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100th Issue of the Review : The Economic Review

Published online by Cambridge University Press:  26 March 2020

G.D.N. Worswick
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Extract

In January 1959 registered unemployment in Britain reached 620,000, 2.8 per cent of the labour force, and the highest figure since the War. The first issue of the Review appeared in the same month, and its conclusion was that if no further Government measures were introduced, a small rise in output was to be expected. In the event, even allowing for subsequent policy changes, this forecast proved to be a particularly bad one, so that for many years to come a superficial inspection of the sequence of forecasting errors was bound to suggest improvement! 1959 was to turn out to be the year in which: ‘You never had it so good’; in October, in a third consecutive General Election victory, the Conservative government increased its majority from 60 to 102. In 1959 also the yield on ordinary shares fell momentarily to 4 per cent and was subsequently to remain below the yield on Consols. Some concern was being expressed about ‘Stop-Go’ which was soon to lead to experiments in national planning, and some people were worried about the persistence of inflation, but all in all the wind seemed to be set fair for an increasingly affluent society. Confidence in the economy was matched by the assurance of economists that they knew what they were about. Economic research would put quantitative flesh on the bones of the Keynesian model which was not seriously challenged. That early forecasting error would be quickly rectified once the new team got into its stride.

Type
Articles
Information
National Institute Economic Review , Volume 100 , May 1982 , pp. 3 - 8
Copyright
Copyright © 1982 National Institute of Economic and Social Research

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References

(note 1 in page 3) A fuller account of the setting up of the Review can be found in the article by Lord Roberthall in the 50th Issue of the Review, November 1969.

(note 1 in page 4) R. R. Neild, and E. A. Shirley, ‘Economic Review: an assessment of forecasts, 1959-60’, National Institute Economic Review, no. 15, May 1961.

(note 2 in page 4) L. R. Klein, R. J. Ball, A. Hazlewood, and P. Vandome, An Econometric Model of the United Kingdom, Blackwell, 1961.

(note 3 in page 4) Besides R. R. Neild's work on prices and employment (Occasional Paper no. XXI) there were articles on output and employment, imports, and taxation by W. A. H. Godley, W. A. B. Hopkin and J. R. Shepherd, and there was continuing work on the wage-price relationship following the studies of J. C. R. Dow and L. A. Dicks-Mireaux. A feature of this work was the increasing importance attached to time-lags in the transmission of changes through the economy.

(note 4 in page 4) W. Beckerman and associates, Britain in 1975, Cambridge University Press, 1965.

(note 5 in page 4) This formula appears in a note on ‘Arithmetic of the long-term balance of payments problem’ in the Review of August 1965. The tone of that note undoubtedly was that there was a clear conflict between growth and the balance of payments, so that if growth was to be resumed something would have to be done about the balance of payments. Eighteen months later the Review came to a much less strong conclusion: ‘Allowing for a minor change in the competitive ness of British manufactures in home as well as export markets, the import availability derived from the rest of the projections would be adequate with a little to spare for a 3 per cent growth rate from 1967 to 1970; it would not be enough—by about the same margin—for a 3 1/2 per cent growth rate’. (National Institute Economic Review no. 39 February 1967.) In short, the message was that one might get by without devaluation. Sterling was devalued in November 1967!

(note 1 in page 5) Besides carrying the regular reports on recent economic developments and prospects for the world, and more especially for the British economy, the Review has also been the vehicle for special articles on a wide variety of topics ranging from the newspaper industry to immigrants and the social services, but this note is confined to macroeconomic analysis and forecasting.

(note 2 in page 5) Running in parallel with the creation of a formal model was the move from the simple calculating machine to the electronic computer.

(note 3 in page 5) A fuller account of this episode is given in chapter 3 of G. A. Renton, ed. Modelling the Economy, Heinemann Educational Books 1975. The Byron model was reported in chapter 1 of K. Hilton and D. F. Heathfield (eds.) The Econometric Model of the United Kingdom, Macmillan, 1970. The other model is essentially the one described in M. J. C. Surrey, The Analysis and Forecasting of the British Economy, Cambridge University Press, 1971.

(note 4 in page 5) In mid-1972 the Institute's model had 11 behavioural equations compared with 49 in the Treasury model and 68 in the LBS model.

(note 1 in page 6) This Model II had some 50 behavioural equations and was fully described in National Institute Discussion Papers 10A, 10B, 10C, and 10D, by C. G. Fane, E. Kiernan, P. Ormerod and J. D. Whitley, October 1977.

(note 2 in page 6) In the event Phase III introduced the ‘threshold’ indexation scheme which was destined to give such a boost to wage inflation in 1974.

(note 3 in page 6) David Savage, National Institute Economic Review no. 89, August 1979.

(note 1 in page 7) J. S. E. Laury, G. R. Lewis, and P. A. Ormerod, ‘Pro perties of macroeconomic models of the UK economy: a comparative study’, National Institute Economic Review, no. 83, February 1978.

(note 2 in page 7) C. Allsopp and V. Joshi, National Institute Economic Review, no. 91, February 1980.

(note 3 in page 7) D. R. Osborn and F. Teal, National Institute Economic Review no. 88, May 1979. A similar methodology was applied to the February 1979 forecast and reported in National Institute Economic Review no. 95, February 1981.

(note 4 in page 7) S. Brooks, ‘Systematic econometric comparisons: exports of manufactured goods’, National Institute Economic Review, no. 97, August 1981.

(note 5 in page 7) The nature and origins of the recession', National Institute Economic Review, no. 98, November 1981.