David ‘Whoops!’ Blanchflower strikes again

Back to the wall again

You…hang on, what’s that noise?

Never mind.

You may have seen that your humble narrator has had one or two exchanges in the past with arch-Keynesian, wannabe Krugman, and Columbo dress-a-like David Blanchflower. They centered on his now infamous 2009 prediction that

“If spending cuts are made too early and the monetary and fiscal stimuli are withdrawn, unemployment could easily reach four million… If large numbers of public sector workers, perhaps as many as a million, are made redundant and there are substantial cuts in public spending in 2010, as proposed by some in the Conservative Party, five million unemployed or more is not inconceivable.”

Blanchflower, being rather a fragile sort, blocked me after our latest discussion of this (I’m in good company there) but others have continued to hold him to account and Blanchflower has continued to defend it.

In the course of defence just 11 days ago Blanchflower tweeted the following

BlanchBut hold on, what’s this? It’s the Office of National Statistics saying that, you guessed it, that double dip never was. Blanchflower’s thumb will be working overtime trying to explain away this one.

Oh, that sound, I’ve figured out what it is; it’s Blanchflower’s credibility disappearing down the toilet.

EDIT

Also embarrassing for such a Labour partisan as Blanchflower is the fact that it now appears that the economy did much worse under Labour, slumping much further in 2009 and recovering less strongly before the election in May 2010.

Dip: The British economy avoided a recession - two quarters of negative growth - at the start of last, the Office for National Statistics said

Source: Daily Mail

Why is David Blanchflower so scared of the truth?

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The Michael Howard of economics

A couple of weeks back I took David Blanchflower of the New Statesman to task over the failure of his recent attempt to justify his infamous 2009 prediction that “unemployment could easily reach four million”. Blanchflower responded on Twitter: “If spending cuts are made too early and the monetary and fiscal stimuli are withdrawn “if crucial- buffooonery” (sic).

In fairness to Blanchflower he did preface his 2009 doomsday scenario with exactly those words. But let’s look a little more closely at Blanchflower’s warnings of the twin evils of tight money and spending cuts.

First, monetary policy. Who, in 2009, was advocating the tightening monetary policy? Possibly a few Austrians (though not all of them). Not many others. Certainly, as far I recall, no one in the Conservative Party as Blanchflower claimed. If I am wrong (and I have scoured the internet) and there were leading Conservatives advocating monetary tightness in 2009 then please, let me know.

But if, as I’m pretty sure is the case, nobody in the Conservative Party was advocating the early withdrawal of monetary stimuli then why on earth did Blanchflower waste anyone’s time warning them about it?

And what about the fiscal side of Blanchflower’s prediction? He loudly and regularly makes the point that ‘Slasher’ Osborne (I know, not much as nicknames go) has cut government spending and plunged Britain into renewed recession. I asked Blanchflower once or twice (or thrice) by how much ‘Slasher’ Osborne has cut government spending to send us into recession.

The answers I got ranged from “go and look it up yourself” to “go back into your hole” and “If you want to hire me to do consulting work for you I will bill at my normal high rates min 3hrs half up front”. How sad that when given a chance to engage and educate, a man who holds a teaching position chose instead to act in such a petulant and childish manner. How terrifying that someone so shifty, evasive, and brittle under pressure, was once a member of the Monetary Policy Committee.

Well, I went and looked up the numbers and the reasons for Blanchflower’s reticence quickly became apparent. In the fiscal year ending April 2010, Labour’s last in office, the British government spent £660.8 billion and in the year ending April 2012 it was £688 billion: an increase of 4.1 percent. Over the same period, however, we have had above target inflation which has given us a real terms cut in government spending of of 2.7 percent.

That’s it. After a decade which saw Labour double government spending in real terms it has been pruned by 2.7 percent. Hardly ‘slashing’ and all delivered by Mervyn King and his failure to keep inflation at 2 percent. If he had we’d have had a very slight real terms increase in spending; but that, presumably, really would have meant the monetary tightness Blanchflower was wailing about back in 2009.

I don’t suppose the monikers ‘Slasher King’ or ‘Trimmer’ Osborne would be much LOLZ for the Prof on Twitter. You can see why he was desperate to avoid giving a straight answer; his whole shtick would collapse if he did.

Blanchflower might argue that some areas of government spending have been cut quite drastically but there are two points to be made there. First, The Master himself, John Maynard Keynes, famously said that it didn’t matter too much what you spent your fiscal stimulus on, whether it’s Pyramids, wars, or burying old bottles full of cash and digging them up again. The key thing was to get the money spent.

