With the Brexit vote behind us, the American presidential election in front of us, and some nationalist movements in Europe demanding a ‘Brexit’ referendum of their own, people are making their voices heard against the rule of ‘experts’. For their part, the reaction of the experts has ranged from confusion to dismissal of their opposition as ‘idiots’ (or other not very nice names). Without a doubt, from California to Paris, ordinary people are pushing back against a class of people who think they know best.

But why?

The reason can be summed up thus: the experts simply haven’t been doing a good job. There seems to be a sense in national capitals (where many experts reside) that the population has gone ‘insane’, either by supporting Donald Trump or voting for a Brexit (i.e. not listening to the experts). This really shouldn’t be surprising considering the number of Americans (7 in 10 as of last year) who think that America is still in recession.

Think about that.

The recession (at least as statistically defined) has been over for 7 years and yet nearly 70% of Americans don’t seem to have gotten the memo. When the perception of 70% of your country is that you haven’t been able to get the economy back on track for 8 years, you can’t be surprised when they question whether you really know what you are doing and stop listening to you.

But why have the experts failed? I believe that there are several reasons.

1.)    The experts think that they know more than they actually do.

There seems to be a human psychological tendency to overestimate our knowledge in many things, and experts are not immune from this either. The world is a big, complex thing. It is unreasonable to think that anyone can get their arms around it, understand it, and make the right call in most cases. The problem is, experts think that they can, and they expect you to think that they can too. In financial markets, how many ‘experts’ are out there on T.V. touting this or that? Lots. How many of them are right at predicting the future consistently? Almost none (if any). Sure, they might get a few calls right here or there, but then they will get others wrong. In short, they think that they know more than they actually do.

2.)    The experts don’t have as much power as they think that they do.

One area where the experts imagine that they have a lot of control is the ability to control the economy. Around the world, central banks and other governmental agencies are trying to steer the economy. While monetary and fiscal policy can have some effect on an economy, there is an implied assumption that central banks can steer economies like a pilot steers an aircraft. Talk of ‘soft landings’ and other such expression imply a level of skill and control that simply doesn’t exist. On a battlefield, leaders on both sides try and control the action. They get information, issue orders, make corrections, develop tactics, all the while chaos is erupting and the situation is developing rapidly. Sometimes they make the right call, and sometimes they don’t. But most generals in large battles, if honest, will tell you that they don’t really have control of the situation (which is constantly changing) and are just making their best guess. A modern economy is a much more complex animal than a battle, and central bankers (and other experts) are often just making their best guess. They are not actually in control.

3.)    The experts rely on faulty numbers.

One of the primary numbers that they rely on is the unemployment number. Currently, the unemployment rate is 4.7%. According to economic theory, this is the full-employment rate. And yet, the majority of the country thinks we are in recession. The reason is the unemployment figure is fake. It doesn’t take into account people who have given up looking for work. In the past, this adjustment didn’t really have a distorting effect on reality as this category wasn’t a large number of people. However today, it is. Millions of people have given up looking for work due to lack of jobs and are not counted as unemployed. So the numbers are giving one picture, and the reality is something else entirely.

4.)    The expert’s assumptions on how the world works is outdated.

In the various agencies and departments populated by experts, certain assumptions about how the world works have become institutionalized. In other words, these assumptions are not questioned or revised, but they guide everything that the experts do. However, when the world changes, slow-moving institutions are not quick to react and change their assumptions. Expert’s, who have achieved their positions by relying on old assumptions tend to double down and hold to those old assumptions that have been so good to them. But that simply makes the expert’s and institutions appear out-of-touch and ‘stupid’ as their actions seem to become more and more disconnected from the reality that people are seeing right in front of them. The result is that people lose faith.

Going forward, whether people regain faith in experts and institutions will depend on whether those institutions begin to perform in a way that positively influences people’s lives in a visible and tangible way. Currently, the reaction of the experts (with a few notable exceptions), rather than using the Brexit vote as cause for reflection, have lashed out at the dumb, stupid, racist, masses. The idea that they, the experts, could be mistaken is not something that they are prepared to accept (yet). The fact is, experts do tend to be very smart people, and they have the potential to play a very positive role in their respective societies. Currently, their actions are out of touch with the times that we live in. Assuming that they are able to reform, they can win back the trust of the people. Until then, they can expect discontent and ‘rebellion’ from various parts of society.