A sketch based on pride, prejudice, assumptions, speculation, incomplete information, wild data and carried off with unsubstantiated assertions of professional expertise.
No different from its subject, then, the Office of Budget Responsibility. Its senior management were up before the Treasury select committee to discuss their response to the Autumn Statement.
At the table three economists.
In medieval times they’d have been consumed by burning faggots. Now they are employed by the Treasury to say things John Dee would have thought far-fetched.
For one thing, they have a description, or forecast or projection of the economy 50 years hence.
The gluteal mass on which you sit, reader, knows as much about our 50-year future as the OBR. That is the only absolutely true and useful fact in this sketch.
Some committee members wanted the OBR to talk about the dangers, difficulties and desirability of a fast growth in house prices. Mark Garnier asked the OBR’s Robert Chote if he had a view on what the ratio of household debt to income should be.
Chote: (Pertly). No. (Pause for laughter. It didn’t come.) If you have an increasing housing market. More transactions. More expensive houses, you’ll see a debt-to-income ratio rising as a consequence of that. You won’t necessarily be seeing a big change in the household net asset. Which we haven’t.
Please note the lack of answer in that reply, rendered verbatim.
Robert Chote has a haircut which is (seasonally-adjusted and regionally-weighted) unforgiveable. It’s a thick crew cut with a closer trim at the sides. He has a long, sharp nose which you want to grab and use his head as a brush to remove lint from your cardigan.
Then it was Stephen Nickell’s turn to patronise the committee with his scruffy condescensions. Garnier had mentioned a household balance sheet, and wanted to know if things were getting out of hand in the property market, what with the surge in house prices. Nickell addressed this member (a former fund manager) saying: “A balance sheet has assets and liabilities. You can’t describe a balance sheet by describing liabilities.”
That is like saying to a bespoke tailor: “You can’t put your trousers on before your underpants.”
Garnier’s point is that household debt was soaring to levels we’ve never seen before. In the 80s it went up a modest 10 or 12 per cent and funded that boom. In the decade before the crash it went from 100 to 170 per cent. It walloped away. And the OBR, Garnier suggested, was saying that was absolutely fine.
“We’re not describing it as fine or not fine,” Nickell said with an expert touch of high table weariness, to suggest he was addressing his intellectual inferiors. He went on to deploy 180 words of this and that – perhaps a massive anagram – to disparage the question without engaging with the substance of it.
Is our economy dependent on house prices for growth? And will it come back to demolish us if interest rates soar (what with QE)?
These are very pertinent questions. But economists are the least-best placed people to answer them. Philosophers and anthropologists can tell us more than these dismal ning-nongs.
PS: Stephen Nickell was one of the 364 economists who signed the catastrophic letter to the Times in 1981. That letter said that there is “no basis in economic theory or supporting evidence” for the budget Howe had produced. And the recession promptly turned into the famous boom. Nickell issued an on-the-one-hand-but-on-the-other clarification of his position.
These highly-paid professionals are, essentially, gutless astrologers and need to be – what’s the modern equivalent? – humbled.
