David Walton

Powerhouse City economist
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The Independent Online

David Robert Walton, economist: born London 30 May 1963; economist, HM Treasury 1984-86; economist, then Chief European Economist, Goldman Sachs 1987-2005; Chairman, Society of Business Economists 2003-06; Visiting Research Professor, Oxford University 2005-06; member, Monetary Policy Committee, Bank of England 2005-06; married 1991 Nicola Reeves (two sons); died Cheltenham, Gloucestershire 21 June 2006.

David Walton was one of the most respected City economists of his, or any other, generation. He probably had the most lucid mind of any economist who ever worked for the economics department at Goldman Sachs, and his gentle and honest personality endeared him to the entire firm. His latest achievement, in 2005, was to become a member of the Monetary Policy Committee of the Bank of England, which sets UK interest rates, a role in which he was blissfully happy and to which he was admirably suited.

After a short stop as an economist at the Treasury in his early twenties, 1984-86, Walton had decided to do a graduate degree in economics at Warwick University (his first degree had been in maths and economics at Durham). Towards the end of that degree course, he saw an advertisement for a UK economist at the investment banking firm Goldman Sachs, and he wrote a letter to apply. When the letter landed on my desk, along with a hundred others, I read it quickly and placed it on the reject pile. But my partner David Morrison rescued it. We interviewed him, and set him a short written test - to write a summary of the latest industrial production figures for the gilts trading desk.

Half an hour later, back it came, clear, concise and penetrative. We hired him, and then watched as he transformed the work of our department for the better.

Starting as a UK specialist and then graduating to the leadership of Goldman Sachs' European economics department, David Walton had the uncommon knack of making the most complex parts of macroeconomic theory accessible and relevant to those who trade in the financial markets. He had complete command of the macroeconomist's toolkit, and knew precisely how it should be used to best advantage in the real world.

His rigorous and enquiring mind was a cut above those which generally populate the economics departments of financial institutions. If he had remained an academic, his glittering career would have included writing a seminal graduate textbook on macroeconomics, which was something he was beginning to construct, as a Visiting Professor at Oxford University, just before he died. Future generations of students have missed something.

Walton's contributions to the way in which economists work in the markets were legion. He was among the first to notice that data from business surveys offered earlier, and more accurate, information on the behaviour of the major economies than the official GDP statistics. This is now the staple diet of everyone in the markets. And he realised that the behaviour of central bankers could be explained by simple algorithms (known as Taylor Rules). His work in developing these was exemplary.

He was born with a remarkable facility for graphical exposition, and for simple but compelling pieces of econometrics. Using both talents, he developed forecasting models which were easy to understand, and which shed light on major issues. He did not waste time on minor questions, but concentrated on the great macroeconomic questions of his time - inflation, the independence of central banks, the relationship between fiscal and monetary policy, and the behaviour of exchange rates.

Always interested in public policy, but never affiliated to any political party, Walton wrote large parts of the Green Budgets which Goldman Sachs produced in conjunction with the Institute for Fiscal Studies each year. In one of these contributions in 1993, we focused on how UK fiscal policy should be conducted in the wake of sterling's departure from the ERM. Our suggestions for a "golden rule" and a secondary rule to limit the debt/GDP ratio were picked up by the team of the then shadow Chancellor, Gordon Brown, and have survived to this day as the Treasury's fiscal rules.

In the late 1990s, David Walton developed a serious illness, which almost killed him. But he made a full recovery, to the joy of his family and colleagues. We soon had the old David back, and realised how much we had missed him. His two young children became the pride of his happy life with Nicola, his wife, and it became difficult to tell whether he was a better head of a family, or head of an economics department. Few people combine both roles as well as he did.

Recently, he was ready for a new challenge, and the Chancellor had the good sense to appoint him to the Monetary Policy Committee at the Bank of England, a position of which Walton was very proud. The MPC badly needed an influx of true expertise, and David Walton provided that. Even those in the Bank who were initially sceptical about the appointment of a practising City economist to their hallowed committee were won over. Their universal view, a few months after he joined, was that he was a wonderful colleague who could provide the MPC with the intellectual muscle that it must always have. He quickly impressed the Governor, Mervyn King, a man who can certainly distinguish an intellectual powerhouse from the run-of-the-mill.

The markets were surprised to see David Walton voting for a rate cut in his first meeting, and then for a rate increase in his last two meetings. Was he a hawk or a dove, they wondered? He was neither. He was an economist who had an independent spirit, and who always assessed the evidence on its merits. He had a balanced mind, led a balanced life, and was the best friend you could ever wish for.

Gavyn Davies

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