Why is there still a row about bankers’ bonuses? What I mean is that the issue should by now be settled against them. There’s abundant evidence that large bonus “incentives” are not only not justified (pdf) by efficiency considerations, but can actuallybackfire, with the result [...]
What should we infer from the fact that productivity in education has fallen (pdf), as higher spending hasn’t led to proportionately higher attainments? It’s trivial to merely attack government waste here. Instead, there’s another possibility - that perhaps education suffers from severely diminishing returns. If so, [...]
Maybe it’s a good job that newspapers don’t matter, because even the so-called quality ones carry appalling errors. Via Tim and Danny, here are two in the Torygraph. First, it tells us that: A low income household is one that lives on less than 60 per cent [...]
Politicians exaggerate the effect of newspapers. That’s the message of this new paper (pdf): We find no evidence that partisan newspapers affect party vote shares, with confidence intervals that rule out even moderate-sized effects. Yes, newspapers increased voting turnout. But they did not influence the direction of the [...]
Via Paul, I see that Frank Field has written some utter bilge. He says: It simply isn't possible to increase the money supply by 300% and for there not to be a megadose of hyperinflation built into the system. This is plain wrong. I assume he’s talking here [...]
Why is there so little interest in the economics of tagging? I ask because this is, in theory, the solution to the problem raised by that Compass report (pdf) - of how to combine a more redistributive tax system with greater economic efficiency. Let’s start from the standard objection [...]
In an earlier post, I wrote: “There’s a conflict between liberty and democracy.” The Swiss decision to ban minarets illustrates this perfectly. Let’s be clear here. This move is, as Norm says, “a grossly illiberal measure”. It is, quite simply, an infringement of an individual’s property rights. [...]
2010 will not be 1981 - in the sense that it‘s unlikely that a tightening of fiscal policy will be accompanied by economic recovery. That’s the message of today’s figures. First, a reminder of the history. In his 1981 Budget Geoffrey Howe tightened fiscal policy despite the recession. 364 [...]
Tim and Richard are debating that old question, would higher taxes on the rich, as demanded by Compass (pdf), actually raise tax revenue, or would the rich emigrate, work less or fiddle their taxes with the result that less income would be raised? Economic theory is absolutely [...]
What is the link between personal identity and behaviour? Two recent episodes pose this question. One is the death of Bill Barker, the PC who died during Cumbria’s floods. Was his death the act of a heroic character, or was he - as Matthew Parris asks - merely [...]
Here are three new papers on happiness research. First, German research finds that there’s a strong day of the week effect upon happiness. People are much less happy on Sundays than other days; they side with Billie Holiday rather than Fats Domino. You might think this [...]
In a letter to the FT, Martin Weale writes: Fiscal policy should be run on the principle of saving up for the next crisis and our government should have saved the revenues associated with the financial boom and a buoyant housing market. Is this true? I ask for [...]
Via the NBER come two new papers on the effect on immigration. First, Giovanni Peri shows (pdf), from looking across US states, that migrants are good for the economy: We present three main findings, two of which are quite new in this literature. First, we confirm [...]
Is the government spending too little? I know it sounds a silly question, but it’s the one raised by today’s public finance numbers. My table shows what I mean. I’ve taken it from page 3 of today’s press release (pdf) and table 2.8 of the Budget 2009 [...]
Joel Waldfogel’s Scroogenomics provides the academic justification for the campaign to cancel Christmas. The gist of his argument will be familiar to anyone who knows his now-notorious paper, The Deadweight Loss of Christmas (pdf). Quite simply, we are worse at buying for other people than we [...]
I said yesterday that MPs should know their Bayes’ theorem. To see its usefulness, let’s apply it to the question: do the deaths of British troops show that the mission in Afghanistan is failing? Bayes’ theorem lets us answer this if we know just two numbers (well, actually [...]
The FT asks: what should MPs know? Its list of questions contains a glaring omission. I would ask: describe Bayestheorem, and discuss some common deviations from it. The reason for asking this is simple. It is a cliché that MPs, and especially ministers, must exercise [...]
