In this week’s FT, Gideon Rachman argued that “maybe it is time for an alternative to the brash certainties, peddled by those pseudo-scientists, otherwise known as economists.” Tim Harford then hit back with a defence of economics, and Diane Coyle has also joined the fray. I know, like and respect all three of them, and [...]
George Osborne described it as “unavoidable” and “progressive”, Vince Cable as “necessary” and “fair”. Don’t blame us, Tweedledee and Tweedledum suggest, Labour left the public finances in a mess – and unless we tighten our belts drastically now, the markets will force our hand. But in fact, the timing, extent and manner of this brutal [...]
I debated the future of the euro with Josef Joffe, the editor of Die Zeit, on the Riz Khan show on Al Jazeera English on 20 May 2010.
I had the pleasure of meeting Daniel Ben-Ami on Saturday and recommend you check out his blog and his book, Ferraris for All, which is out in July and makes the important case for economic progress, which too many people in the West have unfortunately lost confidence in. As I argue in Aftershock, we should [...]
The Guardian, 30 April 2010. The Duke of Westminster will cheer this house price bounce. For most of us it’s divisive and unsustainable
This article appears in today’s Guardian. House prices rose by 10.5% in the 12 months to April. A typical home now costs £167,800, according to Nationwide – more than in August 2008, the month before Lehman Brothers collapsed, credit seized up and the economy fell off a cliff. It’s as if the financial crisis and the worst [...]
Writing in the FT, Chris Huhne demolishes the Tories’ scaremongering about the perils of a hung parliament: It is demonstrably wrong to argue that sound economics requires single-party government… Of the 14 countries that enjoy the top AAA rating for creditworthiness with all three rating agencies – Fitch, Moody’s, and Standard and Poor’s – 10 [...]
If there were a simple, single, universal theory of economic behaviour, then the suite of arguments comprising rational expectations, efficient markets and DSGE [dynamic stochastic general equilibrium] would be that theory. Any other way of describing the world would have to recognise that what people do depends on their fallible beliefs and perceptions, would have [...]
Consider these three facts. Britain is struggling to recover from a crisis caused in large part by a huge property bubble. Unemployment is painfully high and people are feeling the pinch. The government has a huge gap in its finances that cannot be filled by public-spending cuts alone. What would you raise taxes on? Astonishingly, [...]
Money quote: To this day it is hard to find fault with the conceptual framework of our [financial risk management] models as far as they go. Of course not.
Britain’s banks aren’t lending, which is strangling the economy. The package of measures to support lending to smaller businesses which the government announced yesterday will do some good. But it is not enough. As I have argued previously, the government should direct nationalised Northern Rock to step into the breach. Anatole Kaletsky endorses this position [...]
Hat tip: Andrew Sullivan
Now, the United States tried a fiscal stimulus in early 2008; both the Bush administration and congressional Democrats touted it as a plan to "jump-start" the economy. The actual results were, however, disappointing, for two reasons. First, the stimulus was too small, accounting for only about 1 percent of GDP. The next one should be [...]
The Chancellor told the Observer that: You’d be very foolish indeed to say, "Well, that’s the job done". You know this is something that needs constant attention. We’ve got the Budget next year, we’ve got the pre-Budget report in 12 months’ time, the Budget after that. I put more money into the reserve on Monday [...]
The reason why the government had to rescue Britain’s banks is not that their shareholders and executives deserve special favours, but because businesses and jobs depend on the availability of credit. There is no public interest in propping up banks that won’t lend. For sure, banks should not be lending with reckless abandon as they [...]
Willem Buiter sums it up perfectly: The private financial sector has to deleverage massively, but would (with credit markets and wholesale financial markets closed for business) do so in an unnecessarily destructive way if left to its own devices. The household sectors in the US, the UK and a number of other European countries have [...]
The Guardian, 25 November 2008. Darling’s prescription was a sticking plaster on an economy that demands Obama-style shock therapy.
Extraordinary times call for extraordinary measures. Alasdair Darling’s statement was a pre-budget report only in name; in reality, it was an emergency budget crafted by Gordon Brown. It was big and bold, but it should have been bigger and bolder. Worse, the main plank of the government’s plan to support the economy – a cut [...]
The Guardian, 9 October 2008. The UK government’s measures will stave off economic collapse and get banks moving, but calling them a bail-out is misleading