teach us  a lecture on interest rates which is exactly the  

product i traded and made millions of pounds  trading because economists all over the world  

incorrectly predicted a recovery for 10 years  in a row after the lecture i went up to the  

lecturer and said look can we talk about why it  was that economist got this so wrong for so long  

and he said to me like no that didn't happen we  always know interest rates were going to stay  

low we knew it would be a long recovery and you  know i didn't even know what to say when he said  

that because you know i'd been watching this as  a job you know for like the previous like six  

seven years of my life i knew he wasn't right and  i said you know that's not right you got it wrong  

he didn't believe it so i said don't worry  i'll go i'll send you the data i sent the data  

and he said "oh yeah that's interesting" but this  guy is a professor teaching interest rates at  

Oxford University and he doesn't realize that  these guys have predicted it incorrectly for 10  

years in a row like that is crazy right not only  are these guys so bad that their predictions are  

wrong 10 years in a row they are so bad that they  don't even realise they're bad they don't realise  

they've made those wrong predictions okay so why  did that happen all right in order to illustrate  

why that happened i brought in some of the work  i did when i was here okay so this is my folder  

when i was here at oxford and let's look at what  a typical economic student does oxford university  

you can see there it's a nice page of  algebra we'll go to another page there

there you go it's a slightly shorter page  of algebra we'll flip through a bit shall we  

another page of algebra we'll flip  towards the end more algebra and you  

know i could keep going through this algebra  so much so i had to turn the pitch sideways  

algebra algebra algebra that's all we're doing  here if you thought that we were talking about  

the housing crisis we're not if you thought we're  talking about why your wages don't go up we're not  

if you thought we're talking about why you can't  get a good job in the city where you grew up  

we're not all we're doing is algebra algebra  algebra now i found this very frustrating  

and to be honest i used to get quite angry  when i was here and one of the professors  

asked me you know why are you so angry and  i said i'm angry because you're not talking  

about what's happening in people's lives you know  why are you not talking about the housing crisis  

and he said to me we don't talk about the housing  crisis because it's only in London which its not  

by the way but I said to him look the housing  crisis is only in London because that's where  

the jobs are people have to move to London that's  where the jobs are and he said that's not true  

i've got a job, this guy is a macroeconomics  professor at oxford university so you're telling  

me like some guy's lost his job in Grimsby  or in Wigan or in Stoke or in Cardiff   

you're going to turn around to them and say oh  don't worry have you thought about being a  

macroeconomics professor at Oxford university yeah it's madness and it shouldn't be acceptable  

so let's talk about how is it that this  person thinks it's acceptable to say this

this is Keble College, Oxford this was my college  when i studied here this is the kind of place  

where economics professors and students might  come in the evening wearing their bow ties and  

their capes and have a fancy dinner in a harry  potter dining hall now the thing you need to  

know about economics is that it is the least  socially diverse of all major subjects in phd  

it has the highest number of students who have  parents from privileged backgrounds and the  

lowest number of students who have parents from  ordinary backgrounds what this means is when these  

guys make predictions that are incorrect they are  not the ones that get hurt when house prices go up  

that's okay that's okay because their families  own a lot of property when wages fall that's okay  

because their wages don't fall when inequality  goes up they are the group that is getting richer  

rather than the big group which is getting poorer  these guys are not affected by the incorrect  

predictions but not only that the fact that they  are so separated from ordinary society means they  

are unable to understand what's happening in the  last 13 years the main problem has been not enough  

people spending money and the economists here  they don't understand why that's happening now  

i know the people watching understand why that's  happening ordinary people understand but when  

i asked an economist here what did he say? I said  why are people not spending money and he said we  

don't really know but we think it's because of an  exogenous shock to consumption savings preferences  

that's what he said an exogenous shock  to consumption savings preferences now  

you don't need to understand what that means  to know that's nonsense you know because i've  

asked a lot of people why they're not  spending and nobody ever said it was  

because of the exogenous shock to their  consumption savings preferences okay so  

this guy is so disconnected he cannot even  understand why ordinary people don't spend  

more money okay now listen when i worked at  Citibank i was lucky enough to work with a  

fantastically intelligent trader who didn't  go to university he just came from an ordinary  

background in Liverpool and worked his way  up to the top which you can't really do now  

when i worked with him i used to bring my  textbooks in to study economics to try and  

understand what's happening and one day he came  over he just took those textbooks and he threw  

them in a bin and he said gary look if you want to  understand the economy go and talk to your parents  

talk to your friends and their families understand  the economic situation ask what's happening to  

them walk down the high street see what shops are  closing down see if there's more homelessness you  

know look at the adverts on the tube and on the  street that is gonna teach you what's happening  

in the economy all right look everybody  watching this video i want you to understand  

you are the economy your family is the  economy your communities are the economy  

your economic problems are the economic problems  and those are the things that people here should  

be talking about but look around you do you  think those are the things that these people  

are worried about they're not because when  inequality increases those people get richer  

their lives don't get worse they *get* better so they can predict wrong as much as they  

like they've still got comfortable lives they're  still getting paid their families and communities  

are still doing perfectly well the economists here  don't understand why people aren't spending money  

but i understand and you understand we  understand because we are ordinary people  

from ordinary families we know what's happening  these guys don't understand because they're not  

ordinary people from ordinary families are not  spending more money because they are not getting  

any more money because that money is flowing to  the rich and these guys here wearing their bow  

ties and teaching in castles are not going to  help us and a chancellor who is a billionaire  

is not going to help us and a prime minister who  is a multi-millionaire is not going to help us we  

have to help us we have to make it happen and the  way we do that is by educating ourselves and each  

other about economics by teaching each other that  the key thing we need to fix is wealth inequality  

by teaching each other that if we don't fix  wealth inequality things are not going to  

get better but we'll get worse but if we do fix  it things can get so much better for all of us  

so please go watch what is wealth educate  yourselves teach your friends teach your family  

tell them what's happening the only way we are  going to get better lives for ordinary families  

is by fixing wealth inequality so  tell each other what's happening  

anyway it's nearly time for dinner so I  gotta go put my bow tie on, keep watching

but poorer families will be forced to lose almost all of their assets including their home

we have a tax system which is very efficient at taxing ordinary working people  

but very inefficient at taxing the super rich