The Tory Party is less popular than heroin. That - if anything - is the lesson from the Glasgow North East by-election result. The Tories got 1075 votes. The best estimate (table 3 of this pdf) is that there are over 13,000 “problem drug users” in the [...]
Wage inequality is falling. This is one message from yesterday’s Annual Survey of Hours and Earnings. My table shows some measures of this. It shows the ratio of the 90th percentile of gross hourly wages for full-time workers to the 10th percentile. (That is, the wages of someone earning [...]
Duncan has endorsed Keynes’ old proposal to maintain cheap and easy money, and so achieve “an increase in the volume of capital until it ceases to be scarce”. I’m not sure this will work. We’ve tried something like it twice, and on both occasions it proved unsustainable. [...]
Our economy is becoming increasingly feminized. That’s one message of today’s labour market figures. These show that, over the last 12 months, male employment has fallen by a net 447,000 whilst female employment has dropped just 43,000 net. Thanks to this, there are now almost as many female employees [...]
How much influence does the media really have on our behaviour? This question is bedevilled by the problem of interpreting causality: do people vote Tory because the read the Daily Mail, or do they read the Daily Mail because they vote Tory? This new paper (pdf) by Baris Yoruk [...]
Having children makes you miserable. That’s the message of this paper by Luca Stanca, which draws upon data from 94 countries: Having children is negatively related to subjective well-being. Conditioning on individual characteristics shows that the effect of parenthood on well-being is positive and significant only for widowers, older [...]
Gordon Brown’s proposal for some sort of transactions tax seems to have been rejected by Tim Geithner, which means the idea is, in effect, dead: such a tax is only remotely feasible if applied globally. This is good. There are (at least) three arguments against such a [...]
The house next to mine is up for rent. But I have no say over who the tenant should be. Is this right? I’m prompted to ask by Martin Wolf’s argument for immigration controls. He points out that immigrants add to congestion. But if next door is rented out [...]
Is it just me, or do several X Factor contestants look like Arsenal players: Danyl and Eduardo; Joe and Cesc, Jedward and Nicklas Bendtner’s bollocks? Which is a preface to saying that Jedward raise an important point about social choice theory - namely, that the public‘s “choice” can depend upon [...]
It’s insufficiently appreciated that Alan Johnson’s sacking of David Nutt has direct bearing on the question of MPs’ pay. What I mean is that there are two views of what an MP should do. On the one hand, there‘s the Burkean view, that MPs should exercise independent judgement: Your [...]
Are the Tories planning on a huge fall in the pound? This is one question raise by Giles Wilkes’ paper, Slash and Grow, in which he argues that it’s unlikely that capital spending and/or net exports will grow sufficiently to keep GDP growing well in the face of [...]
Alistair Darling says he wants a “safer, more competitive banking system.” But isn’t there a trade-off between these two goals? I mean, competition generates instability, because firms that lose crash out of business. Schumpeter’s “perennial gale of creative destruction” will blow some companies away. We saw this in [...]
Insofar as I’ve given him any thought at all, I’ve long considered Slavoj Zizek to be a mere blusterer*. However, I fear Norm is too quick to dismiss this claim of his: Although democracy, in the formal sense, is precious, it is not in itself a measure of [...]
Could teachers’ racial stereotyping be a cause of black Caribbean boys’ under-achievement at school? That’s the question raised by a new paper by Simon Burgess and Ellen Greaves. They compared two measures of children’s ability at age 11: their results on Key Stage 2 tests - which are externally [...]
Laurie’s post on white male resentment - the tendency for some white men to complain that they are under-privileged and marginalized when in fact they are not - raises an important question: what is the relationship between stated grievances and actual, genuine hardship? This paper by Daniel Neff [...]
Two different comments on different subjects reveal a common error in thinking about social affairs. First, in response to my claim that much of the gender pay gap is due to women having children, Toto says: “you didn't consult any childless women before writing this, did you?” You’re damn [...]
In an earlier post, I asked whether the well-known marriage wage premium was due to causality or correlation. Some new Canadian research (pdf) sheds light upon this. It estimates that, among heterosexual men working over 30 hours a week, married ones earn almost 20% more than singletons; this [...]
