Bad news for political scientists, journalists and pundits: economic data is just too inaccurate

Economic data: it fuels political debate, fills acres of news print and gets fed into regression equations attempting to explain and predict political party support.

There’s just one problem. It gets massively revised years afterwards.

Just take a look at this graph recently issued by the Office for Budget Responsibility:

What we thought had happened to the economy in 1993 and what we now think is very different, especially when you factor in the general election of 1992 taking place in April, just after the end of the first quarter of 1992.

Back then, it looked as if the economy was still stuck at the bottom of a recession. Now we know it had been steadily growing from a low the previous summer, and the gap between the two estimates – around 2.5% of GDP – is not far short of a full year’s worth of growth in most years.

In other words, the economy was significantly bigger and the growth trend very different. So what of all the political angst and media coverage at the time of the economic backdrop against which the then government was seeking re-election? It was based on the wrong picture.