A quiz for the end of 2012
There are many puzzles about the economy, and in the holiday spirit a quiz is provided at the end. A bottle of champagne from me to the winner, the drawn will be from correct entries on the 31st. It might be difficult predicting the outcome of the fiscal cliff in the US. But at least […]
Don’t say IMF, it’s IMF Squared!
In the boom decade of the 2000s, corporate rebranding and renaming was all the rage. Some were successful. Others are best forgotten, like PWC’s proposal to bestow the name of Monday on its consulting arm. But as the world’s economic recovery gathers momentum, perhaps it is time to revive the practice. A prime candidate is […]
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 […]
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 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.
Minsky Mania: a Raincheck
The American economist Hyman Minsky is currently very fashionable, especially amongst those who are sympathetic to the idea of more government intervention in the economy. Minsky argued that financial crises were an inevitable feature of capitalism, unless governments stepped in through regulation and central bank action. He hypothesised that in prosperous times, when the corporate […]
Why are markets so volatile?
Mainstream economic thinking has considerable difficulty in explaining the massive degree of volatility of financial markets over the past few months.Both shares and bonds exhibit large fluctuations on an almost daily basis. The problem is particularly acute for the concept which is fundamental to a great deal of modern macroeconomics, based on the so-called ‘representative […]
Expansionary fiscal contraction
To many people, this phrase is an oxymoron. How can fiscal contraction be expansionary? But the evidence suggests that this is exactly what has been happening in the United States. In terms of national output, GDP, the trough of the trough of the recession was reached in the second quarter of 2009 (2009Q2). We have […]
Why is economic growth stalling? May be it is Ricardian equivalence!
The British and American recoveries do seem to be stalling. The recovery profile is by no means as strong as is usually the case after recessions, even after pretty major financial crises like that of 2008/09. One of the insights of complex systems is that the impact of any particular factor may differ dramatically according […]
Recovery is not always smooth
There has been huge media attention about the 2011 Q2 UK GDP growth figures released today. The estimate of 0.2 per cent shows only very weak growth. It is bound to be revised either up or down as more information comes to light. But at the moment, recovery looks very weak, after more rapid growth […]