Matthew Parris comes up with an entry for Oliver Kamm's and John Rentoul’s series, “questions to which the answer is no”: Does reason, does philosophy matter? Of course they don’t. In politics - and especially on matters of freedom, there are powerful mechanisms selecting against reason: 1. [...]
It’s becoming increasingly clear that people’s behaviour is shaped by peer effects; for good or ill, we imitate those around us. A new paper sheds more light on this. The authors took the common room of the economics department at Queensland University of Technology. Some days, [...]
Several people seem to have missed the point about my last post. The point of comparing BNP membership to Cage and Aviary Birds’ circulation was to show that the BNP is a minuscule presence in society. Insofar as it has political presence, this is only because (party?) politics is itself [...]
Can we put the BNP into context? According to the Guardian, it has 11,811 members. This is less than the circulation of Cage & Aviary Birds magazine, and less than Huddersfield Town’s average attendance this season. It’s barely half the membership of the Bakers, Food & Allied [...]
Tim Worstall’s defence of oil speculators is an immaculate exposition of neoclassical thinking. It is also deeply questionable. He says: This is the point about speculators. If they're correct, if there really is a shortage looming (of anything) then they bring that price signifying shortage forward: thus making shortage [...]
If you want a nice exemplar of some issues in the history of economic methodology, you could do worse than contrast two recent papers - one by David Meenagh and colleagues, one by Rhys ap Gwilym - to chapter 12 of Keynes’ General Theory; all address the [...]
The right’s prejudice in favour of marriage can sometimes lead it to some very sloppy thinking. Two recent pieces suggest this. First, the Spectator’s leader cites ONS research showing that married men are more likely to find work that single ones, and infers that “perhaps it’s time to chivvy [...]
I’ve never seen the point of marriage. For me, women are like horses - nice to look at, interesting to ride, but too much trouble to keep. Nevertheless, I’m intrigued by this new paper on the economics of marriage by Gilles Saint-Paul. He begins from the premise [...]
Does the Trafigura/Carter-Ruck case vindicate Marx? What I mean is that Marx argued that technical change was a powerful force behind social change, so technology influenced power relations between people: Social relations are closely bound up with productive forces. In acquiring new productive forces men change their [...]
The BBC reports that unemployment has risen at its slowest rate since July 2008. What it doesn’t do is point out why. One reason is that economic inactivity has increased. People who would otherwise show up in the unemployment numbers have simply dropped out of the workforce. The number [...]
Boris Johnson is threatening to kill some children and worsen the educational outcomes of many more. The reason for this is straightforward. He intends to remove the western extension zone of the congestion charge, and delay phase three of the low emission zone, which would charge polluting vans [...]
Does it make sense for the government to sell off the Tote? The first question is: how much could it get for it? Let’s take Ladbrokes as the obvious comparator. It has a market capitalization of £868m, having made pre-tax profits of £257m in the last financial year. [...]
The row between Norm andConor about liberal intervention has descended into mere semantics. For me, though, it raises an interesting question: could it be that there’s sometimes a trade-off between the evidence for a policy and the effectiveness of it, so that evidence-based policy-making [...]
The debate about government borrowing shows how backward our political class and media are. It's being conducted within the wrong framework. It’s about what the parties will or will not do, when in fact it should be about the range of policies they are considering. To see what I mean, [...]
One curious fact about this recession is that corporate profits have held up quite well. Today’s figures (pdf) show that, in Q2, non-oil, non-financial firms’ net return on capital was 10.8%. Though down from the peak of 13.7% recorded as long ago as Q4 2006, this is comparable to [...]
George Osborne says: The world is watching Britain at the moment. It is casting doubt on our country’s creditworthiness. It is questioning our resolve to deal with our debts. And when that starts to happen, then long term interest rates rise. Meanwhile on planet earth the opposite is happening. [...]
Good-looking politicians are more likely to get elected than munters. This recent paper (pdf) by Andrew Leigh and Amy King found that, in the 2004 Australian House of Representatives elections, candidates who scored one standard deviation higher for looks won 1.5-2 percentage points more of the vote. This isn’t [...]
