When it comes to governing our economy, estimates rule the day. We want to know what effect a policy might have on the government’s budget, on economic growth, on employment…in the next 1 year, 5 years, 10 years…you get the idea. If you want to make (or critique) public policy, you better have numbers to back it up. 

To get those types of estimates, economists and politicians often rely on institutions like the Office for Budget Responsibility in the UK, or the Congressional Budget Office in the United States. As a result, their estimates and fiscal projections form crucial data points in our modern politics and policymaking. 

We like to think that these estimates and projections (not to mention, the people who make them) come from somewhere outside of our partisan politics. That while our values might be debatable, the numbers, at least, aren’t.

But, as Mark Blyth’s guest on this episode explains: that idea is a fantasy, and to the extent it obscures the values and politics that are baked into organizations like the Office of Budget Responsibility, it’s a dangerous one. 

On this episode, Mark Blyth talks with Ben Clift, author of “The Office for Budget Responsibility and the Politics of Technocratic Economic Governance.” In it, he pulls back the curtain on Britain's Office for Budget Responsibility, and reveals the hidden processes and ideologies that shape the estimates and projections that come out of it. In doing so, he shows how the OBR – and other institutions like it – are much more political than they appear. 

Learn more about and purchase “The Office for Budget Responsibility and the Politics of Technocratic Economic Governance”

Learn more about the Watson Institute’s other podcasts

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MARK BLYTH: From the Rhodes Center for International Finance and Economics at Brown University, this is the Rhodes Center Podcast. I'm Mark Blyth, the director of the Rhodes Center and your host. When it comes to governing our economy, estimates rule the day. We have to estimate what effect might a policy have on a government's budget or on economic growth or unemployment in the next one year, five year, 10 years. You get the idea.

And if you want to make policy or critique policy, you better have numbers to back it up. To get those types of estimates, we often rely on nonpartisan institutions like the Office of Budget Responsibility in the UK or the Congressional Budget Office in the United States. As a result, their estimates and fiscal projections form crucial data points in our modern politics and policy making. However, we like to think about these estimates and projections, not to mention the people who make them as coming from somewhere outside of the political system.

Our values might be debatable, but the numbers aren't, at least, at least in theory. But as my guest on this episode explains, the idea is a fantasy. And to the extent that obscures values and politics that are baked into organizations like the Office of Budget Responsibility, it's probably a dangerous one.

Ben Clift is author of The Office of Budget Responsibility and the Politics of Technocratic Economic Governance. In it, he pulls back the curtain on Britain's Office for Budget Responsibility and shows the hidden processes and ideologies that shape the estimates and projections that come out of it. In doing so, he shows that the OBR, as it's called, and other institutions like it are actually much more political than they appear. And also, this whole idea of putting such things beyond politics, that's the real fantasy. Here's our conversation.

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Hi, Ben. It's great to have you on the podcast.

BEN CLIFT: Hi, Mark. Great to be here.

MARK BLYTH: So you've written this absolutely fantastic book with, I think, a title that undersells itself. So let me just give everyone the title as it stands. It's called The Office of Budget Responsibility and the Politics of Technocratic Economic Governance. I would have basically called it banishing politics because in a sense, that's what these independent fiscal councils and other such bodies try and do. But before we get into that, let's just start off very simply. How did you have the idea for doing this book? Where did you go? I think I want to go stalk the OBR for a while.

BEN CLIFT: Well, it all began in the bowels of the International Monetary Fund of all places. So I was doing an interview for my previous book, all about the politics of austerity in the IMF with a guy who'd just come to work at the IMF from the OBR. And we got to chatting about how the OBR goes about putting together its forecasting, because I said, well, that's really hard to do, isn't it? Because you've got these strange and elusive concepts like the output gap and so on that you need to nail down. But everyone knows you can't nail them down.

And yet you need a kind of an official report that has a number that says it's going to be this, not something else. And we got to chatting about how that happens. And he told me the stories about the sort of rule of thumb and the guestimations and the debates and discussions that go on. So behind the scenes before you get to these official versions and I just thought that is so interesting.

And then the more I thought about it, the more I thought-- and there's a whole lot of really big political economic questions going on in how you do that quite technical stuff about arriving at this or that measurement of potential growth or output gap or whatever it might be. But none of it is kind of-- it's all under the hood and no one sees it and no one talks about it. And everyone sees these bodies as apolitical experts, a bit like kind of surgeons overseeing a patient. But there's much more going on there that wasn't being seen, and that was the real kernel that got me into it.

