Misunderstanding economics


by Chris Dillow    
December 3, 2008 at 11:30 am

Guido has done us all a favour by exposing the innumeracy of some Tories. He accuses the Chancellor of making “fantasy forecasts” and quotes a correspondent querying Darling’s forecast that the economy will grow by 0.75% this year:

Now, when the chancellor stood up at the dispatch box, three quarters of 2008 GDP growth were known:
Q1 0.3%
Q2 0%
Q3 -0.5%
In order to hit the forecast 0.75%, the economy has to grow at feisty 1% in the fourth quarter. Has the Chancellor been outside recently?

This is just drivel. Let me explain.

Here is the series for known GDP (in billions, at 2003 market prices):
Q1 2007 = 313.2
Q2 2007 =  315.6
Q3 2007 = 318.0
Q4 2007 = 319.6
Q1 2008 = 320.45
Q2 2008 = 320.45
Q3 2008 = 318.9
Now, the Chancellor forecasts on page 184 of this pdf that GDP in the second half of this year will be £635.5bn. Take from this the £318.9bn we had in Q3 and we have a forecast for Q4 GDP of £316.6bn.

This is a fall of 0.7% from Q3, which is actually slightly more pessimistic than the Bank of England‘s forecast. Not a 1% rise.

So, how do we get a forecast for 0.75% growth this year? Simple. Just add up this year’s four quarters of  GDP – which comes to £1276.4bn – and compare it to last year’s, which was £1266.4bn.

We get year-on-year growth even with recession simply because the year started with GDP well above 2007’s level.

For the same reason, we’ll probably see GDP fall in 2009 compared to 2008 even if the recovery begins next year because the year will start from a low base.

Now, I apologise for troubling most of you with such obvious triviality. I mention it just to show that some of Darling’s critics just haven’t the first idea what they are on about.


---------------------------
  Tweet    


About the author
Chris Dillow is a regular contributor and former City economist, now an economics writer. He is also the author of The End of Politics: New Labour and the Folly of Managerialism. Also at: Stumbling and Mumbling
· Other posts by
Filed under
Blog ,Economy ,Libertarians


Sorry, the comment form is closed at this time.


Reader comments


1. Kardinal Birkutzki

Good God, you get everywhere! And it’s the same one-eyed nonsense! Apparently you’ve found
an error! So that’s alright then: argument over, eleven years of social-democratic nirvana and an economy even more busted than last time (O.K. come out with some figures proving the opposite but let’s just wait and see, heh?) and you have the gall to have a pop at the Tories.

Socialism = dogma = inability to be open-minded.

Your problem is greater however: IQ too high; CQ (common sense quotient) too low

I am sorry to say some of us ( ahem ) may have been lax in our studies of what figures thrown around daily actually mean so I appreciate this . Year on Year growth is , I now know , a highly misleading measure and I therefore expect it to be used to mislead by New Labour .

So Chris’s point is that Guido has pulled a boner by failing to understand the numbers, and your point is ‘by the numbers’ rant against the ‘eeevils of socialism’ and an appeal to so-called ‘common sense’, i.e. the collective stupidity of everyone who believes that socialism is ‘eeevil’ but without any capacity to articulate argument to explain why.

If the Tories and their pet trolls want to come across as being able to run an economy, or to know what we do/don’t need to do now, a little financial literacy would probably help.

Or, you could just ignore the fact that you don’t know how GDP growth is measured and resort to tantrums.

Eh? Eh? ohhh.

Other than ‘replace the government with US’, I haven’t seen any actual realistic policy from Tories on the current economic situation. Oh, I forgot ‘turn back time and replace the government of 1997-2008 with US, with the benefit of hindsight’.

5. Tim Ireland

Paul Staines appears to be concerned that Alistair Darling is going to make us all bankrupt. You’d think he’d be glad of the company.

(Psst! His name is ‘Paul’ and not ‘Guido’. He has enough problems with his persona-related fantasies as it is. Please, for Paul’s sake, call him ‘Paul’.)

6. Lee Griffin

“Your problem is greater however: IQ too high; CQ (common sense quotient) too low”

Funny, I didn’t see an overwhelming show of support for the Labour economic policy in Chris’s post, only the explanation of how someone got their figures wrong. Some people can see anything in nothing, obviously!

I thought this was a really good post actually it has that precious quality of brevity which some might learn from and by ‘some’ I mean ‘Unity ‘. I was reading his latest into the wee hours the other night and Finnegan`s Wake popped into my head .

Nothing short of divine vision or a new cure for the clapp can possibly be worth all the circumambient peripherization. (Ezra Pound )

I mean this kindly

These Tory trolls are getting to be a real problem aren’t they?

Sunny “These Tory trolls are getting to be a real problem aren’t they?”

