Must-Read: Simon Wren-Lewis: Hitting Back

Must-Read: Whether Britain’s BREXIT vote would bring on a more-or-less immediate recession depended on whether markets and the Bank of England could and would drop the value of the pound far enough to boost exports enough to offset the shock to investment in Britain. There was a risk that they would or could not–enough of a risk that I thought that avoiding a post-vote recession was a tail possibility. But a more than 20% fall in the value of the pound turns out to have been enough to do the job:

However, is there any other high card in the hole that can make use forecast that British economic growth in the five years post-vote will be as fast as or faster than in the counterfactual in which the BREXIT vote went the other way? Yes–if Britain reverses itself and abandons the BREXIT project. Otherwise? I cannot see any. Untangling value chains is expensive. And the untangling will end with less productive value chains than Britain has now. You can argue–and I do–for a less financialized Britain in which government does much more to nurture and support communities of engineering practice and excellence. But BREXIT looks to me like a uniquely stupid and destructive way to set about such a policy shift. And I cannot imagine the clowns who run Britain’s Conservative and Unionist Party today having any clue as to how to accomplish such.

So put me on record as strongly supporting Britain’s Office of Budgetary Responsibility against all of its enemies and critics–including the extremely sharp [William Munchau[]:

Simon Wren-Lewis: Hitting Back: “A reaction to reading this [by Wolfgang Munchau][]…

…A more serious incident was the forecast by the Office for Budget Responsibility in the UK, which said last week that Brexit would have severe economic consequences. Coming only a few months after the economics profession discredited itself with a doomy forecast about the consequences of Brexit, this is an astonishing reminder of the inadequacy of economic forecasting models. The truth about the impact of Brexit is that it is… beyond the ability of any human being to forecast and almost entirely dependent on how the process will be managed…

Shrug your shoulders and move on? If it had appeared in the partisan press that would be a sensible reaction, but this was written by a widely respected journalist in the UK’s internationally renown financial newspaper… written by someone whose knowledge on the Eurozone is beyond dispute and whose views I often agree with.

Well, on this occasion, this particular member of a discredited profession who is no longer apparently considered an expert on macroeconomics is not prepared to take this kind of stuff anymore, whoever it may come from…. No journalist has any excuse nowadays for misunderstanding the probabilistic nature of forecasts (Bank of England fan charts)…. Macro forecasts… exist because it is worth being slightly better than guesswork when the stakes are so high….

In the Brexit campaign… our collective knowledge about the impact of trade restrictions was treated as just one more opinion, or described as Project Fear…. To have the nerve to blame economists for the Brexit result, to suggest that using their knowledge was a ‘tactical mistake’, to imply that the OBR should pretend they know nothing about Brexit, all that is itself amazing malevolent chutzpah. But it goes beyond audacity to criticise a profession and subject matter you appear not to understand when it is this lack of understanding that has contributed so much to the damage over the last few years.