MARK BLYTH: So let's just start off with the official version of things before we go under the hood. What is the OBR for our international listeners who don't live in the United Kingdom? And how does it think it works? What does it think it's doing? Give us a couple of quick summaries of the official version of events.

BEN CLIFT: OK. So the Office for Budget Responsibility is the UK's fiscal council. That's how you could call it. So there's a kind of-- there's now an array of fiscal councils around the world. They've been coming on stream more and more in the 21st century. So lots and lots of advanced economists decided they ought to have and should have and built a fiscal council.

A set of independent in inverted commas experts to run the rule over the economic spending plans and the economic forecasts and casting their eyes ahead to what the fiscal position looks like. It's going to be given the government's current spending and taxation plans. So it exists to check that everything's on track for a stable and sustainable set of public finances and that kind of economic policies on being made on a sound basis, I guess we could say.

So that's what they exist to do and what they see themselves as doing is undertaking that work in dispassionate scientific fashion as policy economists removed from the cut and thrust of political debate about what governments can and should do with public money. But assessing in evidence-based terms, what spending is in process? What it's going to do to the economy? What things like economic growth are going to look like a few years down the line? And so what debt and deficit levels and things like that look like they're going to be into the near future?

And it's doing that to provide reassurance to investors, primarily to market participants. So these fiscal councils have come on stream around the same time a little bit after independent central banks, and all of those came on stream at a time when the globalization of finance evolved in such a way that governments had to pay very close attention to their levels of, if you like, financial credibility or fiscal credibility with bondholders, the people who are going to buy their debt when they issue it.

MARK BLYTH: All right. So that's what they think they're doing. Now, let's do the spoiler alert. I want to get to, if you will, the main claim of the book. Technocracy and politics are basically held as opposites in this worldview. But your main claim is that there's no way you can escape the politics and a sense all they've done is displace the politics and made it more hidden orderly in an environment that fetishizes transparency. So can you unpack for us why the politics never disappears, it just gets displaced and then ultimately is kind of massaged into economic data?

BEN CLIFT: Yeah. So the kind of premise behind doing this let's leave it to the experts thing. It comes really from, I think, new public choice theory. So neoliberal economic theory from the '70s, which is where we started with things like independent central banks. The idea is we cannot trust the politicians. They're all prone to spend more than they're going to tax and run the economy into ruin. They cannot be trusted with the public finances or anything much else.

So we need to hold them to a mask. We need to tie them to a mask of fiscal orthodoxy. And the way to do that is you take powers out of their hands, you give them to independent bodies. They will apply the settled wisdom of the economics profession in dispassionate and consistent fashion. That means that the rules about independent monetary policy or independent fiscal policy will be observed, and the governments won't do any wrong.

The reality, of course, is that you can never take the politics out of economic policy, because economic policy, by its very nature is inherently so riven with politics and so steeped in politics. It could not ever be a political. So that in effectively is a sham and it's a sham for a number of reasons. The first fiction on which it rests is that there is one agreed settled wisdom of the economics profession, which all of these technocrats are dispassionately applying.

If you scratch for a millisecond the surface of economic theory, economic debate, the macroeconomics over the last 20 or 30 years, you see very quickly, there's lots of different ideas out there. There's lots of different schools of thought. There are ongoing debates, and they evolve and they change in the wake of things like global financial crises, or COVID, or climate change. And so one settled wisdom that everyone applies is not there to be found. So the first fiction is that there is one settled view that these technocrats apply.

The second fiction is that once you've got a set of rules and an independent adjudicator upon those rules that that effectively really does tie the hands of policymakers. So our fiscal council, the OBR was introduced in Twenty Ten by George Osborne at the beginning of the era of austerity that you've written so persuasively about. And he delivered to us a set of fiscal rules that the government of the day and thereafter were going to apply.

Now, those are the tablets of stone and to mix metaphors. That's the mast that you're going to untie policymakers to so that they will stay on the path of righteousness and straight and narrow and sound policy. We are now only 12 years later or 14 years later, we are on our sixth set of fiscal rules. And Rachel Reeves has already announced that if she wins the election, she's going to introduce our seventh set of fiscal rules. So that, by my reckoning, is quite a lot of sets of fiscal rules to get through in the relatively short history of the OBR.

MARK BLYTH: So that begs a really interesting question, though, right? I mean, this whole thing is based upon, as you say, rules versus discretion, notions of time and consistency. Democracy is having a deficit bias. Now, the first thing is there's actually very little evidence for any of that being true. Hardly, any empirical. I've been through the work. Try and find the work that shows this. It's like, hmm, maybe. They're wonderful models and theories, but they're not actually backed up by a lot.

