Monthly Archives: March 2015

Electoral ammunition for voters

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Who knows whether a better understanding of the issues changes how people vote – it seems unlikely. Understanding is still important, though: the more voters can tell when politicians are spouting nonsense, the less incentive there will be at the margin for the latter to announce stupid policies in the heat of an election campaign.

OK, perhaps I’m being delusional. But I’m working up to commending a new book (which I’m part way through) by Vicky Pryce, Andy Ross and Peter Urwin, [amazon_link id=”1849547459″ target=”_blank” ]It’s The Economy, Stupid: Economics for Voters[/amazon_link]. Between them the three authors have unmatched experience of working inside the sausage machine of government policy, as senior economists at BIS (Pryce), the Treasury (Ross), and working with departments such as HMRC and DWP (Urwin). The book covers the macro issues (austerity, productivity and growth, Europe) and micro/social policy issues (health, environment, discrimination, immigration).

[amazon_image id=”1849547459″ link=”true” target=”_blank” size=”medium” ]It’s the Economy, Stupid: Economics for Voters[/amazon_image]

Writing a book of this kind is tricky when partisan feelings and emotions are running high. It strikes on the whole a successful balance between being neutral and setting out the evidence/logic on the various topics. After all, the truth is not always non-partisan. There are also issues on which reasonable economists disagree, such as the strength/weakness of the case for HS2, or the extent and timescale for the necessary reductions in CO2 emissions if we are to avoid catastrophic climate events. The first chapter makes a strong case for the importance of economic assessments of policies and for the role of economists in government, and yet I think it could have been a bit more reflective about the way economics has come to dominate policy choices. (Maybe that comes further on than I’ve read so far.)

With this caveat, any UK voter trying to make sense of the economic claims and counter-claims – there will be a lot of that with this week’s budget – would be well rewarded by reading this book. It will also last as a useful read on the issues for students of economics from AS level onward, as it’s very clearly written –  just as you would expect from such experienced writers of policy briefs – and includes lots of references for further reading. Inevitably, it doesn’t cover all possible subjects, but it’s a shame that those most relevant to young people – housing, student finance, and the full implications of demography and the pension bill for public spending on younger people – are missing.

There are some other terrific economic resources for voters too. Two that stand out are the IFS Election 2015 briefings and the  CEP’s Election 2015. NIESR has looked at the macro implications of the parties’ fiscalplans. The Manchester Policy blog covers a wider range of issues, not just economics, and Manchester this week launched a free Election MOOC (aimed at 6th formers but suitable for all). How marvellous it would be if we all got ready to meet our candidates during the next few weeks by lining up our questions and factual ammo from the book and these excellent resources.

Pinkoes, bards, and librarians

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I’m reading at the moment Jean Seaton’s terrific account of the BBC in the late 1970s and 1980s, [amazon_link id=”1846684749″ target=”_blank” ]Pinkoes and Traitors[/amazon_link]. One note took me this morning to Keynes’s [amazon_link id=”161427326X” target=”_blank” ]Essays in Biography[/amazon_link]. It’s best-known for his description of Lloyd George at the Versailles peace conference: “This extraordinary figure of our time, this syren, this goat-footed bard, this half-human visitor to our age from the hag-ridden magic and enchanted woods of Celtic antiquity.”

[amazon_image id=”0230249582″ link=”true” target=”_blank” size=”medium” ]Essays in Biography[/amazon_image]

I happened to read instead today the essay on Mary Paley Marshall, wife of Alfred, first female lecturer in economics at Cambridge, creator of the Marshall Library. She sounds a wonderful person – Keynes describes the deep intellectual partnership between husband and wife. I liked best, though, the bit about the library: “It was an essential part of Marshall’s technique of teaching to encourage his pupils to read widely in their subject and learn the use of a library. To answer a question on price index numbers, a 3rd or 4th year student would not be expected just to consult the latest standard authority. He must glance right back to Jevons and Giffen, if not to Bishop Fleetwood; he must look at any articles published on the subject in the Economic Journal in the last 20 years; and if he is led to browse over the history of prices since the Middle Ages… no harm will have been done.” Hence Mary’s donation of Alfred’s books  and her endowment of the Marshall Library. She was its Honorary Assistant Librarian until nearly 90.

It’s a delightful tribute – how nice to read Keynes being so warm and generous. I see there’s a (well-reviewed) new book about Keynes out – [amazon_link id=”B00LZGBGM4″ target=”_blank” ]Universal Man[/amazon_link] by Richard Davenport-Hines.

