An interesting corollary to public choice economics

Public choice economics is simply the observation that humans respond to economic incentives. Those who rule us, politicians and bureaucrats, are not immune to this - despite appearances and other behavioural attributes we are all members of the same species.

Another way to put the same idea is that everyone always talks their own book. This research testing that in the economic predictions made about Brexit by bank research departments:

Doom-laden warnings of economic catastrophe before the Brexit referendum were driven in part by commercial worries by economists at the banks that stood to lose the most from a ‘leave’ vote, economists have found.

The paper is here:

This paper introduces macroeconomic forecasters as political agents and suggests that they use their forecasts to influence voting outcomes. We develop a probabilistic voting model in which voters do not have complete information about the future states of the economy and have to rely on macroeconomic forecasters. The model predicts that it is optimal for forecasters with economic interest (stakes) and influence to publish biased forecasts prior to a referendum. We test our theory using high-frequency data at the forecaster level surrounding the Brexit referendum. The results show that forecasters with stakes and in uence released much more pessimistic estimates for GDP growth in the following year than other forecasters. Actual GDP growth rate in 2017 shows that forecasters with stakes and in uence were also more incorrect than other institutions and the propaganda bias explains up to 50 percent of their forecast error.

People do indeed talk their own book. And now the test for public choice economics. Or perhaps for opponents of the idea. If the economists in banks will skew their predictions to their own interests then why won’t the economists in government? The Treasury?

That is, if we’re seeing a human universal here what makes our rulers immune to it?

We can even test this empirically. Are we currently in the depths of that recession the Treasury insisted would be upon us the moment we had the temerity to vote for Brexit?