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May 17, 2010

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Alex, Leeds

Oh come on Chris, really?

"But every economist who has ever forecast anything has “fiddled” the forecast. This is because the numbers that drop mechanically out of econometric models always need tweaking."

There's a difference between tweaking figures to improve responsiveness to unforeseen factors (aiming to improve accuracy) and deliberately fiddling them to present a politically desirable outcome. I strongly suspect Osborne is implying the latter, while you're suggesting that he is shocked at the former.

You're attacking a straw man here, either through your own moment of naivete (which I doubt) or through deliberate dishonesty.

chris

You're right - there is such a difference. But is this really what Osborne's suggesting? I mean, how was it politically desireable to forecast £22bn more borrowing than actually occurred?

photo ex machina

I think Osborne was referring to political expediency in this instance. He may even have a point but ultimately he's still playing the blame game.

Alex

"I mean, how was it politically desireable to forecast £22bn more borrowing than actually occurred?"

Er, it's simple really. If you have lower borrowing than expected, then that can be framed as good news. See, things aren't as bad as we thought! Or: things are improving!

CS Clark

'If you have lower borrowing than expected, then that can be framed as good news.'

Well sure Alex, as long as there's no political drawbacks from having a higher projection up to the point it turns out to be wrong, and as long as people really pay attention to the 'good news' when it comes. Otherwise it's about as clever as repeatedly punching yourself in the face so that you'll feel better when you stop.

The thing that strikes me about Darling's overshoot is that - while it seems a lifetime away now - at the time it wasn't seen as incredibly surprising. Nice, sure, but no-one was demanding public inquiries into how he was so off the mark compared with all the many independent forecasts that were exactly right. And yet the number involved is more than three times this six billion which will destroy the economy one way or another.

The Silent Sceptic

CS Clark - isn't your first paragraph exactly the approach taken by Hal in Henry IVth part I?

Unfortunately I can't remember whether it worked out well for him or not.

Glenn

The answer is pretty simple really...

The PSBR forecast changes - employment payrolls did not decrease by as much as forecast (based on previous recessions) and claimant unemployment simply did not increase as much as expected either.

So the tax income from PAYE didn't decrease by as much and the costs of unemployment benefits ditto. Result is an improvement in PSBR forecast.

And the temporary VAT reduction also seems to have maintained spending/consumption too.

Fiddling forecasts - its usually about making them internally coherent as much as anything.

The best forecasts are updated regularly to take account of new events or changes in decision making parameters. They are planning tools, and are imperfect, but hey, a view of the future needs to be taken in order to make policies.

Tim Warrington

I dont know any Financial guru that hasnt manipulated the figures to some degree. This is also a good thing as it helps with planning long term and creating targets. If the targets arent met or are way off then it is obvious the figures wernt just tweaked but plucked from the air.

Fred Kapoor

@Photo ex machina, I agree with your comment, when reading the article it also came to my mind that, that was exactly what Osborne meant. And @Glenn I couldn't have explained it better.
Very interesting article.

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