The Tory £12bn and manifest inadequacy

The leak to the BBC hinting at the scale of the cuts to welfare budgets being modelled by the Department for Work and Pensions has caused consternation. And so it should.

Given that George Osborne has refused to say what he is proposing to cut from welfare spending it was inevitable that any halfway credible information would attract attention. It is frankly outrageous that he is unwilling to be transparent with his plans. But that’s a different issue.

The BBC leak suggests that disabled people, unemployed people and those with caring responsibilities could bear the brunt of reduced spending.

The Conservatives have been quick to deny that the leaked figures represent agreed policy. This is just modelling possible options. Nothing has been decided. This statement is presumably aimed at defusing the row or deflecting attention.

But it shouldn’t. [Read more…]

Economics blogging and the return of political economy

BlogAlex Tabarrok posted yesterday on the relationship between the economics blogosphere and academic economics. He identifies three contrasts between economics blogging and publication in academic economics journals:

  • Blogs are fast, journals are slow
  • Blogs are open, journals are closed
  • Journals reward cleverness, policy requires wisdom

He notes that blogs play a key role in policy debate not simply because it is possible to conduct the debate on a timescale that is relevant to policy (fast not slow) but also because blogs allow you to do things that journals don’t value. The journals worry about the logical consistency and coherence of models, and are less concerned about whether the models capture particular real world situations in meaningful ways. In contrast, policy needs the judicious application not just of an economic model but also “economic history … psychology, politics and law”. The sort of knowledge useful for policy is hard to represent in the academic economic journals. It is inherently eclectic: wisdom not cleverness.

These aspects of Tabarrok’s post reminds me of some of the comments made by policymakers who participated in the debates at the UK Treasury a while ago on what sort of economics education is useful for policy.

But Tabarrok takes things further than that discussion with his second point. [Read more…]

International evidence on housing booms

This post is the first of its kind for me. The post is jointly authored by myself and my friend and colleague Ken Gibb. It is being published simultaneously on both our blogs. You can find Ken’s post here.

A recent NIESR paper by Armstrong and Davis (November 2014 (£)) compares the last two booms and busts in major OECD country housing markets. The authors present a thoughtful macroeconomic analysis of national housing markets and from there conduct panel data analysis of the determinants of house prices focusing on financial, debt and related variables.

The authors argue that comparison of the two most recent housing market cycles (1985-94 and 2002-11) can test the hypothesis that there was something unique about the most recent boom and its aftermath. They state that the housing market is widely considered to be the main cause of the global financial crisis (quoting such authorities as the IMF). However, the authors come away from overall reading of the data for the two cycles unconvinced. In their view the two cycles are sufficiently similar that it difficult to draw the conclusion that the most recent cycle is different in meaningful ways: it is certainly not unique. The implications is that if the received wisdom is incorrect and other factors were important in causing the crisis then macro-prudential policies in countries like the UK may be incorrectly targeted at the control of house prices and mortgage lending.

We are interested in this broad area for several reasons: why did economists miss the bubble nature of the housing market and its departure form fundamentals? Why did they miss the downturn in national housing markets? How plausible are the microfoundations of the models being used to analyze the housing market and explain what is actually going on? What do these analytical weaknesses tell us about the health or otherwise of economics and its capacity to evolve and learn for future challenges? [Read more…]

Election pledges: The few would disagree edition

While I was sat in the auditorium at the Liberal Democrat Spring Conference listening to Danny Alexander’s speech on the economy – which, by the way, was not too shabby an example of the genre – Twitter reported the unveiling of the Labour party’s five election pledges.

Here they are:

Well. It’s hard to know where to start with that offering. [Read more…]

Stress testing society

8020758086_fc194a9c87_nIn today’s Observer Sir Hugh Orde argues that the cuts to police funding being proposed by the Conservatives for after the election, layered on top of the cuts that have already happened, put the ability of the police to fulfil their basic functions at risk. He argues that the police force is near a ‘tipping point’.

No doubt someone somewhere in the bowels of Conservative HQ is crafting a rebuttal that will argue this is special pleading from a high profile representative of an interest group, seeking to make a splash on his way out. Or something like that. The rebuttal may have been launched already.

But Sir Hugh’s comments do raise an interesting and important analytical question. Where is the tipping point? And what happens when we pass it?

We know that the Conservatives are proposing to continue savage cuts to non-protected services for several years to come. And the plans of the other parties, even if a little less savage, are not much more generous. The focus of the argument is on shirking the state and what might be the most sensible timescale for aiming to achieve a budget surplus.