[amazon_image id=”B00LZGBGM4″ link=”true” target=”_blank” size=”medium” ]Universal Man: The Seven Lives of John Maynard Keynes[/amazon_image]

No doubt the role of history of thought will be one of the subjects for discussions at next week’s Economics Network conference on teaching economics.

Theory of unemployment reconsidered

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The news of Edmond Malinvaud’s recent death at the age of 91 caught up with me yesterday. It sent me back to his book [amazon_link id=”0470268832″ target=”_blank” ]The Theory of Unemployment Reconsidered[/amazon_link], published in 1977 and based on his earlier Yrjo Janssen lectures. The subject of the lectures was how – if at all- to reconcile different theories of large-scale involuntary unemployment. To simplify, the mid-1970s were a time of Punch and Judy macroeconomic debate, monetarists then Real Business Cycle advocates versus Keynesians, supply shocks plus rigidities versus demand shocks.

The book notes that a successful theory needs to explain why quantities, not wages, adjust in the labour market, and why wage/price moves are asymmetric (sticky downard but not upward). Malinvaud took labour and goods markets together, and explicitly recognised the need to think about disequilibrium outcomes. “In each market, the short side decides on the amount transacted and the long side is rationed,” he wrote. He argued that depending on which side was rationed in which market, different macroeconomic regimes would prevail, either Keynesian unemployment or classical unemployment or a regime of ‘repressed inflation’, “when both prices and wages are so low that individual assets have a large amount of purchasing power, and when people choose leisure to such an extent that the demand for goods, which may be high…, cannot be fully met.”

It’s a slim book – and not his best known – but made a big impression on me at the time (my copy is dated 1980) simply because it seemed intuitively true that different kinds of (disequilibrium) states of the world could prevail, with different dynamics and different policy implications. But Malinvaud’s approach was pushed to one side by the juggernaut of the political victories of monetarism and the later  academic consensus about equilibrium DSGE models, albeit with frictions. As regular readers know, I subsequently moved away from macroeconomics, and looking back now over [amazon_link id=”0470268832″ target=”_blank” ]The Theory of Unemployment Reconsidered[/amazon_link] it seems to me just as abstract – including with regards to time – as all macro. But that’s another post.

Here is an interview Malinvaud did with Alan Krueger in 2003.

Edmond Malinvaud

Edmond Malinvaud

Revolutionaries, old and new

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One of the enticing books reviewed this weekend (here in the FT by Francis Fukuyama, for instance) was Robert Putnam’s latest, [amazon_link id=”1476769893″ target=”_blank” ]Our Kids: The American Dream in Crisis[/amazon_link]. Fukuyama describes it as: “A truly masterful volume that should shock Americans into confronting what has happened to their society.” The US has become a class-based society; the solid middle has been eroded both by economic and by cultural change. It has happened or is happening throughout the OECD, some of whose member countries (including the UK) were always class-riven. The loss of the middle has just made the social chasm clearer. (Indeed, it’s being built into the fabric of the land, as this report including a description of separate doors for the lower classes living in “social housing” shockingly demonstrates.)

[amazon_image id=”1476769893″ link=”true” target=”_blank” size=”medium” ]Our Kids: The American Dream in Crisis[/amazon_image]

I had just been looking through the new paperback edition of a 2013 book, [amazon_link id=”B00MK2WM98″ target=”_blank” ]The Citizen’s Share: Reducing Inequality in the 21st Century[/amazon_link], by Joseph Blasi, Richard Freeman and Douglas Kruse. It’s a very American book in that it roots the case for restoring greater equality in the writings of the Founding Fathers of the American Revolution, Jefferson, Hamilton and Madison, with many quotations. Here is Madison: “There are various ways in which the rich may oppress the poor; in which property may oppress liberty; and that the world is filled with examples. It is necessary that the poor should have a defense against the danger.” The defence advocated in the book is an extension of ‘broadbased’ capitalism, particularly through increased employee ownership and ownership of other assets. Specific recommendations include not allowing share incentive schemes to count as a cost of business unless they apply to all employees, giving all newborns a small amount of capital, an effective capital gains tax and so on. All perfectly sensible, although I’m slightly sceptical about the scope for or desirability of much more extensive employee ownership, as the same few examples of success stories are cited all the time.