So let's just assume that these things are out there. And you do have to have these rules, but then they break the rules all the time, as you point out, and they change the rules, they avoid the rules. And as you point out, the OBR is there in an advisory capacity rather than a statutory capacity. They can't force the government to do anything. If that's the case in all of this is about credibility, that's an incredible framework, right? Is there any evidence that this actually has any efficacy or is it just like the government sets up something, it does something, and then we assume that it does something, but it's not really doing anything, you know what I mean?

BEN CLIFT: Yeah, I do. So there's been a little analysis, quantitative analysis of do the fiscal rules and their observance or non-observance really make any difference to borrowing costs and bond market developments. And frankly, very little in most cases is where we're at. So they don't really do in mechanical fashion what you assume they do. You obey these rules, you get these borrowing costs you don't, you don't.

However, what they do, I think having some fiscal rules, even if they're changeable a bit. It establishes a set of guardrails within which economic policy is being conducted that provides the background reassurance to bond market participants and financial market actors. And I think we saw with the Liz Truss episode of Twenty Twenty-Three, what happens when you go outside the guardrails?

MARK BLYTH: You go outside the guardrails. I want to get on to that later on, but let's move ahead on this one. So you point out that the OBR doesn't really believe its own forecasts. There's a great quote on page 96 that nobody really believes this stuff and hate when the media takes it too seriously, this type of thing. That's the case. And the error rate is actually quite high as it was in particularly in the austerity years in terms of the growth forecasts. What's the point in the forecasts?

I mean, I understand the guardrails point, right? But if at the end of the day, you're meant to predict the way things go and for years your predictions were consistently off. How is that adding a credibility?

BEN CLIFT: Well, they project they don't predict point one.

MARK BLYTH: Oh, find a sentence.

BEN CLIFT: Very important.

MARK BLYTH: Please explain.

BEN CLIFT: Very important.

MARK BLYTH: Please explain.

BEN CLIFT: So what happened with the OBR-- one of the ways it's interesting is when it was created, and this is unusual internationally. If you look at all the other fiscal councils, very few of them do this. The OBR now produces the official forecast on the basis of which government makes policy all its taxing and spending decisions. So the treasury used to do that for generations. And there's all that great literature about how it did it and chancellors bending the rules and coercing forecasters into giving certain outcomes.

All of that was taken out of the treasury and put in the OBR's office. And now this kind of complex, symbiotic relationship where the government requires the forecast from the OBR. The OBR requires information from the government about what its economic spending and taxing plans are and so forth. And they need each other to arrive at a policy package.

So you need the projections, even though you know the world isn't going to end up like that and no good plan survives first engagement with the enemy. You need the projections to have some sense of where the economy might be going and what it might mean 5 years, 10, 15 years down the line in terms of the spending implications. But you attach all kinds of caveats to those projections. And you do that-- you present them in a way where lots of the uncertainty is built into the way you talk about them.

So the media always want what's the number. So what's growth in four years hence? And the OBR would never want to say that. They will show you a graph and they will show you a lot of shading and they'll say, it will be somewhere around here and there's a 50% chance it'll be between here and here--

MARK BLYTH: The fan chart.

BEN CLIFT: --between 0% and 6%. So you get a fan chart and say, well, that's all we can really say. You must press this to a number. That's the number. But don't press us to a number because it doesn't make any sense. It'll be somewhere in that region. So what they're doing, which is quite interesting is building in the scale of uncertainty into their forecasting process in ways that, as you say, kind of undermine the forecasting process itself. Because if you're forecasting, it's supposed to have some confidence in the projections, but they're saying scale of uncertainty is such that their confidence should be limited.

But what's also interesting about them in terms of the point you made just there about the failings of their growth projections is-- and this comes back to my point about how you construct and select your models is always going to reflective of a set of political economic assumptions. They built in for understandable reasons that the standards growth trajectory of productivity and growth that the UK economy had experienced for the previous 70 or 80 years with a slight hiatus in World War II.

And there's a good reason to do that. Economic forecasting is hard. Who knows what the future holds? If you've got a relatively reliable past historic trend, why don't you start with that as a baseline and work with that? They kept that for over a decade when it was clear from year one that it was too high and that we shifted off that historic trajectory. But they didn't have a better idea about what the new trajectory might be or a better-- or a way of gleaning a different trajectory because it was too hard to glean.

So they stayed with that trajectory and therefore, overestimated how quickly the UK would do things, like bounce back from the global financial crisis, and so on. So it took them a long time, took them years and years to finally through a process of auto critique, recognize the flaws of that.

