Economics in the bubble

414585868_2c8513d269_nMy plan was to write something following up last week’s Autumn Statement. But what with having to do other things – work and that – I’ve not had the chance.

In the interim there has been bucketloads of analysis. So I’m not sure there is more to say on the substance. All right thinking people are agreed that George Osborne, along with frontline politicians in the other parties, is suffering from what Gavin Kelly has christened a “candour deficit”. No one is being honest with the electorate over the scale of the cuts being planned. And, equally importantly, no politician is being honest about what cuts on that scale imply for unprotected services. Rick illustrates the point beautifully drawing on data from the OBR, the IFS and elsewhere (here and here).

Even Fraser Nelson is calling Osborne out for the sleight of hand he used to claim that the Government had cut the deficit in half. Fraser Nelson. Crikey! [Read more…]

Academic economics, institutions and incentives

Economics economistsAn interesting discussion about academic economics and its role in public life has sparked into life while I’ve been away (eg Simon here and here; Chris here and here). This discussion touches on many of the things that are closest to my academic interests – in particular, thinking about economics as a set of social practices as much as bodies of knowledge.

Just before I disappeared for a few days I finished Lanteri and Vromen’s recently published edited collection The economics of economists: institutional setting, individual incentives, and future prospects. It’s a volume that speaks to many of the same issues, particularly with respect to the incentives facing economists individually and collectively. The contributors approach the issues from a range of social scientific perspectives.

I’d been looking forward to reading the book because it includes several economists who I’d go out of my way to read – Arjo Klamer, David Colander, Deirdre McCloskey, Robert Frank.

And there is plenty of interesting material here, touching on diverse aspects of economics. Topics include understanding economics as an academic discipline in which to build a career; how the discipline can be taught most effectively; the risk of European economics losing its strengths and distinctiveness as it seeks to ape US economics; and some challenges regarding the way the economy should be understood. The collection is eclectic; there is little offered by way of unifying themes.

Whether you’ll find the volume of particular interest depends on how familiar you are with the debates. [Read more…]

Learning implementation lessons

mistakes in setting goalsChris Dillow draws our attention to the issue of policy implementation. He rightly argues that implementation is vitally important, but does not play well in the media. Unless, that is, something goes spectacularly wrong. The media tends to be more interested in the political “soap opera” or in new policy initiatives.

Chris argues that there are reasons for thinking that implementation will be sub-optimal. These include that:

There’s a fetish of “leadership” and “boldness” which encourages a neglect of the unglamorous gruntwork of proper management: tracking progress, achieving small partial targets and overcoming problems. This neglect will be magnified by cognitive biases such as overconfidence and groupthink … Perhaps the most grievous problem, though, is a lack of information.

Chris draws our attention to something very important here. Politicians are mostly, at best, decision makers; they are more rarely doers or managers. In that respect at least the simple division between politics and administration continues to be relevant. In a system that is increasingly populated by professional politicians who have taken the think tank, SpAd, MP route few members of the political classes have much first-hand experience of managing large-scale organisations or delivering successful organisational change before entering politics. [Read more…]

Never mind possibilities for our grandchildren, what about our children?

Revisiting-Keynes-PecchiIn 1930 Keynes wrote his famous essay Economic Possibilities for our Grandchildren. In the essay he made a range of predictions about what the world would be like a hundred years hence. At the heart of the exercise was the impact of increasing productivity and rates of economic growth compounded over several decades. The result would be hugely expanded levels of economic output. In this respect he was correct, although in fact he rather underestimated the rate of growth in economic output over the subsequent 80 years.

But Keynes also envisaged a world in which productivity growth would be such as to create permanent technological unemployment. That is, it would not require all the available labour force to produce all the goods required to satisfy human need. As a consequence, a few people would be fully employed but most people would only have to work part-time. The later would appreciate the sustaining contribution of those who worked full time, for the benefit of all, but there was no longer a need for everyone to devote themselves so exclusively to the pursuit of mammon. The part-timers could turn their minds to higher things: they could devote time to other voluntary activities or cultivate the virtues of the arts and literature.

A few years ago Pecchi and Piga edited very interesting book called Revisiting Keynes in which a selection of leading economists provided their perspective on what Keynes got wrong and what he got right. A fairly obvious criticism of Keynes’ position is its liberal elitist bias and its rather disdainful attitude towards “trade”. Equally, his chronology was a bit wonky, if you take “grandchildren” literally. But two more profound criticisms meant that he was, overall, rather wide of the mark. [Read more…]

Reaching the Terrible Twos

Today is the second anniversary of this blog opening for business. Happy Birthday – Blorthday? No, that sounds awful – to me. Another year of offering a largely indifferent world some more or less coherent thoughts on a range of loosely related topics.

This landmark arrives at a time when the Liberal Democrat blogosphere is going through a period of reflection. This was triggered by Stephen Tall’s comments at the Liberal Democrat Voice Blog Of The Year awards at the Brighton conference. He made the point that things aren’t quite what they used to be, with a reduction in the number of active Liberal Democrat bloggers, and the enticements of alternative social media – primarily Twitter and Facebook – seemingly proving a distraction. Several prominent bloggers – including Jonathan Calder, Richard Morris and Neil Monnery – responded. The assessment that emerged was not, perhaps, quite as downbeat as Stephen’s initial comments might have been taken to suggest.

My view is that, for all their virtues, other social media cannot supersede blogging or, if they do, then something will be lost in the process. [Read more…]

Economists? That’ll be your problem right there

Last Wednesday Suzanne Moore posted a Guardian comment piece entitled Why do we take economists so seriously? which takes a rather scatter-gun approach to some familiar themes. The argument, in outline, is that the economy is in a mess and this is primarily because we have been hoodwinked by orthodox economists. These economists produce inadequate theories unsuited to understanding society. But we nonetheless invest them with too much power over it, and us. The range of opinions on how to resolve the current crisis is too narrow and largely reflects the interests of those who support the current social order. New voices are needed. As Moore argues:

we are indeed in reduced circumstances when debate is reduced to bankers arguing with economists. This clash of ideologies is not really left versus right. It is more akin to fundamentalists talking to agnostics …

This is what you get from this dictatorship of economists, and it should be overthrown. It is wrong and keeps being wrong. The choices to be made now are moral, not economic ones. Only an idiot or an economist would think otherwise.

For a piece in which the author professes to be largely ignorant of the matters about which she is writing, this is quite a brave stance. Predictably it has generated a response. [Read more…]