The Inevitable Politics of Economic Forecasting and Analysis

Economic methods often get overlooked as purely technical implementation devices for economic concepts. In fact, even a technocratic body such as the OBR adopts approaches rooted in contestable assumptions about the principles of Political Economy. The politics of economic method approach lens exposes the political underpinnings of economic ideas, analysis and policy prescription.

Economic concepts, for example those used to gauge growth trajectories and pilot economic policy in the context of medium-term fiscal rules, are always founded upon contestable normative assumptions. This remains true when such concepts are deployed by technocratic bodies like the OBR. The extensive scope for adopting the different modelling approaches, assumptions and techniques discussed in later chapters opens up space for deliberation and contingency.

The register of the disciplinary discourse of Economics rather obscures the political and ideological implications of taking different stances on these crucial issues, but ultimately the Political Economy of economic policy cannot be escaped. The mechanistic view of enacting fiscal oversight occludes the inevitable politics of economic method involved in things like the practical operationalisation of fiscal rules, and in economic forecasting.

Economic policy-making and evaluation, including when conducted by technocrats, needs to be analysed in appropriate ideational context – appreciative of the politics of economic ideas, including how dominant ideas evolve. Important method and technique choices need to be made in conducting economic forecasting, for example. Key judgements and assumptions have to be incorporated, and tricky concepts like trend potential output have to be operationalised.

The politics of economic method lens underlines how method and technique choices entailed in economic forecasting often reflect positions in underlying debates about fundamental economic ideas. In ways not fully appreciated in discussions of technocratic economic governance, economic methods, and economic modelling assumptions, constitute sites where different views on the principles of Political Economy are in play

The greater the scope for interpretation and judgement, the more there is a politics at play within the apparently technical process of economic forecasting.

The OBR sees itself as operating at the non-normative end of the spectrum, but given the inevitable politics of economic policy, it is questionable how far such a location can ever be attained.