And seven years into their existence, what they did was that instead of coming up with a new worked through model of the UK economy, they said the previous growth direction was up here. What we've had since the crisis is zero or nothing. So we're going to draw a line halfway between what it used to be and what it's been since the crisis, and that's our new growth trajectory. So more art than science, I think we might say.

MARK BLYTH: Well, I mean, you do have that lovely quote from one of the chief economists saying there's the big M model and the model-- and there's the small M model in my head. And there's the whole issue of the judgments that go into that. I want to get to in a minute. But to go back to what you were just talking about, it's very similar to what I found with central banks. I just finished a book on inflation.

And it's the whole notion that's, like, OK, so who is the audience for this? Who's actually listening to this? And it's supposedly these financial markets who are hanging on every word. And if you're not credible, they're going to short all your bonds and you'll end up in fiscal hell. And not only is there not a lot of evidence for this, as you said, if you look at it on the central banking side, the best paper I know and this was one that was done by a bunch of Spanish economists and basically scrape the entirety of the New Zealand web.

And they said, they invented inflation targeting. Let's have a look at who in New Zealand listens to the central bank. And it turned out you were several hundred times more likely to pass around a cat video than any leading financial commentator or business person to share an inflation forecast. Nobody's listening. So it's this bizarre performance whereby we break the rules. That doesn't matter. We make predictions, but they're just fan charts. We are the guiderails, but we shift them.

And then when things don't match up, we eventually adjust by basically splitting the difference. It's not sounding very convincing. Do the people who are actually working there, do they feel that there's a kind of an issue here that maybe it doesn't to use my Great British phrase, it doesn't do what it says on the tin?

BEN CLIFT: Well, the people who worked there, for one thing, most of them previously worked in the treasury and did very much the same work within the treasury. And so they've got a long history of public finance assessment evaluation and the limits and the kind of flaws of public finance. So I think the expectations and the limits of the possible are factored into the way they do their work.

They realize that what the kind of mandate sets them is kind of an undoable task at some level of offering the kind of projection that actually is going to gauge where the economy is going. I think what they would say is that-- but it's better to have an economic policy regime when you have us doing this. And at least assessing the economic policy plans of the government and the trajectory for the economy against available evidence, fact, reason, those kind of things, rather than not having that at all, because not having that at all could-- well, we're back to Liz Truss again there maybe.

So there's a kind of-- there's a role and a function for them, particularly, I think in a world of increasing post-truth politics and populist politics whereby somebody's trying to maintain a conversation around what's actually happening in the economy, not just what someone reckons ought to be or could be or should be happening in the economy is not an unhelpful thing. But their ability to ultimately hold the government to account, they're quite sanguine about that.

They're quite effective, I think, at poking the government, pointing out uncomfortable truths in their reports and in their media appearances around their reports to flag, look, you've got this level of public spending, you've got this level of tax take highest we've had in human in UK history and yet living standards for ordinary people are where they were 25 years ago. And there's never been a period where they've been that low for that long.

Pointing out certain home truths like that, it's kind of uncomfortable for the government. And they see that as part of their role in terms of improving or casting comment on the quality of economic governance maybe. So perhaps, that's what they're for rather than the overall assessment of the fiscal forecasts, and so on.

MARK BLYTH: So let's go into-- we mentioned the austerity years and the growth trajectory being off and the recognition. It took a long time for that to come back to normal. I was really struck by the fact that they obviously were consuming the multipliers debate of the Twenty Tens from what the commission, the IMF, et cetera, the whole lot, and they kind of just sat on their own estimates for 10 years through this whole period and didn't change them, which suggests a sort of conservativism.

But what you also point out is and I just mentioned this before. I want to go back to it is that it's not really the model's big M that's doing the work. It's the model's small M. It's the judgment. Now, tell us about what you mean by its judgment that's in the driving seat.

BEN CLIFT: So when they are presented with a set of figures about the state of the national economy, so they'll do a series of surveys of labor force participation and they'll get all this data and they'll get-- they've got their underlying model of the economy. And basically, what happens is you put the data into the model and you run it and it doesn't really seem to explain what's going on terribly well.

So you think, well, we're going to need to tweak some of our assumptions here, because obviously, our model is an advanced and sophisticated but simplification of reality. And it's obviously simplifying reality wrong in certain ways. So which of our assumptions do we think maybe need to revisited in light of what we know about the economy or other data we've got access to.

