The subtle art of sitting on the fence

Have you ever read through a thought-provoking economics or finance article, fully enthralled by its strong and opinionated message? The witty rhetoric, the bold stance or the possibility it envisages are absorbing, leaving you to eagerly read until the end.

But then, it happens. As your eyes reach the final paragraph, the following assertions fill the page: “on the other hand…”, “nevertheless…”, “then again…” and many more. The exact wording is immaterial, for the message is just the same: the final paragraph vaguely addresses an opposing view as a viable possibility, effectively nullifying any claims made before.

Be it inflation expectations, the direction interest rates will move, threats posed by external shocks or, frankly, any other topic, economists and analysts are infamous for their lack of consensus and non-committal attitude. Rarely will you ever see someone staunchly defend a stance, remaining committed despite acknowledging opposing points. This indecisiveness stems from the tendency to cover for oneself to avoid professional embarrassment – economics is rarely an exact science, after all.

Former U.S. president Harry Truman famously voiced his frustration with indecisive economic advisors by once exclaiming “give me a one-handed economist. All my economists say ‘on one hand…’, then ‘but on the other…” Apocryphal or not, this phrase perfectly encapsulates the essence of the issue: a lack of commitment allows economists to vaguely weigh in on the economy without ever putting their reputation on the line.

Issues arise when sitting on the fence becomes too comfortable, a seat that one does not dare to venture out of. Not enough coherence or clarity may result in mixed market expectations, which restrains the effectiveness of certain monetary policy tools and erodes business confidence. Central banks, for instance, attempt to combat uncertainty through clear forward guidance (hinting or communicating their policy directions).

In a general sense, we should all be less afraid of being wrong. Mistakes and unpredictability are built into economics; characteristics that make it exciting. Moreover, it is thrilling to see someone passionately defend a view, and even more so when opposing views have been brought up, but the writer skillfully rebuts or deems points in favour to outweigh opposing views. This brings credibility to one’s argument: after all, if they don’t believe in what they’re saying, why should I?

Then again, I may have overblown the danger of indecisiveness. Perhaps it is a harmless phenomenon, or maybe it is simply uncommon.