That is what I have been trying to say Sunny. Most of these people are not interested in coming here and debating. They just drive by and shit everywhere.

Exibit a…..
.
Kardinal Birkutzki “Good God, you get everywhere! And it’s the same one-eyed nonsense! Apparently you’ve found
an error! So that’s alright then: argument over, eleven years of social-democratic nirvana and an economy even more busted than last time (O.K. come out with some figures proving the opposite but let’s just wait and see, heh?) and you have the gall to have a pop at the Tories.

Socialism = dogma = inability to be open-minded.”
Your problem is greater however: IQ too high; CQ (common sense quotient) too low”

That is not debate, it is just smarmy, smug Tory bollocks. But I take on board your warning to me, and I am glad you are going to take action against the trolls.

While regretting that every other post has to contain the obligatory sideswipe against “Tories” or the Mail, I thought this was very useful reminder about lies, damned lies and statistics…

Eeek , I have the unpleasant feeling a troll feels in his water when the forces of Liberalism are about to bann something.

“Eeek , I have the unpleasant feeling a troll feels in his water when the forces of Liberalism are about to bann something.”

Which is exactly what you trolls want to do achieve

Shit everywhere, then get banned , so you can then claim……… “not very liberal are you.”

Au contraire I like this site and I enjoy the articles and comments which are often tremendously well researched . Sally why not lighten up a teensy teensy bit , its hardly life or death is it and your language is terribbly aggressive .

I am sure nice Mr. Hundal was not thinking of anything so intolerant

14. Kardinal Birkutzki

The thing is that I am actually a member of the SDP party in Germany and my criticsm of “social domacracy” reflects what I believe to be the wrong-headed and biased way in which Labour/New Labour has head over the post-war decades in the UK.

What I find extraordinary is the LACK OF CONFRONTING THE ISSUES IN THE UK BLOGOSPHERE.

I criticise the incumbant UK government and therefore the smokecreen, defensive, no-arguement
retort is thrown at me that I am a Tory.

Yet the UK economy is in the most dire state ever. I do not ceebrate that fact! I abhor it! But please think. It cannot be that difficult to ask people to think! The Labour Party has cremated the UK.
God and the British cal it Democracy!
So let’s go: to save you time replying here’s your criticsim-:

OK Birkutzki you would say that becaus you are a right-wing Tory and blah,blah,blah.. the Labour Party will rule for everyone and in eleven years will have solved child poverty( just past a law you know) but what if the Tories blah blah…it would have been worse blah!

15. Lee Griffin

“I criticise the incumbant UK government and therefore the smokecreen, defensive, no-arguement
retort is thrown at me that I am a Tory.”

Firstly, that’s just Sally for you, ignore her/him/them.

Secondly, you criticised the poster for simply correcting someone’s figures and *then* took that to mean that they were defending some kind of policy that their posting never even slightly suggested….you flew over the top given the source material here, if you wanted to have a debate about British economic policy then just say so, don’t go on the offensive so early ;)

“God and the British cal it Democracy!”

I don’t know how many of us really call what we’ve got a democracy…

“Yet the UK economy is in the most dire state ever.”

And why do you feel that is? If you want to talk about it let’s get your more informed and fleshed out view and go from there.

16. Aaron Heath

I think people should be aware that this is a blog which is paid for. It is private property.

If the editors decide to ban anyone – it’s a very simple process, and very gratifying.

You should try surfing blogs in the US, where banning trolls is considered good housekeeping – especially on GOP blogs, where liberals are not tolerated. I know, I regularly get banned.

People seem to have got a strange interpretation of what liberalism and free-speech mean.

You can practice free-speech any time you want, by getting your own blog.

17. Aaron Heath

newmania

Au contraire I like this site and I enjoy the articles and comments which are often tremendously well researched ~ newmania

We’ll take that, tentatively, as a compliment. Thank you.

Actually, on a good day, I’d say YOU are an asset to the site. I like having Tories around to question things. I just get pissed off when they start telling us how we should run the blog or question our liberal credentials (we’re openly a mix of liberals and lefties – not always the same thing. The name of the site was intended to be slightly tongue in cheek).

I thought this was a really good post actually it has that precious quality of brevity which some might learn from and by ‘some’ I mean ‘Unity ‘. I was reading his latest into the wee hours the other night and Finnegan`s Wake popped into my head .

To be fair to Unity, some of the things he talks about aren’t done justice to by short pieces – if you want short, unqualified opinion pieces, buy a newspaper. I read Unity’s work because he is saying why he has a particular opinion, backing it up with research, not simply that he has a particular opinion.

19. Alisdair Cameron

Never mind the shilling for party a, b or c.
Can anyone, anyone at all make financial forecasts that are worth paying attention to?
Not with anything like the degree of accuracy that would be much help, I’d wager, given that the known data sources and methods of analysis weren’t much cop for anticipating what transpired this year..
(In percentage terms we’re not actually talking about much variance either.
Best option is plan for the very worst.)

