There's one response to this week's poor GDP figures that hasn't had the criticism it deserves. It's this from Vince Cable (5'37" in for the Flanders-phobics):
No one was expecting that the situation across the channel would deteriorate as much as it has done...Everybody concerned under-estimated the enormous damage that had been done to this country as a result of the collapse of the financial system.
As statements of fact, these are reasonable, but as a defence of tight fiscal policy, they stink.
I say this because any sensible future-oriented plan - fiscal policy, business investment, household financial plans, whatever - must ask: would this plan be sensible if things turn out different from expectations? Is it resilient to shocks?
The fundamental fact about the future is that it is unknowable. Any policy which does not start from this premise is stupid.
If a man loses all his money at the roulette table and says "I didn't expect red to turn up" we don't sympathize with him. Likewise, it's no excuse that the euro crisis worsened. A plan that works only if everything turns out well is not really a plan at all.
Of course, the government could not have foreseen the worsening of the euro crisis. But it could, and should, have asked: if the economy is hit by an adverse demand shock, would fiscal tightening make sense?
At risk of sounding like a Monday morning quarterback* the answer to this question is surely: no.
This is not just because such a shock would increase the case against tight fiscal policy. It's because a world of weak growth is one in which investors want to hold government bonds, and thus is a world in which the cause for austerity - to avert a sell-off in gilts - diminishes.
Conversely, sensible policy-making would also have asked: would fiscal austerity be a good idea if we get a positive demand shock? The answer to this would not necessarily be: "yes". Granted, such a shock would see gilt yields rise simply as investors switch into riskier assets. But the sell-off would be mitigated by the fact that unanticipated growth would reduce the deficit more quickly than anticipated. And such a shock would also allow the government to change plan and tighten by more.
These considerations suggest that a sensible fiscal policy would not have been as tight as the one we have. What I'm saying here is just an expression of the Brainard principle - that uncertain policy-makers should tread cautiously.
In this context, Cable's words (if they are sincere, which I doubt) should be shocking. They suggest that the coalition did not undertake basic contigency thinking - that, as Hopi says, policy was based upon hubris and overconfidence.
* Some American sporting metaphors are good. My favourite is Barry Switzer's "Some people are born on third base and go through life thinking they hit a triple." Which is also relevant in this context.