Stephen Says...

Stephen Says...

This is my blog

sharing occasional thoughts about things that interest me

The Economics Profession (sic)

the state of the countryPosted by Stephen Wed, February 04, 2015 11:38:20

Twice per year an official assessment of the country’s economic prospects is published in accordance with which government plans for spending and taxation are calibrated. One of these assessments (or forecasts) accompanies The Budget each Spring, when final decisions are announced. The other is made in the Autumn, so as to guide official thinking at HM Treasury during preparations for the next Budget.

These assessments are made by the Office for Budget Responsibility, a body intended to be independent of political control and thus untainted by considerations of administrative convenience or presentational expediency in coming to conclusions.

The idea (perhaps a good one) is that political debate and Parliamentary control should be constrained to cut the clothing of government economic policy (decisions about public expenditure patterns and taxation) according to the cloth of national economic circumstances as determined by dispassionate ex cathedra expertise. This represents a belief that the interests of the public (the population at large or the electorate) are better served when responsibility for constructing a narrative of national economic circumstances lies not with elected representatives but with independent experts or ‘technocrats’.

The process of decommissioning parliamentary involvement in the assessment of the country’s economic situation began with the Blair government’s decision to make the Bank of England independent, with power to decide an official rate of interest in relation to a particular aspect of economic circumstances (the rate of inflation). The inauguration of the OBR was at the behest of the Coalition government. In neither instance was the decision foreshadowed by an election manifesto commitment.

An unfortunate consequence of these decisions has been to absolve politicians from taking responsibility for explaining the analysis of the country’s economic situation to the population at large. This is a democratic deficit much more significant than the deficit on the budget.

When Keynes looked ahead, to what we should probably consider our present day, he expressed the hope that analysis or advice from an economist would become recognised and respected as the technical equivalent of a dentist’s work. And with the Bank of England’s Monetary Policy Committee having been in operation for so long, and now having been joined by the Office for Budget Responsibility as an independent body, surely that day is meant to have dawned.

Dentistry is a profession. My dentist has to have a ‘licence to practice’, annually renewable only upon the basis of having devoted 50 hours to accredited continuing professional development (CPD) and being required to account for a further 50 hours of self-directed activity. Similarly, the Royal Institution of Chartered Surveyors (RICS) doesn’t just admit people to membership on the basis of an academic qualification (or equivalent in-service learning) but expects them to pass a Test of Professional Competence (a post-entry, post-experience, peer-assessment process) and commit to an annual programme of CPD to sustain membership (there are different grades of membership, my father was a Fellow). Because of this, we members of the public can have some confidence in the standards of professional practice to be expected of dentists and chartered surveyors.

Economics is not a profession. The Royal Institution of Chartered Surveyors is a professional body; by contrast, the Royal Economic Society is a traditional English subscription society, open to all who can afford its fee (I’ve been a member myself on an experimental basis). There is no Royal Institution of Chartered Economists (RIChE) assuring professional standards and providing for a Licence to Practice on the basis of annual commitment to accredited CPD. So there is no professional body to which the public can turn for assurance about standards of professional practice. And this despite members of the MPC and the OBR (for example) exercising considerable delegated authority (independence) with respect to public policy.

In their report Standards Matter (January 2013), the Committee on Standards in Public Life noted that their Nolan Principles have informed developments across a wide range of organisations and professions. And they claim that considerable progress is being made: “In professional services there have been major efforts to improve the quality of self-regulation. Examples of professional regulatory bodies established (post-Nolan) include the Bar Standards Board (2006), the Solicitors’ Regulatory Authority (2007) and the General Pharmaceutical Council (2010).”

But still no Royal Institution of Chartered Economists.

And when first I heard the Governor of the Bank of England claim (on a TV News clip, during a visit to Scotland) to represent “an impartial technocratic institution”, I thought it a bold claim. And one no less applicable to the OBR.

My (Chambers) dictionary indicates that a “technocratic institution” claims to exercise political authority on the basis of technical expertise; a “technocratic assessment” constitutes an authoritative statement not subject to public dispute (i.e. beyond political debate).

But if ‘technocratic’ indicates a claim to possess privileged insight, with no use for evidence (nor any need to answer to evidence independently presented), then technocracy is gnosticism. And the English traditionally reject gnosticism as the basis of executive authority. In fact we expect that public servants will be agnostic on our behalf and will use evidence impartially as the basis for judgement. This is embodied in the Nolan Principle of Objectivity: “using the best evidence and without bias”. When preconceptions are incompatible with available evidence we expect the preconceptions to be abandoned. To a convinced technocrat this understanding may seem unsophisticated, but as the Chair of the Committee on Standards in Public Life’s Research Advisory Board points out: “Principles in the public domain should be clear, and should depart as little as possible from their ordinary meanings. Too much divergence breeds misunderstanding, and misunderstanding exacerbates mistrust.” (Mark Philp, The seven principles of public life: What they say and what they mean, report to the Committee on Standards in Public Life, 2002, revised 2012, p.10). It is necessary to be rather strict about this because: “Individually and collectively people have a great capacity to find ways of acting within the letter but not the spirit of acceptable behaviour and to rationalise their reasons for so doing” (Standards Matter, p6).

Unfortunately there is no prospect of economists establishing themselves as a profession. Thus there is no chance for the public to hold official economic thinking to account. The political parties have forsworn critical scrutiny and the public has no professional body that it can appeal to. Meanwhile the evidence that official thinking is wrong (e.g. goes officially unacknowledged and deliberately ignored.

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