The financial crisis suggests there’s a strong argument for the BBC remaining state-owned and not carrying adverts. Yes, this claim looks bald. But the reasoning’s simple. Let’s start from the assumption (which might be questionable) that high levels of personal debt were a contributory factor to the recession, and/or that [...]
The Times reports that the government is planning to sell off assets to reduce the deficit. There’s certainly stuff available to sell: the latest national assets register estimated that the government had £294.8bn of fixed assets in 2007. Such sales are, though, a bad way of reducing borrowing. [...]
Why are the great and the good of the arts world - including Martin Scorsese, Whoopi Goldberg and Salman Rushdie - calling for the release of Roman Polanski? I suspect there are some inferential errors at work. Here are five possibilities: 1. The halo effect. It’s common to [...]
According to a recent poll, half of the public believe there is no need to cut spending to reduce public debt. Today’s figures from the Bank of England suggest they might be right. They show that individuals borrowed money in August (pdf), suggesting that July’s repayment was a [...]
It’s insufficiently appreciated that Come Dine with Me raises some profound issues in economics. Here are three: 1. The importance of norms of fairness. The format of CDWM is simple. There are four people. Each hosts a dinner party for the other three. The guests score their host out of [...]
It’s reported that Gordon Brown wants to introduce a law committing future governments to reduce borrowing*. This is both very stupid and very cunning. As macroeconomic policy, it scales the peaks of imbecility. To see why, imagine the following (which shouldn’t be difficult, as it’s what’s happened in the [...]
Duncan says we should be concerned by today’s news of a collapse in capital spending because “investment is the driver of long term growth.” This sounds sensible. But it raises a problem, shown by my chart. It plots the share of business investment in GDP, measured in [...]
The papers report that Brown's requests to meet Barack Obama one-to-one have been rebuffed. What they don't answer is the question: what was the policy issue that Brown believed could be solved only by facetime, rather than by the sort of emails and phone calls that occur all [...]
If you want an example of how good politics makes bad (or at least indifferent) economics, the LibDems "Mansion tax" is it. I was prepared to defend this, on the grounds that it's a minor move to improve the allocative efficiency of the housing market*. The idea here [...]
For me, Norm’s criticism of Terry Eagleton’s discussion of propositions and performances just highlights why the debate between atheists and the religious is a dialogue of the deaf. Terry says: “It is a typically positivist kind of mistake to begin with the propositional.” To this, Norm replies: Let's [...]
Peter Mandelson claims that we have a choice between Labour’s “progressive reform” and the Tories “ideologically-driven retrenchment and deep cuts”. Which raises the question: what impact do different governments really have upon public spending? The answer might be: less than you think. A new paper by Allen [...]
Happiness is infectious - we catch it from others. That’s the finding of this new paper. The authors find that people in Chinese villages are more likely to be happy if their fellow villagers are. Significantly, this is not simply because the things that cause their neighbours to be [...]
Tim picks apart many of the weird claims made by Will Hutton here. What irritates me, though, is that Will is attacking the strawest of men: As a nation, we carry on measuring the growth of goods and services that are sold in the marketplace – the gross [...]
150 years ago, John Stuart Mill described national currencies as a “barbarism.” Brixton seems to want to bring this barbarism nearer home, as this week it launched its own currency. This seems a bad idea. The mere existence of an exchange rate brings with it costs. [...]
The Centre for Social Justice claims that its proposals for welfare reform would get 600,000 households into work. This is an example of the fallacy of composition. The gist of its story is simple. It proposes to increase the return to working relative to not doing so by [...]
Richard Layard argues for old-fashioned Benthamite utilitarianism: I should aim to produce the most happiness I can in the world and, above all, the least misery. And my rulers should do the same. One issue this raises - which Layard doesn’t discuss in his article and barely addresses in [...]
Why should firms use celebrities to advertise their products? A new paper uses MRI scans to cast light upon this. The researcher got a group of Dutch women to look photos of pairs of shoes alongside pictures of various female celebrities, or non-celebrities of equal attractiveness. They found [...]
