Thread by @Gilesyb

Quick thread on why I decided to write this:

Challenge yourself by reading Oliver Lewis' praise for his now-departed boss Lord Frost
conservativehome.com/platform/2021/… and you find a link to Frost's lecture from February. Frost makes a particular claim about trade 1/

https://twitter.com/Gilesyb/status/1472932660033040394

Attacking the (multiple, almost unanimous) studies saying Brexit makes us poorer, Frost says this, and in particular questions whether the decline in trade will really hurt productivity so badly. 2/

(He calls it "unproven" decline in trade, but the OBR can pretty much refute him - see charts).

Anyway, I have long read that lower trade lowers productivity, and it stands to reason. Trade and comparative advantage, the essence of what the market does - who questions that ? 3/

But it turns out that if you visit the OBR's immediate post-referendum forecasts (the EFO), obr.uk/efo/economic-a… you see a decided ambivalence and caution: 4/

HOWEVER, by last November, the OBR in analysing the risk of an impending No Deal Brexit appears to have abandoned its ambivalence 5/

When we emerge WITH a deal, something for the OBR to get its teeth into, it finds plenty of reason to continue to assume a 4% hit to productivity - notably, the loss of trade in services that will come 6/

When I try to find out what are the theoretical drivers for this, some excellent papers pop out of the footnotes, such as this 2017 one from the World Bank which nailed the likely drop in trade 7/
openknowledge.worldbank.org/bitstream/hand…

and for the COST of that loss in trade, see this from @swatdhingraLSE, Van Reenen and others eprints.lse.ac.uk/66144/1/__lse.… 8/

I have no reason to doubt these findings - nor does Frost, imho. But I don't understand the journey the OBR has been on, from ambivalence and caution to nailed-on certainty. It may have encouraged sceptics?

9/

In my view, Brexit damages productivity for reasons any freemarketeer would struggle to evade. But the state of the literature is not as definitive as I expected to find on setting out, so anyone with anything better, show me! 10/10

PS Frost's complaint about these studies is also weak in pretending they try to "predict the micro-detail". No they don't, and see this tweet

https://twitter.com/Gilesyb/status/721942344128442368?s=20