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Lantau Tomorrow Mirage: Do we really need investment advice from academic economists?

Well well. No less than 38 academic economists were reported last week as having signed a petition in support of the government’s “Lantau Tomorrow Vision,” which might be more honestly labelled as “Carrie Lam’s plan to dump a lot of dirt in the Western Anchorage for some future government to build housing on.”

The petition described the dream archipelago as “affordable and an ideal investment.” The economists also attacked opponents of the plan as “emotional slogans with pre-supposed stance, and even political manipulation of populism by inciting public anger.”

Lantau Tomorrow Vision

Lantau Tomorrow Vision. Photo: GovHK.

The Standard said this was the “first-time academics have come forward in support of the government,” which I found difficult to swallow. Individual academics have often supported the government. If this was supposed to mean academics as a group supporting the government, it was over-stated.

Actually, the signatories of the petition are quite a small portion, even of academic economists. The academic populations of the departments teaching economics in five publicly-funded universities are City University 21, Hong Kong University of Science and Technology 24, Hong Kong University 35, Baptist University 18, Lingnan University 20.

The Hong Kong Polytechnic University certainly has academic economists but their website does not disclose names or numbers, at least to me. The new Hang Seng Business University has at least 24 economists, Hong Kong Shue Yan University 11 and the Open University 5.

I infer that making a reasonable allowance for the reticent Polytechnic University and for economists who are plying their trade in departments under other labels, like business or finance, there must be something in excess of 200 people who could be called academic economists in Hong Kong.

Hong Kong Polytechnic University

Hong Kong Polytechnic University. Photo: PolyU.

This means there are about 160 economists who either do not share their colleagues’ rosy view of the proposed dirt dump or think that academic economists are not as well qualified as some of them think they are to assess the financial merits of investments which reach 30 years into the future.

This last belief is quite widely shared. Economics, it now appears, is not a science but a narrative discipline like history. Economists do a good job of telling convincing stories about the past, but this does not equip them to make accurate predictions.

Or as a Canadian academic put it: “An economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.”

Rupert Murdoch has said that the purpose of economics is to make weather forecasting look respectable. This looks like a rip-off of the economic historian John Kenneth Galbraith, who said that the purpose was to make astrology look respectable.

For a more scientific view, we can look at the work of Philip Tetlock, who interviewed 284 assorted commentators and pundits, including economists, and collected from them more than 80,000 predictions. The results were not impressive. Tetlock concluded that overall they would have scored better results by throwing dice.

stock finance market bank banking financial

Photo: GovHK.

More qualifications and experience did not produce more accurate predictions. It just increased the subjective confidence of the person making them.

Nissam (“The Black Swan”) Taleb lumps economists into a larger group of people whose predictions are worthless because they suffer no penalty if the prediction turns out wrong.

Danny Kahneman (“Thinking fast and slow”) takes the more charitable view that “It is wrong to blame anyone for failing to forecast accurately in an unpredictable world. However, it seems fair to blame professionals for believing they can succeed in an impossible task.”

So I think on general principles we are entitled to some misgivings when confronted with a gaggle of economists touting an “affordable and ideal investment.” Better than “my uncle in Nigeria needs to hide a million bucks under your mattress.” But not much.

There are also some question marks over the way this particular recommendation emerged. The petition, apparently, had two more or less memorable names. One was Professor Richard Wong, a leading light in the Our Hong Kong Foundation, which is Tung Chee-hwa’s contribution to public cogitation. Prof Wong may be regarded as a recent convert to the cause of avoiding “political manipulation… by arousing public anger.” It is not so long ago that he wrote a piece comparing people protesting at increased tourism in Sheung Shui to the Ku Klux Klan.

Mui Wo protest

Photo: Save Lantau Alliance.

The other is Prof Sung Yun-wing, also a think-tanker, who swims in the private thoughtful pool of Ronny Tong, the interesting political chameleon who now sits in the Executive Council.

So a lot of political connections here. One wonders, naturally, whose idea this was, a point on which the local media did not enlighten us.

Well, I suppose we should not be too discouraging. It is nice of academics to share their investment advice with us, even if the cautious among us do not take it.

What seems to be a bit out of academic economists’ territory is the opinions and motivations of those who disagree with them.

Economics concerns the economy. Whether slogans are emotional, stances pre-supposed (whatever that means) populism is manipulated or the public angered is not a matter on which academic economists speak with any particular authority. If you guys think the numbers add up, fine. Criticism of people who have other concerns about the project should be left to other authors.

lantau reclamation protest

Protesters oppose the Lantau reclamation plans. Photo: Holmes Chan/HKFP.

In any case, my personal suspicion is that all this is beside the point. The purpose of the Lantau Vision is not to build anything. When accused of slighting the work of the working party looking at land supply matters, Ms Lam said that Hong Kong people would have been disappointed if there had been nothing in the policy speech about housing.

To avoid this disappointment we have a visionary project which will remain pie in the sky for decades. Or will it? The Vision has performed its function of preserving us from a policy speech let-down. It will now spawn some studies, at a modest cost. And then at some point in the future, when property prices are at last falling and Ms Lam has retired, I expect it will quietly disappear into the mist.

Mike Rowse has offered the hilarious suggestion that the project needs a more sexy name, and suggested: “Freedom Island”. I think Freedom might object to that in view of what is happening to her in Hong Kong. May I suggest “Lantau Tomorrow Mirage”? Now you see it. Later… who knows?

Lantau Tomorrow Mirage: Do we really need investment advice from academic economists?