So they basically kick the tires of their different assumptions they make and think, well, that one's looking a bit shaky given the trajectory of this sector or that sector or other information they've got. So they adjust their judgment. And so it's about a set of assumptions built into the model, but those assumptions themselves are judgments so that they will tweak them and adjust them the numbers, the values for multipliers that say might be adjusted from one projection to the next.

And then once they've cranked the wheel and they've got the results, then there'll be a further interpretive judgment phase where they revisit, does it pass the sniff test? is the way they talk about it. Does it look like it makes sense or is that like a bit off?

And so you've got-- the sense of these kind of policy economists with years of experience, people like Professor Charlie Bean, who's been in the Bank of England and he's been-- and he was in the OBR for many years. And they basically been doing this all their working professional lives, and they kind of get what-- get the game. And they just nudge this nudge that to try and make it all make sense.

MARK BLYTH: But isn't that kind of weird when the entire point is the rules are in charge, not discretion? I mean, what you're basically saying is at the end of the day, it's all discretion. It's just been moved from democratically elected politicians to unelected technocrats. I mean, isn't this actually the populist sort of critique of the entire thing, that it's all show and tell and it's just an elite running the show with their own subjective judgments?

BEN CLIFT: Well, it certainly is the case that the rules versus discretion-- distinction, dichotomy framework that we've all been working with as political economists since the '70s is a sham because the deeper you look, rules are always discretionary in their construction and especially in their application interpretation. And therefore, the rules are-- yeah, the rules are to be treated with some skepticism as to how far they tell us anything hard and fast about the state of the economy or what's actually being done in terms of economic policy.

I think the nature and complexity of the task means that that discretion is inevitable. I mean, one of the key themes that I come back to again in the book is the kind of limits of the legibility of the economy, the limits of the no ability of the economy. So they're doing their best and they're drawing on lots and lots of data. But that data is partial and it's the first draft of history and it will get revised down the line.

And modern economies are complex things and you can't really capture them through any. It's a bit of like James Scott and that whole kind of the hubristic modernity of the state assumes it can know about the economy. It can't. I mean, that's really what, I guess, I've found from doing the work.

MARK BLYTH: But it can also choose different lenses. I mean, it has to. And essentially what you describe in the book is they have a standard new Keynesian model that assumes a trend rate of growth. And then there are shocks, always exogenous, despite the fact that Two Thousand Eight was deeply endogenous, but we'll call it exogenous. And you get smacked and you get moved above or below trend, and then you do some compensatory policies because they only work in the short term and then you ultimately end up back on the growth trajectory.

Now, as you pointed out for the UK, that hasn't been true for nearly 20 years. I mean, this time series is broken, right? It's just we're now on a completely different trajectory. And this is called the productivity puzzle. And you've got Charlie Bean and others saying, yeah, the puzzle is-- it's a real puzzle. Well, it's only a puzzle from that point of view. I mean, there's lots of other work. For example, Brett Christophers, who's been on the podcast, right? I mean, Brett is just a raunchy encampment. The other one you've got the head of Neisser saying, yeah, we're horribly dependent on finance. And guess what, you're no longer very good at it.

If you take out the miners and the multinationals footsie's flat. So the city's not what it once was. I mean, we've got an 80% service sector economy. It's really hard to add capital to hairdressers to make them more productive. We actually have pretty good explanations as to why this is broken. But why are they unable to actually then do it? All right. We really need to rethink this and try something different.

BEN CLIFT: Well, I think what's quite interesting about them at the minute is there is a process of rethinking. It's probably not a process rethink on the scale you or I would be satisfied with. But they recognize that model of the economy is still the kind of fundamental working model of the economy they work with. But they realize that the real economy is not one of their model. And therefore, there's a kind of décalage, as they say, in French between the two.

So what's interesting about them at the minute or the last couple of years since Richard Hughes came in as the chair, I think is they talk about, well, our modeling and things like the output gap closing over a five-year cycle and that new Keynesian view of a cyclical fluctuation of the economy. That might make sense in normal times. The trouble is normal times have been hard to come by in the last 15 years, and we might need to revisit the way we think about the short to medium term evolution of the economy, i.e. that whole neo-Keynesian worldview of the output gap will close and we'll get back to--

MARK BLYTH: Yeah, the trend rate of growth.

BEN CLIFT: --the optimum level. Yeah. That doesn't function anymore. The question is, the problem they have is, well, if you're going to jettison that--

MARK BLYTH: Yeah, what do you do?

