Monday, 14 June 2010

3 musketeers

Cool, I get to be a pertinent for a change.

Between them Vic Reeves, Professor John Kay and Johnny Rotten provide the best guide available to the future direction and state of the British economy, one that’s far more accurate than the shite being issued by the Office for Budget Responsibility.

Starting with Vic Reeves, his comment that 88.2% of statistics are made up on the spot doesn’t directly apply to economic forecasts, but the warning it gives about spurious precision does. Every forecast comes with the caveat ceteris paribus (all other things being equal) because every forecast is the product of a model that only takes a finite number of things into account when it predicts the future direction of an infinitely complex thing (the economy). This would be cool if right now infinite complexity didn’t involve all sorts of mad, unpredictable shit that may or may not have all sorts of mad degrees of significance attached to it, like a sovereign debt crisis of a major European economy and all the scope for contagion that entails in a completely impossible to model type style, except it does.

But, then if you go by Professor Kay’s sage suggestion (and you really, really should), about economics and economic forecasts and how while we may be able to accurately predict what team will win on Saturday (particularly if it's however is currently top of the league), predicting the score is a lot less certain, then that’s all good (the practical example here being if we could quantify the future with any meaningful degree of accuracy the pools would have gone bust years ago).

Except right now we’re being encouraged to attach importance to the 0.4% difference between the 3% rowth Treasury under Labour forecast compared to the 2.6% subsequently forecast by the OBR. Alternatively fuck that shite, fuck it long, hard, bad, rough and wrong because both views depict strong, above trend growth, which is a YAY! in my book.

Plus given recent events the more recent the forecast the more likely it is to be pessimistic and anyhoo in forecasting terms how big a difference is 0.4% anyhow? Like as of May 2010, if you wanted a forecast for UK economic growth in 2011 you could choose from hundreds of options including Goldman Sachs’ 3.4% and Capital Economics’ 1.5%, 2 views with a whopping great 1.9% spread between them. Or should we simply tell both of these august institutions to go and fuck themselves for being useless fuck nuggets? (Probably, but thats a different point).

The reality then is that forecasts are affected by recent events on an ongoing basis, they change on a regular basis as a result, are derived from different models that are more or less accurate over time in unpredictable ways and can only ever provide a general guide as to what is likely as opposed to what will happen; a diretion as it where as opposed to a step by step route map.

Except that don’t fit in with the political narrative being constructed as I type this which is because we’re in an economic crisis government spending needs to be hacked back hard. As ever the use of economic forecasts here to "objectively" legitmise political decision making is a reminder economics is actually political economics as opposed to a game of psuedo scientific mathematical wanking, which in turn reminds me of Johnny Rotten saying "Ever get the feeling you've been cheated?"

(revised and arse picture added May 15th)

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