A report by "Change Britain" is the latest in a long line of flawed forecastsby Iain Begg / January 10, 2017 / Leave a comment
Paul Krugman, the Nobel prize-winning US economist and (these days) New York Times columnist, once described the three kinds of economics: the “Greek letter” variant beloved of contributors to academic journals, with articles stuffed full of impenetrable equations; the “up and down” economics of the forecasting and instant comment industry; and the “airport” economics found in the latest best-selling economics books.
To this collection we should, in this post-truth era, now add “bonkers Brexit” economics, characterised by daft assumptions, sloppy empirical work and untenable conclusions. During the referendum campaign we had claims and counter-claims galore about how the economy would or would not fall of a cliff, with spuriously precise figures from the Treasury about how every household would be worse-off after Brexit by £4,300. There were outright lies about the £350m per week windfall from ending payments into the EU budget, figures by the Confederation of British Industry about gains of £3000 per year for British households from EU membership that seemed plucked out of thin air, and so on.
Sadly, the trend persists. The claim from Change Britain, “the campaign to make a success of Britain’s departure from the EU,” that leaving the EU customs union could generate 400,000 new jobs is the latest in a long line of striking, but in my view empirically unfounded assertions. Cunningly, the “analysis” uses data from a study by the European Commission written to support the striking of new deals between the EU and a number of other trading blocs. However, the reasoning and the empirical work undertaken is so flawed that is surprising it saw the light of day. Critics from all sides, “Leavers” included, had a field day, pointing to the glaring weaknesses in it.
The claim is that by striking deals with parts of the world growing more rapidly than the EU—be it India, Canada, the United States or China—the UK will be able to increase its exports and, as a result, jobs will be created in exporting companies. True, but pause for a moment: what about the jobs in companies which will now face increased competition from our new trading partners? The hard fact is that opening up trade cuts both ways, such that looking only at the growth of exports…