BEN CLIFT: --what do you impress it with? Yeah. And it's too hard a problem. Too big an issue. And maybe that really would undermine the credibility. Actually, it'd probably be more accurate rendition that came out. But ironically, jettisoning the model might spook the markets.

MARK BLYTH: I mean, this isn't something you talk a great deal about in the book, but what we could go for it here, which is that technocratic legitimacy comes from the fact that we have this special set of skills and we have this special set of models, et cetera. So if we were to abandon these things, we would be undermining our own legitimacy claims. So even if you know it's wrong, it's really hard to get off that bus if driving the bus is what gives you the legitimacy in the first instance.

So I think that's exactly a good way of thinking about it. I think central banks are very much caught in the same issue, which is at the end of the day, they have two tools buy and sell assets, raise and lower the price of money, basically. And it turns out we want them to do loads and loads of things like climate and everything else with these two tools. And it's kind of an unfair ask in a way if you want to put it that way.

BEN CLIFT: No, absolutely. Well, I think that's totally fair. And I think there is a limit to how far they will ever fully embrace a kind of heterodox position. They are quite open-minded individually when you talk to them. They're quite broad-minded, open-minded economists. They're not headbangers of any kind. But there are limits to how far outside the box they are going to be able to think and still get the job done, partly because they've got a limited staff and a big set of tasks to do. So, you can't fiddle around with everything because you've got to deliver your forecast in three weeks time.

And so like just get on with it kind of thing. But on the climate one, I think what's really interesting about them is that probably their most interesting work is being done, not around the five-year forecast, although that's the kind of key mandated one, the one that the media and everyone focus on. It's their longer term--

MARK BLYTH: Longer term.

BEN CLIFT: --maybe 50-year projection. So the fiscal risks report and stuff like that, that's really interesting. And they're kind of add more liberty to cast a longer term view about the major issues, concerns facing the nation.

And they've said some fascinating things about climate change and the economic and fiscal costs of climate change, which is just trying to drag the government and the political debate in the UK kicking and screaming onto some kind of a sensible path where we recognize how costly-- how dramatic the change needs to be, how the fiscal and economic costs of not mitigating and not transforming are just so incredibly high. And there's kind of no case to answer for not beginning to address climate change very, very quickly. Economic and fiscal case is overwhelming. We cannot afford not to do it.

MARK BLYTH: But here's the thing. Would they end up in a kind of like self-contradiction again? What was that French word that you had for it?

BEN CLIFT: Decollage.

MARK BLYTH: A decollage, whereby-- yeah, you said all that. Imagine I'm Rachel Reeves, right? So I read the long term report and I'm like, oh, crap, we really need to do something. So you go back to Ed Miliband and say, you can have your 23. In fact, we're going to make it 25 or whatever the figure is. And then the OBR comes out and goes, oh, you can't do that. You're going to blow through the guiderails.

BEN CLIFT: Yeah. No, it's really interesting. And it's going on within the IMF at the minute. It's going on with central banks, as you've talked about, and it's going on within fiscal councils. And it's a recognition at one level of we cannot afford not to. So the ecological tipping points argument is unassailable and therefore, they've done this projection based on the gas price hike we have with the Ukraine war. And they said, well, let's project forward 40 years. Let's say there'll probably be two or three more of those because they probably will.

If that is the case and we respond to them fiscally as responding to that one, then the cost of just maintaining gas dependence is going to be twice as high than would have been the entire cost of transforming the entire economy onto a net zero basis. So the status quo fossil fuel pathway is twice as expensive as a cleaner pathway. So therefore, there's no case to answer.

But as you say, then with another hat on, they go and do the fiscal evaluation for like, how much can we spend relative to GDP and that we cannot afford not to goes out the window and they're back to old school cost benefit analysis. And it's like-- and all of them are kind of like, I think in a state of cognitive dissonance trying to make sense of, well, what other kind of accounting framework could we bring to this because we know that stuff over there about the ecological tipping points.

We know this stuff about standard cost benefit analysis, but we really can't make them coexist happily, which is why they do the good stuff in the long-term reports. And it's not really in the short-term reports to reduce the kind of tension between the two is my reading.

MARK BLYTH: So maybe then one way to put it is what they do is they displace the politics from a kind of Democratic setting to a technocratic saying, then we're getting to the technocratic politics you're talking about. But then inadvertently, almost as a function of doing their job as well as they can, they end up reinventing the politics in the future, bringing that back to say, you need to pay attention to this, which is entirely a political move, but then they're totally hamstrung by the fact that they have to go back to the day job.

