We reported last year that no less a figure than the UK’s Queen Elizabeth II had admitted to bafflement about the financial crisis. “ … She asked me: ‘How come nobody could foresee it?,” Professor Luis Garicano of the London School of Economics (LSE) told reporters back then.
The professor and his colleagues later wrote to the Queen to try to answer her question, blaming in part “a failure of the collective imagination of many bright people”. Now, they’ve sent another letter to Her Majesty, suggesting she could actually play a role in helping to avoid the next crisis.
The academics’ idea is that the Queen should request a monthly briefing on the state of the economy and – crucially – what may lie ahead. This would go beyond forecasting, which is an attempt to say what will happen; instead, the aim would be say what could happen under a variety of different possible outlooks – so-called horizon-scanning.
As The Guardian reports, the economists’ letter “explained the need for less complacency and more horizon-scanning, during which various scenarios are thought through, however unwelcome their outcomes might seem.”
Interestingly, this idea is not dissimilar to OECD proposals on financial reform, which include the idea that government figures and regulators in every OECD country –not just the UK – “should publish annual reports that give an overview of developments in the financial system, identify key risks and explain how they are addressing them.”
We asked Tim Besley, one of the signatories of the letter and a professor of economics at LSE, to explain a little bit more about the proposal, which came out of a forum organised by the British Academy.
“It’s difficult to get busy people, whether they’re ministers, senior civil servants or even academics to take their eyes off their desks, look into the future and say, ‘what are the bigger-picture issues we should be worrying about?’,” says Prof. Besley. But, he adds, if we’re to develop a proper system for spotting risks and vulnerabilities “we have to institutionalise this more long-run, horizon-scanning focus.”
Prof. Besley admits that creating such a committee would carry its own risks, including the danger of it getting stuck in a rut: “I think there’s a sort of tendency for people to get bogged down in their own thinking about their own issues,” he says. It would also be hard “to get anyone to take any notice of the output of this institutionalised committee.”
Which is where the Queen comes in: While providing a report to the head of state wouldn’t be the main function of the committee, it would, Prof. Besley believes, be a useful catalyst – focusing minds on the need to communicate clearly and to keep on thinking the unthinkable: “The idea would be to keep the thing fresh and really try to find the key issues every month.”
Useful links OECD
The OECD International Futures programme carries out horizon scanning
The OECD Horizon Scan was part of the Danish government’s Forsk2015 strategic planning exercise
OECD Insights: From Crisis to Recovery (forthcoming)