Short-Term Forecasting
Although assigned a range of tasks, Godley quickly gains a reputation for assembling data and preparing the one-year forecast, which has become a central Treasury function and the anchor of its other activities. His data analysis skills are the Launchpad
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Compared to those at Metal Box, Godley’s tasks at the Treasury were wide-ranging. They drew on his personal skill in persuading others to part with their departmental data as much as technical skill to make sense of it once obtained. The Economic Section’s economists, numbering no more than 15 in a staff of around 200, were responsible for monetary management (liaising with the Bank of England over interest rate setting and public debt management), design of tax policies, supervising the finances of nationalised industries and advising on the conduct of economic and financial policy abroad, as well as keeping the economy stable in the short term and promoting its medium-term growth (Cairncross 1996: 30). The opening rollercoaster ride, from the aftermath of a misjudged fiscal expansion in 1955–1956 through currency crisis and deflation in 1957 to boom and bust again in 1958–1960 and Chancellor Selwyn Lloyd’s despairing turn to the supply side in 1961–1962, swiftly instilled the practical macroeconomics education that Oxford had never allowed.
© The Author(s) 2019 A. Shipman, Wynne Godley, https://doi.org/10.1007/978-3-030-12289-8_3
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38 A. Shipman
One Year Ahead Although recruited in a general capacity, with no reputation for augury beyond the tin price, Godley quickly acquired special responsibilities for short-term forecasting. He had received only a basic quantitative training at Oxford; Godley had an intuitive ability to identify patterns in large arrays of data and understand what processes might be causing them. This came with an equal adeptness at noticing misplaced or miscalculated figures in official date—a frequent occurrence as Treasury figures were passed around departments and routed through its newly installed computers. Godley quickly reinforced these instinctive abilities with a self-taught understanding of applied economics and statistics and of how to use the relatively predictable magnitudes to generate plausible year-ahead forecasts for the less predictable, within the tight timescale that an annual budget required. One of his first regular assignments was to gather raw data from the scatter of government departments and offices that held it and sort out the meaningful figures from the ones that were plainly wrong. Success at this brought the dubious honour of tackling the next, much tougher step: building the numbers into a coherent analysis of the current state of the economy and using them to venture a sensible view of how it will be in one year’s time. Anticipating how the main economic indicators—GDP, unemployment, public expenditure and revenues, the external balance and the inflation rate—would perform in the next year or so was central to the Treasury’s task of advising the Chancellor on the budget and telling other ministers how much they could afford to (or might have to) spend. Despite its arriving coated in caveats, this information flow was becoming central to the work of the senior economic advisers. Alec Cairncross, a Glasgow economist who became Director of the Economic
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