[amazon_image id=”B00MK2WM98″ link=”true” target=”_blank” size=”medium” ][(The Citizen’s Share: Putting Ownership Back into Democracy)] [ By (author) Joseph R. Blasi, By (author) Richard B. Freeman, By (author) Douglas L. Kruse ] [January, 2014][/amazon_image]

Tackling corrosive inequality will be a complicated business, and there will be detailed debates about all the policies required. But the underlying question is simple – do we want to accept the end of our representative democracies based on a solid middle class, or not? It’s a political question – politics and culture trump economics even if the underlying economic/technological trends seem inexorable. So meanwhile, while waiting for Putnam’s book to come out here, I’ve ordered [amazon_link id=”B00RYGKVAW” target=”_blank” ]Blueprint for Revolution[/amazon_link] by Srdja Popovic, having been intrigued by Otpor since reading this in Foreign Policy. It might come in useful.

[amazon_image id=”B00RYGKVAW” link=”true” target=”_blank” size=”medium” ]Blueprint for Revolution: how to use rice pudding, Lego men, and other non-violent techniques to galvanise communities, overthrow dictators, or simply change the world[/amazon_image]

Economics and its women problem

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It’s International Women’s Day and my Sunday newspaper has a big feature asking ‘Does Tech Have a Women problem?’ (bizarrely, for a tech supplement, not online). A question to which the answer is ‘Duh!’ Shockingly (for a social science), economics isn’t any better. Noah Smith forcefully pointed this out in a recent column.  In the UK, the Royal Economic Society is soon due to publish another report on the proportion of women at different levels in the academic hierarchy, but there’s no reason to think it will be better than the 2012 outcomes. My university is celebrating its women with a little film (including me, hmm) but I don’t think my department is any better than the norm for economics.

There’s no quick fix; it will take a mixture of encouraging female role models for young women economists and students (especially while still at school), making sure all-male panels don’t feature at conferences, raising the consciousness of hiring and promotion panels so they do not confuse “best candidate” with “male”, and so on.

Start today by reading some relevant economics books! I just read Katrine Marçal’s [amazon_link id=”1846275644″ target=”_blank” ]Who Cooked Adam Smith’s Dinner?[/amazon_link] (I’m reviewing it elsewhere) and although irritating in some if its generalizations about economics, it’s terrific about the role of women in the economy and economics, and is a short and enjoyable read. One of its central arguments is about the need to measure better (mainly) women’s unpaid work outside the market, not included in GDP, something also advocated in my [amazon_link id=”0691156794″ target=”_blank” ]GDP[/amazon_link]. As the chart below shows, the increase in the UK’s female economic activity rate during the past generation has been substantial (up from 55.5% to 72.4%) and it is extraordinary not to have regular data that make it possible to evaluate the consequences of switching between unpaid and marketed work.

UK female economic activity rate 1971-2014, source ONS

Jonathan Gershuny and his team gather time-use data to explore who does what in the non-market economy in the UK – a new survey is due to be published early in 2016. The database on their website has a bibliography of relevant publications covering time use data from around the world.

[amazon_image id=”B00TOLYFOS” link=”true” target=”_blank” size=”medium” ]Who Cooked Adam Smith’s Dinner?: A Story About Women and Economics[/amazon_image]  [amazon_image id=”1861342004″ link=”true” target=”_blank” size=”medium” ]Seven Years in the Lives of British Families: Evidence on the Dynamics of Social Change from the British Household Panel Survey[/amazon_image]  [amazon_image id=”B00MXDLPSI” link=”true” target=”_blank” size=”medium” ]GDP: A Brief but Affectionate History by Coyle, Diane (2014) Hardcover[/amazon_image]

Recently I reviewed here [amazon_link id=”B00KAJJBYM” target=”_blank” ]Why Gender Matters in Economics[/amazon_link] by Mukesh Eswaran. Women younger than me are unlikely to have read Simone De Beauvoir’s [amazon_link id=”009974421X” target=”_blank” ]The Second Sex[/amazon_link] – it was all the rage among 1970s/80s vintage feminists. It’s a book that changed my life. Although far more about culture than about economics, it places huge emphasis on the vital need for economic autonomy for women. There is of course a Journal of Feminist Economics. Amartya Sen’s eye-opening article about missing women is 15 years old now. Nothing has changed. The attitudes in India to rape are shocking evidence of that.

[amazon_image id=”B00QASWUU4″ link=”true” target=”_blank” size=”medium” ][(Why Gender Matters in Economics)] [ By (author) Mukesh Eswaran ] [September, 2014][/amazon_image]  [amazon_image id=”0140034633″ link=”true” target=”_blank” size=”medium” ]The Second Sex (Penguin Modern Classics)[/amazon_image]

It would be great to gather more reading suggestions – welcome in comments or via Twitter.