Exciting times at the Office for National Statistics: the value of drugs and prostitution
The Office for National Statistics (ONS) has just increased the size of the British economy by nearly £10 billion, a figure equivalent to around 0.7 per cent of the economy as a whole. George Osborne has not waved a magic wand. We have not suddenly become more productive. The reason is that, for the first […]
Two cheers for the global recovery, but doubts remain in the Euro zone
Worries are growing about some of the countries in the Euro zone slipping back into double dip recession. By convention, a recession is when national output (GDP) has fallen for two successive quarters. But this is far from being news. In a substantial number of economies, output is lower than it was not just two […]
Forget the hype. Capitalism has made the world a more equal place
Metropolitan liberals love to be able to criticise Western society. Recently, their lives have been brightened by the extensive discussion on the rise in inequality since the 1970s, especially in the Anglo-Saxon economies. There is a danger that this essentially anti-capitalist narrative will come to dominate the media, paving the way for increased regulation and […]
A Different View of World Trade: Why National Accounts Can Be Exciting
Imagine that, for some reason, you were forced to choose between having to read a long, turgid novel like Westward Ho or Middlemarch, or a book on the methodology of the national economic accounts. Most people, however reluctantly, would plump for the former. But the latter can at times be very exciting. A recent paper uses national accounts […]
New ideas are needed in economics, but not the tired old statist one
The annual Institute for New Economic Thinking (INET) conference was held in Toronto earlier this month. INET was created by George Soros in the autumn of 2009 in response to the economic crisis. Mainstream economics bears a heavy responsibility for creating the intellectual climate prior to the crash that the problems of boom and bust […]
Ukraine and Russia: why they’ve proved Friedman’s ‘MacDonalds’ doctrine wrong
On 31 January 1990, a great event took place in Pushkin Square, Moscow. A branch of MacDonald’s was opened. The same excitement was generated in Kiev on 24 May 1997, when the MacDonald’s franchise was extended to the Ukraine. The American author Thomas Friedman wrote in 1999 that no two countries with such a franchise […]
Forward guidance needed for companies, not consumers
Most of the commentary on the UK’s economic recovery focuses on consumers. Are they taking on too much debt again to finance their spending? Is there a bubble in house prices, as people get excited about bricks and mortar again? Certainly, in terms of its sheer size, spending by consumers is by far the biggest […]
German revival exposes deep fissure within Europe’s economies
In the 1990s and early 2000s, Germany was seen by many as the new ‘Sick Man of Europe’. Between 1991 and 2005, GDP growth averaged only 1.2 per cent a year, compared to 3.3 per cent in the UK. Since then, the German economy has revived dramatically. The recovery in the German cluster of economies […]
The so-called ‘output gap’: another piece of economic mumbo-jumbo
The concept of the’ output gap’ is central to mainstream macroeconomics. It is not merely of academic interest. The Office for Budget Responsibility (OBR) has a specific requirement to estimate the output gap, which it defines formally as “the difference between the current level of activity in the economy and the potential level it could […]
Psychology, not economics, is the key if we leave the EU
Poland is the only European country to avoid a recession during the financial crisis of 2007-2009. Polish GDP is 36 per cent higher than it was in 2005. To put this in context, the comparable figures for the UK and Germany are 5 and 12 respectively. The Polish economy has been a stunning success by […]