BEN CLIFT: Yeah. And so it's interesting that in their lifetime, we've lived through major upheavals and crises. So the aftermath of global financial crisis, but then obviously Brexit and then COVID and now the climate crisis. And each of them massively throws up in the air some foundational assumptions, those settled truths of the economics profession we all thought they were applying or they claim to be applying. Those very truths are being kicked and found hugely wanting and being questioned and revisited.

And therefore, they're reinventing economic orthodoxy on the hoof almost from their tower of technocratic authority and trying to press the case for governments recognizing some of these unanswerable cases for changes on fiscal and economic policy whilst being an independent apolitical fiscal council who don't tell the government how to run economic policy.

MARK BLYTH: And not just that, who worry about deficit bias. It's like, you're worrying about deficit bias while literally Rome burns.

BEN CLIFT: Yeah.

MARK BLYTH: Let's move on a little bit. A couple of things I want to touch on before we close. The first one, Brexit. So fantasy economics meets technocratic governance. How did they negotiate that space and how did they avoid becoming a kind of populist target to the extent that they avoided it?

BEN CLIFT: Yeah. Well, what was really interesting as soon as I got talking to them was how much work and effort they put into avoiding being in the crosshairs of the Brexiteers. So what they did, which I think was very savvy, firstly, they looked at their mandate and their mandate said you are there to evaluate announced government policy.

So pre-referendum they said, well, announced government policies were staying in the EU. So we're not touching that. That's not what we're for. After the referendum, they produced one forecast where all they did, they didn't do any of their own kind of clever modeling or grunt work.

MARK BLYTH: This is totally brilliant. I love this bit in the book.

BEN CLIFT: There's a kind of established set of assessments from recognized experts in the field, banks and LSC economists and various others. And they just put all of them together and say, well, this is the kind of band of possible outcomes of how much Brexit will hurt the economy or not. And we're going to go right in the middle and say center ground will go-- so the worst is not 8%, might be 0%. We'll go for 4% to hit to the economy and that's all we do.

And it's so like-- it's so kind of not trying, really. They just sort of-- so we put 4% and punch that in and that's kind of you can't really touch us because that's kind of the center ground of received economic wisdom. And it's not our job to gainsay that or second guess that.

MARK BLYTH: Two thoughts on this, right? The first one is, ironically without doing any work, they ended up being right because 4% was the hit, which is like, oh, that's interesting. But the second more serious one is isn't that just-- I mean, it's clever politics to avoid getting beaten up by John Bojo and his friends. But ultimately, isn't it an astonishing abdication of responsibility because you're meant to forecast to the best of your ability what's going to happen to government finances and just simply plumping for the middle and then hiding under the parapet kind of dodging it. No.

BEN CLIFT: Maybe a bit. I think what they did is-- and this is one of their favorite techniques. So they have that as their bench line, but they say, well, there's an alternative scenario where we have a no deal Brexit and then things will be a good deal worse. So that's going to be-- that's your 6% hit. And again, they do that by we read the-- we read the literature of those who are doing the kind of detailed modeling of this and look at it closer than us, and we take the temperature of what the debate says.

And what's really interesting about it is they've got the graph in some of their reports about this. You've got the sort of everyone in one place underneath the line. It's going to hurt the UK economy. And then you've just got one dot above the line at a 4% boost to the economy from Minford and the economists for Brexit and the economists for free trade and all that. And they were the people who Bojo and Co were talking to. And they were the experts they wanted to hear from, but they weren't experts at all. They were just charlatans.

MARK BLYTH: No, but I mean, the classic one was economists for free trade. It's like, OK, so let me get this straight. You're for free trade, yes. All right. You realize you're about to leave the world's largest free trade zone so that you can have more free trade. Just stop there.

BEN CLIFT: Then you get genuine free trade. Genuine free trade.

MARK BLYTH: Oh, I see. That's what it is. Goodness.

[LAUGHTER]

All right. So you mentioned Truss, and I don't want to go into the whole Truss debacle, but her basic gig was avoid the OBR looking at my sums because they're not going to add up, right? But I want to look at this in a slightly different way. According to their charter, they're not actually empowered to talk about the distributive aspects of policy. Now, that's an interesting one because I understand how you can do a budgetary forecast. You will be 2% over of 2% under. But an actual forecast of government policies fiscal consequences has to encompass its distributional aspects. And I'll give you an example of this.

Imagine that Truss got away with it. And what she did was the biggest upward redistribution of income and wealth, possibly since, I don't know, the 18th century or something, because that's what she was planning. Well, that obviously has not just distributive consequences. It's going to have massive budgetary consequences. So how do they kind of, like, go-- well, we're not really going to talk about the distributive aspects. The distributive aspects are budgetary aspects. They have to be, right?