The thing is that I am actually a member of the SDP party in Germany and my criticsm of “social domacracy” reflects what I believe to be the wrong-headed and biased way in which Labour/New Labour has head over the post-war decades in the UK.

I think we have a bit of cognitive dissonance to work through here – the Kardinal appears to be suggesting that New Labour is somehow either socialist or social democratic in its approach to the economy, which I suspect explain why no one manage to follow his argument.

Aaron Heath “You should try surfing blogs in the US, where banning trolls is considered good housekeeping – especially on GOP blogs, where liberals are not tolerated. I know, I regularly get banned.”

Which is probably why I am so hostile to Conservative trolls. The Right wing blogs are non to tolerant of opposing views, so I don’t see why we should put up with them.

22. Andy Gilmour

Sally,

“I don’t see why we should put up with them.”

Because we’re *better* than they are ;-) ))

And we know it… :-) )

23. Alisdair Cameron

@ sally, (post 21)
“The Right wing blogs are non to tolerant of opposing views [accepted], so I don’t see why we should put up with them”

Um, to prove we are better than them, progressive and liberal in outlook, and hence tolerant with regard to folk expressing an opinion. Don’t have to resort to their intolerant depths of banning: reasoned demolition of their arguments, ridicule (but NOT abuse) and withering contempt (but again not abuse, no ad hominems etc) do the trick.

The thing is I actually like abusing right-wing trolls. I’d do more of it if I wasn’t hampered by my own guidelines.

25. Alisdair Cameron

Ah, but Sunny, there’s abuse and abuse.
Calling someone a f*cking c*nt might relieve some stress but doesn’t actually cast you in a great light, as it’s give the impression you’re a bit dim/unimaginative etc.
Being inventive and creative with insults, that is using a rapier not a blunderbuss is how you should operate. Use ‘bad’ language, sure, but imaginatively please. trouble is, it requires either effort or inspiration to do so, by which point you might fell, why bother, or, God forbid, simply pen a civil post…

26. Aaron Heath

Use ‘bad’ language, sure, but imaginatively please.

Aye. Learn from Sir Stephen of Fry ::

Let it be established here, this day, that no one, on pain of being designated fifty types of watery twat, ever dare repeat that feeble, ignorant, self-satisfied canard ever ever again.

Now that is how you swear.

27. Tim Ireland

It’s not just the words, either, but the context.

I had to issue a rare ban within the past few days when someone referred to Iain Dale as “some poof (who) inflates his readership figures”. Without this, the contributer may have escaped a ban, even when calling me “a mongish type” and “a bit of a spaz”.

Paul Staines recently laughed off a posts by Sunny and myself about his use of the word ‘chinky’ to describe Chinese food, but it’s clear that its use is far from a laughing/piffling matter when you take into account his publication of comments describing China as “the chink dictatorship” and Sun Tzu as “the Chink who wrote ‘The Art of War’”


Reactions: Twitter, blogs




    Sorry, the comment form is closed at this time.

     
    Liberal Conspiracy is the UK's most popular left-of-centre politics blog. Our aim is to re-vitalise the liberal-left through discussion and action. More about us here.

    You can read articles through the front page, via Twitter or RSS feed. You can also get them by email and through our Facebook group.
    RECENT OPINION ARTICLES




    6 Comments



    8 Comments



    24 Comments



    78 Comments



    68 Comments



    20 Comments



    29 Comments



    45 Comments



    32 Comments



    45 Comments



    LATEST COMMENTS
    » Mender posted on You just can't be a Monarchist and believe in meritocracy

    » Mender posted on You just can't be a Monarchist and believe in meritocracy

    » Layman posted on Why Jenny Tonge had to go for her comments on Israel

    » jon posted on We Libdems will need more than an apology if the NHS bill passes

    » mark hope posted on Oi Daily Mail - who you calling a "Plastic" Brit?

    » persephone posted on Women in power - what will it take?

    » Chaise Guevara posted on The EDL and BNP start to join forces

    » Trooper Thompson posted on Libdems approve obliteration of the NHS

    » Chaise Guevara posted on The EDL and BNP start to join forces

    » The Judge posted on Oi Daily Mail - who you calling a "Plastic" Brit?

    » Chaise Guevara posted on The EDL and BNP start to join forces

    » Chaise Guevara posted on The EDL and BNP start to join forces

    » Cylux posted on Libdems approve obliteration of the NHS

    » Chaise Guevara posted on Oi Daily Mail - who you calling a "Plastic" Brit?

    » Chaise Guevara posted on You just can't be a Monarchist and believe in meritocracy