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Keep it simple: Exploring the precarious world of economic forecasting with Prof Michael Gasiorek
By: Neil Vowles
Last updated: Thursday, 7 January 2021
“The only function of economic forecasting is to make astrology look respectable”, the US economist John Kenneth Galbraith once famously and savagely stated.
And while University of Sussex Business School economist Prof Michael Gasiorek would not agree with the extremity of that position, he would agree that making any economic prediction is difficult. An act of crystal ball gazing into the future to try and predict how firms and individuals might respond to changing circumstances as he explains in the latest Impacted podcast.
To try and bring certainty and accuracy to economic predictions, economists build models which are based on a number of assumptions made by the individual(s) making the model. Which explains why two economists can see the future differently. Of course what happens in the future may then be affected by other unforeseen events (think Covid), which is why such models should not be seen as providing predictions/forecasts, but more as indicating the direction of change and broad orders of magnitude; and which is why different models can arrive at different conclusions.
What Prof Gasiorek has added to the world of trade policy decision making and economic modelling is more simplicity. In the latest Impacted podcast, he tells hosts Suzanne Fisher-Murray and Will Hood that much of his work in the 1990s and 2000s was the time consuming and repetitive process of analysing thousands of rows of data on products and services for import and export in an attempt to understand the impact of proposed trade deals on economic welfare.
He and his colleagues identified the need for technology that could automate the process, making it much easier and quicker to sift through the endless data in an intelligent way. Through this idea, the TradeSift software was born.
Eventually, Prof Gasiorek, along with colleagues Prof Jim Rollo and Dr Peter Holmes, managed to get government funding for a pilot project and then the University provided additional funds to allow for the academics to found the company InterAnalysis and build the TradeSift software.
The Department for International Development were among the first customers who saw an opportunity to use TradeSift to help civil servants in developing countries understand the basic principles of international trade and their own national trade better.
While TradeSift was designed with simplicity in mind, and so user friendly for clients without a high level of training or academic background, InterAnalysis also developed the more complex TAPES – a partial equilibrium model which uses real data predicting what might happen in the future. A more formal complex system, TAPES requires a team of economists to operate.
Interanalysis has been able to share this expertise to help a host of countries including India, Pakistan and Ukraine and many countries in Africa to understand their national trade flows better and to improve their trade policy decision making.
Since the Brexit vote in 2016, InterAnalysis have been training UK government staff to improve their understanding of trade statistics and modelling. DFID staff have been using TAPES to evaluate future free trade agreements and InterAnalysis have written a bespoke model for them to use in house.
Prof Gasiorek explains to the Impacted podcast team how the slow and gradual impact his work has been having on the decision makers in Westminster and Whitehall.
Through the InterAnalysis software and the outreach work with stakeholders and the media by the UK Trade Policy Observatory, where he is now director, Prof Gasiorek believes that with his colleagues he has helped create an evidence base detailing the trade realities of Brexit and its consequences that has successfully scrutinised some of the unverified claims made by politicians.
It is through this work that there is now almost universal agreement, including with the Government, on a key central truth about Brexit. Whatever its’ merits, it is a seismic shift in our trading status as a country which will leave UK citizens less well off in the future.