NIESR’s Jonathan Portes has posted an edited transcript of his appearance in front of the Treasury Committee – specifically, his exchange with Jesse Norman MP (Conservative, Hereford and South Herefordshire).
Norman just can’t quite seem to reconcile the fact that it is possible to be politically neutral, and still argue that the government’s economic policy is not up to scratch. As a result, he heads down a line of questioning which doesn’t leave him in the best light. You can read the whole exchange at Portes’ site, but the most telling questions are excerpted below:
Jesse Norman: Just picking something at random, there was a recent piece of yours in The Spectator, “‘Plan A’ has failed.” That seems to me to be a pretty political judgment…
Jesse Norman: Let us just be perfectly clear that, whatever he said, there is a line here. The question is, are you transgressing it? If you are transgressing it, are you transgressing it with the institutional support of NIESR, or are you operating as a kind of rogue economist? I am very struck by the fact that you are not prepared to give the Government any credit at all on a 300 basis point difference between UK policy now versus Italy, and two years ago. That seems extraordinary to me…
Jesse Norman: You seem to be extraordinarily unwilling to give any credit or credibility. When the question of credibility is raised, your answer is to say, “Look at what actually happened”. Of course, credibility does not concern just what actually happened—it concerns whether the market believed that the Government’s direction of travel was right, given the circumstances at the time…
Jesse Norman: Just to be clear, you do not think that there is anything strange about not attributing any aspect of the UK’s long-term debt yield performance to Government credibility, and you do not think that there is anything strange about the lack of caveating in using a phase like “‘Plan A’ has failed” when the whole of economics relies on a series of judgments of probability.
Norman goes on like this at length. Portes’ answers are commendably to the point, even if the video does reveal him to be as baffled as anyone would be by this line of questioning.
If your job is to comment on matters of economics, and you shy away from making statements which could have a political effect, you will not make very good comments on matters of economics. We can see that in organisations like the American Congressional Budget Office, which – unlike NIESR – actually is required to steer clear of any and all political questions. As a result, when someone like Paul Ryan submits his budget to the CBO, he can, in the words of Paul Krugman:
[Present] a plan to hurt the poor and reward the rich, actually increasing the deficit along the way, plus magic asterisks that supposedly reduced the debt by means unspecified.
Without the power to call bullshit on untrue or impossible claims, no economic commentator can be effective. The fact that Norman is attacking Portes for doing his job well just shows how besieged he and his party are feeling by the simple facts of economics.
As for the fact that Norman apparently thinks it is strange that Portes is “attributing any aspect of the UK’s long-term debt yield performance to Government credibility”, enough has been written about the depressing effect of recession on long-term debt yields that it doesn’t bear repeating in too much depth: sovereign debt yields can be low either because investors think there is little chance of the nation going bankrupt, or because there is scant competition from other potential investments pushing up the yield. Since the crash, the chance of Britain defaulting hasn’t changed from basically-zero, but the growth rate – and thus the average return on investment from putting your money in the “real” economy – has plummeted.
In short, with the crushed economy, there is nowhere else for savers to reliably put their money than government bonds. That depresses yields, but contra Norman, has nothing to do with Government credibility.
Some credit must go to Norman for articulating the relatively important idea that economics can only talk about balances of probabilities. But to use that as a stick to beat Portes is similar to the people who attack evolution for “only being a theory”. It conflates technical and lay language to make a point which is, fundamentally, anti-expertise.
Not that anyone was likely to confuse Jesse Norman for someone in favour of expertise after this hearing.