Second, you have to wonder what else Blanchflower expects. Even with record low interest rates, British government debt, for which we are all liable, has risen so vertiginously that by 2015 it is estimated that we will be spending £70 billion a year on debt interest, up from £31 billion in 2008. To some extent we are seeing spending on welfare being cut so we can give the money to bond investors instead. Don’t like it? Don’t run up a load of debt.

Of course, Blanchflower would argue that we don’t actually need to worry. We just keep printing and borrowing the money we need. The £450 billion the coalition will have added to the national debt by April 2013 is too stingy; the doubling of the national debt over its lifetime too miserly. With views like that you can understand why Blanchflower runs scared from any rational discussion.

So, back in 2009, Blanchflower was warning us about something that wasn’t going to happen. After trying and failing to exonerate his 2009 prediction his argument now is that he wasn’t wrong, just irrelevant. But then you might find yourself asking why we should pay much attention to a slippery peddler of irrelevancies. Why indeed.

With his affected rudeness and terror of reasonable discussion with anyone who might disagree with him, Blanchflower is a sort of pound store Paul Krugman. But, without a bestselling book, a Nobel Prize, and with a column in the Independent rather than the New York Times, that’s a bit like comparing Donovan to Bob Dylan.

The humility of David Blanchflower

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“So what I told you was true, from a certain point of view” – Obi-Wan Kenobi

In 2004 the theoretical physicist John Preskill proved that, contra what Stephen Hawking had said, information could escape from a black hole. There was, thus, no ‘information paradox’ and the laws of quantum mechanics were confirmed. Hawking took a look at the evidence and said “I was wrong”.

This sort of humility has always been lacking in the ‘soft’ social sciences. David Blanchflower, Economics Editor of the New Statesman, gave a good example of this last week.

Back in 2009 Blanchflower famously predicted that

“If spending cuts are made too early and the monetary and fiscal stimuli are withdrawn, unemployment could easily reach four million… If large numbers of public sector workers, perhaps as many as a million, are made redundant and there are substantial cuts in public spending in 2010, as proposed by some in the Conservative Party, five million unemployed or more is not inconceivable.”

Of course, since then we have seen a veritable employment boom. As Martin Vander Weyer writes in The Spectator

“Since 2008, we have had ten quarters of growth and ten of shrinkage; last year, when most of us thought recovery was imminent, we had no net growth at all despite a euphoric post-Olympic blip. And yet there were 580,000 more people in employment by December than a year earlier, taking the total UK workforce to a record 29.7 million. That’s roughly 24 million in the private sector, which added 627,000 jobs in the year to September; the public sector shed 128,000 and has now shrunk all the way back to its 2002 numbers, before Gordon Brown went mad.

“So we have an economy that is rebalancing itself favourably between tax generators and tax spenders while creating 2,000 jobs per working day”

That notorious 2009 prediction has hung round Blanchflower’s neck like a necklace made of cat poo, Daniel Hannan bringing it up again recently.

Blanchflower could, like Hawking, have held his hands up and said “I got it wrong”. Instead, with Stirling University economics professor David Bell in tow, he set out to prove that the prediction had actually been correct.

Sure, unemployment might have played out totally differently to Blanchflower’s predictions, but by concocting a measure of underemployment, they might finally locate the dark truth that simply must lay behind Blanchflower’s famous prognostication and vindicate him.

And they found… not very much actually.

Source: New Statesman

As you’d expect Blanchflower and Bell’s underemployment is higher than unemployment. When Blanchflower states that the first conclusion from his data is that “underemployment consistently adds to the measured excess labour capacity in the UK labour market” he is simply stating the obvious.

But it is his second conclusion which is more questionable, where he states that “since the start of the recession, underemployment has been contributing an increasing share of overall excess labour capacity in the UK”.

Well, that’s true, but not by very much. We do not have the data yet so these are rough estimates, but taking the figures from each January of 2001 to 2012 we can see that between 2001 and 2008 underemployment was, on average, 2.73 percent higher than unemployment. And we also see that, from 2009 to 2012, underemployment has been higher than unemployment by 3.32 percent on average. A rise, yes, but not much of one.

Yet on these slim pickings Blanchflower hangs the claim that “It is clear that the coalition is bad for jobs”. And with one bound he is vindicated!

You sympathise with Blanchflower. Faced with the comical failure of his 2009 prediction he set out to fashion a new statistic which would prove that he had, in fact, been correct. And it didn’t. One thing is clear from all this: a desperate desire to exonerate your crackpot predictions is bad for economic inquiry.

This article originally appeared at The Commentator