Policy makers have learned from the mistakes of the 1930s
Nobel Prize winner Paul Krugman will shortly be in town. With Lord Richard Layard, he will be calling for more public spending and borrowing. The two have issued a ‘Manifesto for Economic Sense’. But is it? The opening sentences make dramatic claims: ‘More than four years after the financial crisis began, the world’s major advanced […]
Ninja Turtles, Nick Clegg and Market Failure
Christmas is coming. Retailers are beginning to push their offers hard. The first page of a search on Google for ‘Christmas Toys 2012’ is full of sites announcing the ones which will be ‘hot’ or ‘top’. In total, there are over 75 million results available to be perused. Last year it was Mishling Tree Monsters, […]
George Osborne’s economic policy seeks to blind markets from the truth
Andrew Mitchell, the government’s chief whip, remains in some difficulty after his exchange with the police at the gates of Downing Street. At the heart of the incident there is an objective reality. Either he used the word pleb, or he didn’t. Either the police were officious jobsworths, or they were the epitome of politeness. […]
We are all better off than we think
Apple’s iPhone5 has already smashed sales records. The first day on which consumers could make purchases over the web, more than 2 million online orders were placed. Little wonder that JP Morgan has estimated that sales of the iPhone5 could add as much as 0.5 per cent to American GDP. These numbers have attracted criticism. […]
A Tale of Two Recessions: Grounds for Optimism
The economic news at the moment is mixed, and the impact of the 2007-2009 financial crash is far from over. But looking back into the past may give us something to feel cheerful about. There have only been two global financial crises in the past century, that of the early 1930s and the most recent […]
How Big Is My Multiplier?
The debate rages about whether the Chancellor should implement a Plan B, or C or D or even Z. There seems to be a plethora of alternatives. But many of them share a key common theme. Namely, that an increase in public spending will boost output in the economy overall. This was one of the […]
Why teachers are just like bankers
The current highly emotional debate about GCSE grades is not very enlightening. But what has happened tells us a lot about how incentives matter, how they affect outcomes. And at the same time, it shows that unless a proper set of social norms is in place, incentives can have unanticipated, perverse effects. Bankers and teachers […]
How to unpick the apparent paradox of falling GDP and rising unemployment
GDP estimates are eagerly awaited in the City, and dominate the media headlines. Huge significance is attached to arithmetically trivial differences, whether between market expectations and the announced figure, or to subsequent revisions to the data.
But GDP is not something which can be put in a set of scales, say, and measured accurately. The concept is clear. It is the value of national output at market prices. Market prices? How do we value the public sector, where there are no market prices? A series of plausible conventions has evolved as to how to value such activities. But there is a substantial amount of arbitrary judgment involved.
USA vs China continued… The Influence of Networks (and the Olympics!)
The last three Olympics have seen a titanic battle between the US and China to head the medals table. If you combine the total of the last three Games, China stands just ahead, with 121 golds to the United States’s 116. But, the US topped the table in both 2004 and 2012, while China edges […]
Who will rule the 21st Century?
This is a nice big question to ponder on the holiday beach or in the rented villa. A vast amount has already been written on the rise of China and whether the US will be replaced as the global superpower. And where exactly does Europe fit into all this? It is easy to make a […]
The Olympics, traffic in Central London and a bar in Santa Fe
We all know now about the empty roads and deserted shops, all quite contrary to the official announcements before the Games began. No doubt Transport for London used their massively complicated, expensive models of the transport network to deduce that the system would be under massive strain. But a deceptively simple game devised in the […]
Why Can’t Debt Just be Inflated Away?
The debt problems which the UK and Europe currently face are essentially ones of political economy. Basically, there is a lot of debt around and the simple question is: who is going to pay for it? All the economic theory in the world does not get around this fundamental issue. Traditionally, bondholders paid. The real […]
Royal Bank of Scotland fiasco shows the power of networks
The last week or so has seen complete mayhem in the Royal Bank of Scotland and its subsidiaries. A computer glitch has caused their payments systems to collapse. Monies have not been processed, 17 million customers have been unable to access their accounts and pay their bills. The impact for RBS has been catastrophic. So, […]
Kahneman and schizophrenia in economics
I was at a fascinating session last night, with Nobel Laureate Daniel Kahneman in conversation with a leading thinker from the advertising world, Rory Sutherland of Ogilvy and Mather. Kahneman was talking about his book Thinking Fast and Slow, a summary of his life’s work. I am a great admirer of Kahneman. Trained as a […]
Political map of London is like America: strong geographic segregation
Thomas Schelling is a brilliant American polymath, who deservedly won the Nobel Prize in economics in 2005. One of his most remarkable insights is about segregation in cities, which he published as long ago as 1971. The residential pattern of American cities tends to be pretty sharply divided on ethnic grounds. The population of many […]
