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Emeritus Prof Christopher May

As Daniel Suskind points out, the UK finds itself in the strange situation where the Office of Budget Responsibility is essentially shaping economic policy... why?

Well, the OBR produces forecasts of what specific economic policies will contribute to growth & as Rachel Reeves is both committed to promoting growth but also sensitive to how 'markets' see her policies in light of OBR forecasts, will try to do what the OBR thinks will promote growth.

But does the OBR actually know?

article extract: Here, though, is the complication: the OBR does not actually know what causes growth. In fact, no one does. The true causes of growth are one of the great mysteries of economic thought. Hundreds of possible causes have been identified: everything from tax cuts to infrastructure spending, the number of frost days to the level of newspaper readership. And today they remain hotly contested among various schools of thought, divided along deeply political lines and duelling with one another. With that in mind, the idea that the OBR somehow knows enough to take each UK government policy and state its impact on growth to a single decimal point is fanciful. Yet that is what it will attempt to do at the end of the month, with immense practical consequence. A reduction of 0.1 percentage point in the OBR’s potential productivity growth forecast, for instance, is estimated to create a hole of £7bn-£8bn in the public finances — that is the equivalent of the entire budget of Defra.
#economics
Mar 07, 2025, 02:45 PM·Public·Web
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Donald Roy

@ChrisMayLA6

A classic example of 'Nicholson's lament' - 'Hitting the target but missing the point'!

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Frozen Jubbly

@ChrisMayLA6

What J. K. Galbraith said - astrology.

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