The big freeze and Rational Expectations

If you are travelling in the present frosty conditions, do take extra care. I've just got back from a trip to Birmingham on business.

Most people I met on my travels were careful and considerate. There was one lunatic who overtook several cars on the road to Great Clifton at about 6 am this morning, who was travelling well over the speed limit in conditions of total darkness and when there was ice and snow on main roads in the immediate vicinity. One did think "Darwin Award candidate."

But lots of other people were the soul of courtesy, from the police civilian who got out of his car when the A66 was blocked to advise other drivers of progress with sending for snow ploughs, to colleagues at the telephone exchange in Penrith who helped me deal with snow there.

As BT's Business Travel Unit is a great deal more effective at keeping expenses claims under control than the House of Commons Fees unit appears to have been, I had booked my travel well in advance, on trains which I was not able to make, and could have been put to considerable trouble had various officials of the railway companies been the kind of jobsworth who likes exercising authority and being difficult. Fortunately they were to a man and woman very helpful and recognised that the circumstances were unusual because of the very bad weather.

My other thought on my journey today relates to a much misunderstood economic principle - that of Rational Expectations, applied in this instance to travel warnings.

I checked travel conditions on the internet before starting my journey, and today was the only time in my life that I've have done that and subsequently found conditions worse than the warning. Usually the people who compile them bend over backwards to avoid understating the problem.

I should have allowed for the possiblity that just occasionally things might be worse than forecast, but I'm afraid I didn't. And it was for a very simple reason: because the people who predict road and rail travel issues usually err on the side of caution, we are all used to problems not being as bad as expected. And then it is very easy to fail to allow for the possiblity that we might sometimes get an error in the opposite direction. Try as you might, if a forecast tends to overshoot, it's very hard not to at least unconsciously factor this into your expectations.

But as with the boy who cried wolf, sometimes there really is a wolf.

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