The NIESR blog is a forum for Institute research staff to provide an informed, independent view on current economic issues and recent NIESR research. The views expressed here are those of the authors, and are not necessarily those of the Institute.
The August 2013 issue of the National Institute Economic Review, published on August 2nd, brings together new research by leading economists on the credit cycle - the expansion and contraction of access to credit over the course of the economic cycle. This is arguably the key challenge facing most major economies at present. The authors’ offer an enlightening menu of reforms – contrasting in some cases with the current UK approach.
In May David Bell and I published a paper in the National Institute Economic Review, introducing a new measure of labour market slack. The conventional measure of the difference between supply and demand in the labour market is the unemployment rate. But it does not capture a phenomenon which has become increasingly important during the current recession - underemployment.
In our continued discussion of his book "The British Dream" in the London Review of Books, David Goodhart argues that what he describes as a "small number of factual errors", and I describe as his "slapdash approach to evidence and analysis", do not have "any bearing on the book's main arguments."
[UPDATED 9 JULY WITH A FURTHER ROUND, at bottom of page]
The paradox of the modern age is that whilst we are apparently more willing than ever to disclose our private thoughts to public scrutiny, the fear of what ‘Big Brother’ might do with our personal information is also high. The reaction to recent revelations about Facebook, Google and others sharing information on users with the US government via PRISM, plus GCHQ tapping into fibre optic cables, have sparked a public debate about what we can reasonably expect to remain private.
The quarterly journal of the Institute for Public Policy Research, Juncture, has published an article entitled "Dear Mr Carney....Memos to the Bank of England Governor." (subscription). It has brief contributions from Dean Baker, France Coppola, Brad Delong, Izabella Kaminska, Dan Corry, Ann Pettifor, Tim Allan, and Bruce Banner (aka ECONOMISTHULK).
This speech discuss the prospect of an independent Scotland re-introducing its own currency. This is far from hypothetical. In recent weeks the leader of the Yes campaign has also suggested that this would be the best option for an independent Scotland. This appears to becoming the 'Plan B'. Indeed, if Scotland is to join the European Union then a pre-requisite of joining the euro is to already have had an independent currency and central bank. However, the key point I make today is that if Scotland is to prosper over the long term, it is not enough just to have a new currency. It is not enough to advocate a new currency as a process of elimination. And it is not enough to advocate a new currency on a text book case of how this could allow an independent monetary policy. Above all else, an independent Scotland requires a ‘hard’ currency if it is to prosper.
There is a growing body of research indicating that more focus, inventiveness and co-ordinated action is needed from central government to improve the employment prospects of young people who are furthest away from the labour market. When looking out how the Coalition’s centrepiece policy, the Youth Contract, is designed to help these young people it becomes apparent that what is on offer is not enough to meet the scale and nature of the challenge.
Can fiscal policy increase or reduce demand? Whatever one thinks of the current stance of fiscal policy, most of us thought the last three years had settled this argument. Of course it can. But - at least for those economists who argue about these things on blogs and twitter - the Chancellor reopened it with his speech to the CBI earlier this month. The Chancellor argued:
The Commission today published its "country-specific" economic policy recommendations. The UK ones are here. There are number of generally very sensible, if somewhat bland and unspecific, supply-side suggestions (liberalise planning to increase housing supply, introduce a "Youth Guarantee" to address youth unemployment:). But it was the recommendation on fiscal and budgetary policy that caught my eye (it is Recommendation 1, after all). Here it is in full:
“International monetary regimes have been born at a conference table and laid to rest in foreign exchange markets”
Currencies are national emblems, but the choice of currency regime governs the basis of monetary policy, financial policy and, in some circumstances, fiscal policy. In a very real sense, the choice of currency is the choice of economic independence.
Following today's mildly encouraging inflation figures, Chris Giles observed that a number of economists had predicted that quantitative easing would lead to "hyperinflation", which now seems highly unlikely to materialise. This provoked a conversation between me, Chris, Giles Wilkes, Pawel Morski, and ECONOMIST HULK, in which Andrew Lilico expressed his view that if we returned to healthy growth, inflation would inevitably follow. Andrew argued:
If economy's back to growing faster, inflation will go back to rising. Betcha!
My summary of the economic evidence on immigration: labour markets, benefits, public services and the long-term impacts on growth and productivity (video, 8 minutes)
The Daily Mail is rarely knowingly understated when it comes to a scare story, especially about immigration. However, sometimes ignorance of basic statistical concepts does the job for them. So it is for today's piece, "How rise of white flight is creating a segregated UK", which states:
In a new paper published today in the latest issue of the National Institute Economic Review, economists David Bell and David Blanchflower of the University of Stirling and Dartmouth College introduce a new measure of labour market slack. The conventional measure of the difference between supply and demand in the labour market is the unemployment rate.