Sir Mervyn can't be pleased. The MPC is in a hole.

As in the US, growth forecasts were wrong all along.

There were a lot of very embarrassed members of the economics staff at the Bank of England, this morning. They messed up and it is certain that Sir Mervyn was not pleased, as now the MPC is in a hole. More of that in a minute. First, we need some background.

The Bank of England has put a good deal of resources into trying to understand the patterns of revisions to data in general and to GDP quarterly growth data in particular. Growth numbers are published by the ONS and then are revised over time as more data becomes available. So, not only is there uncertainty about where the economy is going, but also about where it is currently and where it was before. Over the past year or so, the MPC has based its forecast to growth and output not so much on the official ONS data but on what it thought it would end up being once it had gone through a revision cycle.

So, here is the latest forecast of the MPC taken from its August inflation report (2011). Everything to the right of the dashed vertical line is the forecast and the green lines are the 90 per cent confidence interval, which widens as the forecast moves further into the future. To the left of the line is the backcast, which also has error bands on it showing that it is measured with error. The black line shows the official data from the ONS. The fact that the green lines are mostly above the black line means that the MPC was expecting the data to be revised up. It didn't turn out that way.



[MPC's GDP projection based on constant nominal interest rates at 0.5 per cent and £200bn asset purchases, August 2011]


The table below shows the old data and the new data. A few facts stand out. First, the extent of the decline in output in 2008 and 2009 was greater than was previously thought: that output fell by 7.3 per cent between 2008 Q2 and 2009 Q2, compared with 6.6 per cent, as previously estimated. Second, the fall in output now appears to have stopped in 2009 Q2, rather than in 2009 Q3. Third data for 2008 Q3 has been revised down substantially -- recall that the first release was + 0.2 per cent. Finally, output over the last three quarters did not grow at all compared with the 0.2 per cent previously estimated.

Hence the staff and the MPC got it wrong and have collective egg on their faces. So did a number of others including Gavyn Davies, who in his blog article "Anglo Saxon GDP not as weak as it appears" argued on 1 May 2011: "It is quite likely that UK real GDP growth in the past two quarters will be revised up markedly from the zero rate which is currently estimated." Andrew Sentance has continued to argue that one of the major problems the UK faces is inflation, because the recession was much weaker than previously thought and the recovery much stronger. As ever, his analysis is negatively correlated with the actual outcomes. Kevin Daly from Goldman Sachs also claimed on 24 April: "Despite the uncertainty about the future, the UK's growth performance in the recent past has been better than is commonly portrayed." Wrong, chaps, sorry.

This is almost exactly what happened in August 2008, when the MPC failed to see the recession, because it assumed the back data would be revised up but, in the end, they were revised down. The MPC's forecast is now going to have to be lowered even further, bringing it closer to that of NIESR, which has been very bearish -- and on the basis of these numbers, they are likely to lower their forecast even further, according to Simon Kirby.

This means that the MPC has no alternative but to do more QE at its meeting tomorrow, proving Adam Posen has been right all along. The MPC can't afford to wait until November. I suspect also that some heads will roll at the Old Lady of Threadneedle Street -- and so they should. Embarrassing.

2007 Q1 1.0 1.1
2007 Q2 0.6 1.2
2007 Q3 0.5 1.2
2007 Q4 0.3 0.6
2008 Q1 0.5 0.0
2008 Q2 -0.3 -1.3
2008 Q3 -0.9 -2.0
2008 Q4 -2.1 -2.3
2009 Q1 -2.2 -1.6
2009 Q2 -0.8 -0.2
2009 Q3 -0.3 0.2
2009 Q4 0.5 0.7
2010 Q1 0.4 0.2
2010 Q2 1.1 1.1
2010 Q3 0.6 0.6
2010 Q4 -0.5 -0.5
2011 Q1 0.5 0.4
2011 Q2 0.2 0.1

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

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What’s the secret of the world’s best-paid sports manager? Ask the Chicago Cubs

Theo Epstein is a star because he values the person as much as the player.

As I write, the Chicago Cubs, perennial underachievers, are three wins away from reaching baseball’s World Series for the first time since 1945. By the time you read this they may have crashed out. Besides, baseball – like cricket – is a language that asks a lot of its translators. So, in writing about the Cubs, I’ll skip the baseball bits. Fortunately, the lessons of the Cubs’ success (they were the outstanding team of 2016, even if they don’t win the World Series) transcend baseball.

