The Civil Service reportedly has redone the Treasury’s Brexit long-term forecasts with a new approach, so say numerous leaks via Buzzfeed and elsewhere. ‘Officials believe the methodology for the new assessment is better than that used for similar analyses before the referendum,’ reports Buzzfeed. This new approach has, it seems, dumped the old Treasury calculations and methodology published in the original Treasury Project Fear report during the referendum. Plainly, the criticisms of this old approach – persistently so from us at Economists for Free Trade – have hit home; if so, that is real progress.
Under its old approach, the Treasury used something they called the ‘gravity approach’. This approach consisted of four steps:
As the Treasury or Civil Service seems now to have conceded, this procedure makes no sense because all these relationships are ‘correlations’ – correlations do not reveal causation. We have a correlation between unemployment and crime; but it would be dangerous to use it to predict unemployment from data on crime. This is because both these data series are impacted by a complex causal system involving a lot of other factors.
To read Patrick’s piece for BrexitCentral in full, click here.