But the whole strategy only makes sense if you assume one of two premises. Either it is assumed that you can keep cutting budgets without affecting services in ways that are materially significant – public services can take advantage of effectively infinite efficiency gains. Or it is assumed that the public services were doing lots of things that are of no social value and so stopping doing them will make no difference to anything.

There is also, it would appear, relatively little consideration of whether cuts to some parts of the public services are of greater significance than others – or whether all are equally required to swallow unpleasant medicine in order to ensure that pensioners can continue to be bribed to vote Conservative.

But all of this seems to fly in the face of even rudimentary thinking about society and the institutions that are necessary to underpin it. [Read more…]

On Social Policy

Big ideasA couple of days ago I was asked, at short notice, to write a brief introduction to Social Policy, suitable for young people interested in finding out more about the discipline.  Even though I only had a few minutes to write it somewhat inevitably I wrote more than could be used for that purpose. So I was given a firm edit. Here is the fuller version, in case it is of interest.

How does a society meet the needs of its members and promote their well-being? What sorts of things are seen as problems for individuals to cope with on their own? And which are problems that society more broadly has a reason, or an obligation, to address? Should we rely mainly on our families for help? Or should we expect governments to act for us? What about services provided by organisations in the private market? And what is the role for charity?

How do the answers to these questions differ between different countries or regions or cities? How do the answers differ in the same society at different points in time?

These are questions examined by the discipline of Social Policy. [Read more…]

Has The Good Right got it right?

7134884983_5301865c77_zI’ve only just found the headspace to catch up with Tim Montgomerie and Stephan Shakespeare’s The Good Right, an agenda for the modernisation of conservatism. I was reminded of it yesterday while reading Stephen Tall’s final – and excellent as ever – post for ConservativeHome. The overarching aim of the project is to break away from the idea that the Conservative party is the party of the rich and seek to reinvigorate its mass appeal.

The Good Right styles itself as a contribution to internal debate on the future direction of the Right, but it has generated a lot of critical comment from all points on the political spectrum. The “libertarian” right clearly don’t like it very much because they don’t see it as “right” at all. While the left don’t like it for rather similar reasons: a Conservative party that embraced this agenda would be much better able to reach beyond its core vote and therefore would pose a much greater threat.

I’ve seen a number of people comment on how many of the 12 draft policy ideas presented by The Good Right they agree with. It would appear that the ideas resonate quite well with many. People with rather different public political alignments are willing to acknowledge that they could endorse many/a majority/pretty well all of the ideas. [Read more…]

Three aspects of coalition government

[This post is the original version of a text that first appeared in issue 370 of Liberator magazine (February 2015), under the title “Sustained by useful idiots”]

4604466137_65e4ae185d_nAs we approach the last few weeks of this Parliament it is almost inevitable that our thoughts turn to evaluating the Coalition Government as a whole, the role of the Liberal Democrats within it, and the implications for the party of participating in a Westminster government for the first time in many decades. But this is by no means a trivial task. Not least because the answers depend on the angle from which the issue is viewed.

If we focus on the politics of the Coalition then one common criticism has undoubtedly been put to bed – coalition governments are not by definition weak because at their heart sits horse-trading and compromise. This government has pursued a radical agenda renegotiating the role of the state. It has set in train structural changes in a whole range of policy areas that have yet to fully work themselves through the system. This was possible in large part because for much of the Parliament the Liberal Democrats were willing to put aside dissent, in public at least, and support a wide range of Conservative projects. Only in the last year of the Parliament has the party made any real effort to differentiate from the Conservatives. [Read more…]

Policy unpacked #8 – Giving away social housing

Policy Unpacked 5In this podcast I discuss proposals emanating from the Conservative party for new ways to dispose of social housing. At the moment IDS’s proposal to give properties to previously unemployed tenants who manage to secure a job for a year is the one gaining the most media attention.

At the end of the podcast I speculate on how the incentives facing housing associations may change in the face of conflicting imperatives.

(Running time: 22′ 18″) [Read more…]

The narrow politics of slogans and symptoms

The long election campaign is now well and truly under way. It is hard not be underwhelmed by the story so far.

Politics is a complicated, multidimensional business. Indeed, one of the things I don’t envy politicians is that they are expected to have intelligent views on all sorts of topics close at hand, or at the very least be able to recite the current party line with some semblance of cogency and sincerity. At one level I rather admire those who manage it, and in the process avoid the bear traps laid for them by the media.

But at the moment we aren’t getting a very multidimensional view of what the parties are thinking or planning. Isabel Hardman’s piece in today’s Observer gives us an insight into why that is the case. [Read more…]