The Folly of Academic Forecasting
No Skin in the Game, No Accountability
“Government is like a baby. An alimentary canal with a big appetite at one end and no sense of responsibility at the other.”
—Ronald Reagan1
Academics have long been the self-appointed oracles of the future, issuing predictions with all the confidence of ancient prophets, but with none of the consequences. Their models are tidy, their language authoritative, and their credentials impeccable. But their track record? That’s another story. What unites many of these failed forecasts is not just their inaccuracy, but the lack of accountability behind them. These intellectuals rarely suffer when their predictions go wrong—they have no skin in the game.
“A cancer is an uncontrolled multiplication of cells; the population explosion is an uncontrolled multiplication of people ... We must shift our efforts from treatment of the symptoms to the cutting out of the cancer... We must have population control ... by compulsion if voluntary methods fail.”
—Paul Ehrlich2
Consider the population panic of the 20th century. In 1968, Paul Ehrlich published The Population Bomb, a book that triggered widespread fear. Ehrlich, a Stanford professor, confidently warned of mass starvation and societal collapse due to overpopulation. “Hundreds of millions of people are going to starve to death,” he wrote, and proposed draconian measures, including forced sterilisation and population control policies. Politicians, the Club of Rome, activists, and even philanthropists took him seriously.
“In ten years all important animal life in the sea will be extinct. Large areas of coastline will have to be evacuated because of the stench of dead fish.”
—Paul Ehrlich, Earth Day in 1970
But what actually happened? Agricultural productivity soared. The Green Revolution, spearheaded by scientists like Norman Borlaug, dramatically increased food production. Far from starving, much of the world began consuming more calories than ever. By the 2000s, the problem was no longer overpopulation but the demographic cliff. Today, countries like Japan, Germany, and even China are grappling with population decline, not explosion. Birth rates are falling below replacement levels, and governments are now incentivising childbirth. Ehrlich’s doomsday never came, but the real demographic crisis—the one he didn’t foresee—is now reshaping global economics and geopolitics.
“People aren't stupid. The problem is that our educational system has an amazing blind spot concerning risk literacy. We teach our children the mathematics of certainty—geometry and trigonometry—but not the mathematics of uncertainty, statistical thinking. And we teach our children biology but not the psychology that shapes their fears and desires. Even experts, shockingly, are not trained how to communicate risks to the public in an understandable way. And there can be positive interest in scaring people: to get an article on the front page, to persuade people to relinquish civil rights, or to sell a product.”
—Gerd Gigerenzer3
Was Ehrlich held accountable? Did he lose tenure? Face public sanction? On the contrary, he continued his academic career, enjoying prestige and publishing more books. The institutions that endorsed his apocalyptic vision didn’t retract their support or reassess their methods. They moved on to the next scare.
Another telling example is the 1970s climate forecast—specifically, the predicted ice age. In that decade, a consensus seemed to form among climate scientists and media outlets: the Earth was cooling, and a new glacial period could be imminent. Newsweek ran a 1975 article titled The Cooling World, citing “ominous signs” of a global temperature drop. Scientists warned of expanding polar ice caps, failing crops, and climate-induced chaos. Governments were urged to prepare for food shortages and global unrest.
Fast forward a few decades, and the narrative flipped entirely. By the 1990s, the dominant concern became global warming. While science does evolve and improve with new data, the shift was less about refinement and more about the wholesale abandonment of a once-popular theory. Those who sounded the alarm about an impending freeze were never held to account. Their reputations remained intact, their research continued to receive funding, and no one was asked to explain the error.
“The continued rapid cooling of the earth since WWII is in accord with the increase in global air pollution associated with industrialization, mechanization, urbanization and exploding population.”
—Reid Bryson, Global Ecology; Readings towards a rational strategy for Man, 1971
What connects these failures is the absence of consequences. Academic forecasters are not investors putting capital at risk, nor are they engineers whose bridges collapse when their models fail. They are insulated by tenure, institutional support, and a pall peer-review system that often rewards novelty over accuracy. This allows them to issue predictions with impunity. When the forecast proves wrong, the cost is borne not by them but by policymakers, citizens, and future generations misled by faulty assumptions.
“[F]orecasting, especially when done with “science,” is often the last refuge of the charlatan, and has been so since the beginning of times.”
—Nassim Taleb4
Nassim Nicholas Taleb, author of Skin in the Game, makes this point forcefully: “If you give advice, you need to be exposed to the consequences of that advice.” Without skin in the game, there’s no feedback loop, no penalty for being wrong, and thus no incentive to be right. It’s intellectual gambling with house money.
“It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.”
—Thomas Sowell5
Forecasting is hard—even honest experts with skin in the game get it wrong. But when academics operate in a risk-free environment, shielded from the outcomes of their ideas, we must treat their predictions with scepticism. The future doesn’t conform to neat models or institutional authority. It unfolds on its own terms, often defying even the best-educated guesses. And until academic forecasters are made to bear the consequences of their bad bets, we’d be wise to take their prophecies with a grain of salt—and a healthy dose of cynicism.
Trivia:
Joke during his 1965 campaign for Governor of California, as quoted by Leo E. Litwak in The New York Times Magazine (14 November 1965).
Paul Ehrlich, The Population Bomb (Ballantine Books 1968), xi, 166.
Gerd Gigerenzer, Risk Savvy – How to make good decisions (New York: Viking, 2014), 14.
Nassim Nicholas Taleb, Skin in the Game – Hidden Asymmetries in Daily Life (UK: Allen Lane, 2018), 25.
Thomas Sowell, "Wake up, Parents," Jewish World Review, 18 August 2000. The context of the quote is parenting. However, it is applicable to finance too. Full quote: "It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong. Know-it-alls in the school system do not lose one dime or one hour's sleep if their bright ideas turn out to be all wrong, or even disastrous, for the child." Replace the term "school system" with "Wall Street" and the word "child" with "investor".