The authors have a
post
on the Prime website in which they, among other things, respond to
two blog posts of mine where I mention their work on Brexit. In the
first post
they mention [1], I use a graph from their paper to illustrate how
important the Single Market was for UK exports. Here is the graph.
I then wrote
“But didn’t the CBR report say that the benefits of the Single
Market had been exaggerated by the Treasury? Yes it did. Here is some
of its reasoning. That growth in UK export share after the Single
Market is not as impressive as it looks, because there is an
underlying 6% positive trend in the share, which you can detect
before we joined the EU. That looks pretty on a picture, until you
realise it is nonsense. A 6% trend rise in an export share will imply
that at some point not too far away UK exports to the EU will be as
high as total EU GDP. UK exporters are just not that much better than
exporters in other countries. There is no underlying trend rise in
the UK’s export share.”
By export share, it
is obvious that I’m talking about share in destination GDP, as in
the chart. In my paragraph there is an error. I used a 6% figure
rather than the correct 3.5% figure for their trend in export
penetration relative to the non-EU penetration. It was a particularly
stupid error, because just below Chart 7 is Chart 8, which contains
the correct figure.
But, as the authors
must know, this error is not important to my argument. Replace 6 by
3.5 in the relevant paragraph and it still makes perfect sense. What
I was criticising was the notion that there was any substantial
underlying trend in export penetration, and that the impact of EU
membership should be judged relative to that trend. You can see
from this chart how ludicrous a 3.5% trend is: it implies that
without EU membership the UK exports share would be now above 10% and rising
fast. This trend seems to be an important part of their judgement
that UK export penetration relative to the EU would fall by
substantially less than the Treasury assume in their analysis. The
trend makes no sense, unless the aim is to make the impact of EU
membership look small.
So what is the
authors’ response to my basic criticism in their Prime piece? There is none.
As far a the 6
rather than 3.5 is concerned, it is also odd is that this is the
first time they have mentioned the error to me. The post was from
mid-January, and I would have happily changed 6 to 3.5 if they had
pointed it out to me earlier.
The second post
was a discussion of the notion of ‘fake economics’. I said fake
economics could be described as “economic analysis or research that
is obviously flawed but whose purpose is to support a particular
policy.” or “We can equally talk about evidence based policy and
its fake version, policy based evidence.” Here is what I wrote in
full about their study in that post.
“The CBR analysis is less obviously fake. However Ben Chu has
gathered
the views of some academics who are experts in trade theory,
including Richard Baldwin (who has just written a definitive and
widely praised book
on the ‘new globalisation’) and Alan
Winters, both hugely respected with immense experience, who pour
some very cold water over the study.”
How do the authors
respond to this second post in the Prime piece. They write
“It is unusual for
Wren-Lewis to rely uncritically on mainstream economists, but he was
willing to do so in this case. With many of Wren-Lewis’ articles
being used by one of us in economics teaching to encourage students
to query and to test what is considered ‘mainstream’ it seems
more than a little surprising to be discredited for daring to do so.”
This is wrong in many ways. First, I was not relying on others, as I
had serious misgivings about their use of trends that I outline above.
Second, I made no mention of ‘mainstream’ and heterodox anywhere,
so any suggestion that this was behind what I wrote is their
invention. Finally, there is no problem with anyone challenging
anyone else.
Let me reproduce one of the quotes from Ben’s piece
“The HMT [Treasury] use of gravity model was perfectly in line with
best practice. It was classic evidence-based policy analysis”, said
Richard Baldwin, Professor of International Economics at The Graduate
Institute of Geneva. Professor Baldwin went on to accuse Mr Gudgin
himself of engaging in “policy-based evidence making” and “using
evidence the way a drunk uses a lamp post – for support, not
illumination”.
So Richard Baldwin was accusing the authors of exactly the fake
economics that I talked about. Given my suspicions about their
treatment of trends discussed above, I felt justified in writing
about their piece in this context.
I could have ignored Richard Baldwin’s criticism and my own
suspicions, and not included them in this post. But here is another
quote from Ben’s piece:
“Dr Graham Gudgin of the CBR criticised the Treasury’s
analysis, which predicted a major hit to the UK economy by 2030
if the UK experienced a “hard Brexit”, in unusually strident
terms describing it as “very flawed and very partisan”. Dr Gudgin
said he “suspected” Treasury civil servants had been leaned on by
ministers to produce the results David Cameron and George Osborne
wanted.”
Recall that the Centre of Economic Performance argued, based on their own extensive analysis, that the Treasury had underestimated the costs of Brexit, so
presumably the accusation of ‘very flawed and very partisan’
applies to their analysis too. If one of the authors was happy to
argue that the analysis of others had been designed to produce
certain results, I felt it only fair to ask the same question of the
authors.
[1] Actually the second post by date: the two post were a day apart.