To understand the future of sport – and perhaps employment – I recommend a pair of profiles of Theo Epstein, the president of baseball operations for the Cubs, one published in the New York Times and the other written by David Axelrod (Barack Obama’s strategist) for the New Yorker.

Epstein, 42, has just agreed a contract extension worth $50m over five years, making him the highest-paid non-player in professional sport. There is plenty in the profiles on his whizzy use of data analytics; his algorithmic tests that measure players’ co-ordination (essentially using neuroscience to measure talent); as well as the Cubs’ coaching programme dedicated to mental health and managing stress. Most timely and important of all is Epstein’s emphasis on character. He talks about “scouting the person more than the player”. He wants the right kind of people on the field.

“In the draft room [where the team decides which players to sign], we will always spend more than half the time talking about the person rather than the player,” he has said. “We ask our scouts to provide three detailed examples of how these young players faced adversity on the field and responded to it, and three examples of how they faced adversity off the field.”

Epstein is well known for empowering a “geek department” inside his baseball teams. Yet instead of perceiving a conflict between science and the human realm, he sees the two as part of the same big picture. He craves players with character who can benefit from the insights of science.

“Character” is a vexed subject inside sport. It sets off uncomfortable associations. Talking too much about character – building it, or even just valuing it – sounds dangerously close to endorsing an amateur ethos. Victorian public schools often celebrated sport explicitly in opposition to intelligence, even achievement. H H Almond, the headmaster of Loretto from 1862, got an A for candour (if nothing else) when he ranked his school’s priorities: “First – Character. Second – Physique. Third – Intelligence.”

The Victorian notion of games cast a long shadow over sport and society in the 20th century. The first phase of ultra-professionalism, in the office as well as on the sports field, was a reaction to Almond’s set of values. The concept of character was recast as a consolation prize, doled out to the class dunce or the twelfth man. Crucially, reformers and nostalgics alike bought in to the historical perception of a separation or conflict between character, intellectual life and sporting achievement.

The Cubs, however, know better. To adapt Almond’s clumsy saying: intelligence and physical skills derive, significantly though not entirely, from character. Character is now being understood not as the destination, but the foundation, even the process.

This is an overdue reassessment. In the loosest terms, I would identify three phases in the development of professional sport. Phase one optimised the body. Sadly, though we are still inching forward, the human body is now reaching the outer wall of virtuosity. All sports will tail off in speed of progress, in terms of pure physicality.

Phase two of modern sport turned to psychology. Realising how hard it is to gain an edge through physical conditioning, everyone suddenly started talking about the mind: the inner game of this, the mental game of that. However, reconfiguring the mental approach of elite athletes – already in their twenties and thirties, with deeply ingrained habits and highly evolved psychological software – is also exceptionally difficult. That is why many top athletes recoil from conventional “sports psychology”; the discipline is oversold and under-sceptical.

We are now entering phase three: the whole person. Sustained high achievement relies on something much deeper than a few sessions with a sports psychologist. So you need the right people in the room.

Coaches in future will be numerate and intellectually unthreatened by the scientific advances that illuminate sport. But the best coaches will never lose sight of a parallel truth: that although science can help us to understand what happens on the sports field, and sometimes how to do it better, it cannot conveniently convert athletes into inert particles, as though it were a ­physical science. Coaching can benefit from ­science but remains an art – one that revolves around understanding and helping people.

In most sports, players and coaches are really in the business of decision-making. The winning team, as Pep Guardiola says, makes more good decisions. Sport, in other words, advances when it trains people to make better decisions. There are now highly evolved analytical techniques for understanding how those decisions influence results. However, the athletes themselves are still people, imperfect and imperfectible. If you want machines, you get dummies.

This month, I was asked to found a new institute of advanced sports studies at the University of Buckingham. The mission is to create undergraduate and postgraduate courses that attend to the entire mindset – critical thinking, ethics and leadership, as well as data analytics and sports science: a kind of “PPE of sport”. After a misleading triple fissure – character, body, mind – sport is starting to put the pieces back together again. That’s why, this month, I’m rooting for Epstein’s Cubs.

Ed Smith is a journalist and author, most recently of Luck. He is a former professional cricketer and played for both Middlesex and England.

This article first appeared in the 20 October 2016 issue of the New Statesman, Brothers in blood