Subjective Objectivity – The Blog of The Reasonable Man

January 26, 2011

Post hoc ergo procter hoc – GDP Edition

Filed under: Uncategorized — mikeshotgun @ 12:01 pm

So the economy lost 0.5% in the last quarter. Or so the current estimates say. They can and probably will be revised (maybe even upwards! Who the hell knows any more.) Blaming the weather does sound like something from the annals of canine consumption of homework, but it’s actually credible, as it impacts on consumer spending, tourism and the construction industry all of which are key components in any recovery.

Now, my blogging colleague, queries whether this in fact is the result of the cuts being implemented as part of the Comprehensive Spending Review.

Two things I should point out, to the extent that this probably isn’t the case:

Firstly, this reminds me of an old latin maxim that is the title of this post. Those familiar with the West Wing, will know the phrase to roughly mean “Event Y is preceded by Event X, so Y must have been caused by X”. Chronology as causation, if you will. It is a tempting piece of logic, but is generally considered a logical fallacy. Now, it may actually be the case that there is a causal relationship between our two Events, but to assume it just because of this not advisable. This is especially true in the realms of mysticism known as Economics, where effects of changes to macroeconomic policy are usually staggered and tend not to impact directly on the attending business quarter, or even the following one.

Secondly, the cuts don’t actually start until April of this year.

That said, this Good News for Ed Balls and the Keynsian Method (my best idea for a hipster band name this year) who will argue with greater credibility that the government ought slow or delay its programme of cuts. Certainly the narrative looks just awful for George Osbourne right now. He’s going to need an upward revision on the -0.5% figure, and a complete reverse of the trend for this quarter.

And no more snow.

Cross-posted at Something Quotable

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