BEN CLIFT: Yeah. Well, what they really do, I think, is they play with their remit and what they are and aren't allowed to talk to. So if you look at all of their reports through, say, the Sunak as chancellor era, every time the headline figures are look what this is doing to the cost of living and the average life chances of ordinary citizens. And these are distributional questions. And these are the main ones they talk about all the time when they're doing the media presentation.

So notionally, there's not the remit to talk about distributional outcomes, and they will always point with only a small office, we can't take on every question. So that's a question we can't take on. But they nevertheless have their two penn'orth and say their piece about it.

And so as a set of political actors and ones seeking to move the dial of the economic policy debate in a political fashion, they do get to say their piece, but they could be criticized for avoiding certain questions that they don't have the capacity or the resources to address and maybe they don't want to get into as well. A bit like central banks, which don't really want to pretend there's any distributional aspects to monetary policy when me and you know there's one or two.

MARK BLYTH: Exactly. So here's my closing question for you. So you got the IRA over here, reshoring on a massive scale, domestic investment through the roof unlimited tax cuts. You can do this because you're the dollar and you're the global savings asset. You've got the EU trying to do it but doesn't really have the capacity caught in the middle. You've got China on the other side, you've got Ukraine kicking off. We've got inflation, which seems to be sticky, which given climate change and other endogenous sources of shocks, may actually be more persistent than we think going forward, blah, blah, blah.

And we have an imaginary. It's very Nineteen Nineties of independent central banks, independent fiscal councils. And we talked about it earlier. They know the cost of doing nothing on climate and they're quite willing to admit it, but then they go back to their day job and it's like, oh, you're going to be 2% over. Probably can't do that, right? Is this sustainable or are these institutions going to have to change? Is they're going to have to be much more of a back to a whole of government approach, whereby the fiscal arm and the monetary arm and everything works cooperatively within some kind of framework rather than each trying to check the other. What do you think?

BEN CLIFT: I suspect that that kind of moving back towards integration of the two policy areas is would make a lot of sense. I mean, there's kind of how do you get there from here problem. But I think that would make a lot of sense. I think where there is some-- we've just done a symposium on the book in the Journal of British Politics, actually, and there's some really great stuff in there about the democratic legitimacy questions we need to ask of this regime, even if it functions reasonably well and does a few helpful things for democracy. It's not very democratically legitimate, is it?

And one of the calls to arms there is, well, how could you make the work of bodies like the OBR or indeed the Bank of England may be more kind of democratically accountable, more closely supervised and overseen by, say, parliamentary politics to bring it into the kind of demos a bit more or under the auspices of the demos a bit more? I think the difficulty there is the work is so technical and understanding in depth. The kind of what they're doing and how they're doing it. The knowledge gaps between them and the treasury select committee members who do their best to ask pointed questions.

But they can't be expected to have the grasp of how you come up with an output gap and the flaws and problems of doing so and the flaws of the kind of new Keynesian model of a cyclical but stable economy that you've just pointed out. You can't expect them to get that. So how do you bring that kind of-- how do you bring that accountability that star chamber into being where you and me and a few others should hold them to account and it should be on Newsnight or something. I don't know.

But without that, without some more muscular oversight that's got a kind of a Democratic component to it. I think that the risks for them are quite severe in terms of their-- they're on quite shaky ice in certain regards. I think they're broadly speaking quite a good thing to have in a modern advanced democracy. But there are problems with them and the problems are kind of legion and not going away and maybe getting worse as populist governance.

I mean, what will happen if we get a kind of another Bojo style populist government is someone will abandon them and then we'll have to see what happens next. But yeah, interesting times ahead, I'd say.

MARK BLYTH: Well, that's always a good note to end on. Ben, it's been lovely to see you. It's been quite a while. It's a great book. I recommend it to everyone. And it's just a really, really great read and I've thoroughly enjoyed it. So good luck with the book. I'll see you around the block.

BEN CLIFT: Will do. Thanks very much, Mark. It's been great to talk.

MARK BLYTH: This episode of the Rhodes Center Podcast was produced by Dan Richards and Zach Hirsch. If you like the show, leave us a rating and review on Apple, Spotify, or wherever you listen to podcasts. And if you haven't subscribed to the show already, please do that, too. You can learn more about what we covered in this episode and the other podcasts from the Watson Institute at Brown University, by following the links in our show notes. We'll be back soon with another episode of the Rhodes Center Podcast. Thanks

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