The FT reports that the Tories are planning a “Tell Sid”-style privatization of bank shares. This is a bad idea, for four reasons. 1. It forecloses the possibility of some intelligent banking reforms. Should big banks be split so that they are no longer too [...]
The financial crisis will kill between 28,000 and 50,000 babies in sub-Saharan Africa this year, according to this paper. The reasoning here is straightforward. For people on subsistence incomes, a fall in GDP can be fatal. The paper's authors, Jed Friedman and Norbert Schady, estimate that a one percentage [...]
68% of the Great British Public support a Tobin tax. This is a paradox - because the argument for a Tobin tax is also an argument for not giving a stuff about what the public want. The case for such a tax is that traders trade too much, which [...]
Philippe Legrain, author of Immigrants: Your Country Needs Them, is on the wireless tonight advocating scrapping immigration controls. What puzzles me, though, is the BBC’s description of this position as iconoclastic. In truth, Philippe’s position is mainstream. What’s odd and extreme is the argument for immigration controls. [...]
Michael Skapinker writes: The division of work into “socially useful” and “socially useless” was a particular preoccupation of the post-Woodstock generation. But it certainly wasn’t one of the preoccupations of the post-post-Woodstock generation. I’m a member of that later cohort. I’ve spent almost 24 million minutes on this [...]
The question of whether the BNP should appear on Question Time raises a worrying question for the health of our democracy. Matthew Syed thinks the BNP should appear, on the Millian grounds that: The more oxygen they are given to publicise their views, the more the British people will [...]
I’m surprised by Tim’s and Peter’s take on property rights. My first surprise is that, in denying that people have some kind of natural right to the fruits of their labour they are throwing out the libertarian baby with the Marxist bathwater. This is because (some) libertarians’ [...]
Here’s a contrast that tells us much about our political system. On Friday, Samuel Brittan wrote of politicians “boasting that they have never heard of [Rawlsianism].” Today, Alice Thomson writes: The X Factor has become the show that every politician must watch…Both parties are convinced that shows such [...]
James Kwak cites David Romer’s paper (pdf) showing that American football teams kick too often on the fourth down. This, he says, is evidence that coaches protect their own reputation - by doing the conventional thing - even though it reduces their team’s chance of winning. It’s [...]
How much would the global economy lose if the financial sector were to shrink?* This question raises a problem about the role of human capital. Take the question: why are (some) bankers so well paid? One possibility is that they are highly skilled; they have lots of [...]
Gender differences in decision-making can be very sensitive to context, according to this new paper (pdf). The researchers got groups of Swedish students to play simple dictator games, where they were given some money and then asked whether they wanted to give some of it away. When the [...]
Anthony Evans has written a fine paper (pdf) proposing how economists might make themselves more useful. There’s much to like about this - not least his stress upon the need for economists to be imaginative and his claim that it is “simply anti-intellectual” to believe in economic forecasts. [...]
Tom Watson says the “Sunday Times published a thoughtful contribution to the filesharing debate from Peter Mandelson.” He’s wrong on two counts. First, the piece appeared in Saturday’s Times. Second, it is not “thoughtful.” I have three problems with it. First is this: Taking something for nothing, without [...]
Many of those who have criticised my post on music downloading seem to be asserting what has to be proven - that there should be large-scale intellectual property rights. But what is the origin of this right? It’s doesn’t lie in nature. Property rights, as David Hume said, [...]
If I give a friend a lift in my car, should BP refuse to sell me petrol to punish me for depriving cab companies of revenue? No-one is proposing this. So why is the government proposing that ISPs cut off services to people who swap music files? [...]
You can’t open a newspaper these days without seeing somearticle about how people behave irrationally. What much of this writing misses, however, is that - for many practical purposes - it’s just impossible to behave rationally. The distinction between actually-existing irrational people and the desiccated calculating machine [...]
Religion is good for your health. That’s the finding of this new paper (pdf) by Angus Deaton. He says: On average, over all countries, and over countries sorted into income groups, religious people do better on a number of health and health-related indicators. These protective effects appear to be [...]
My call for workers to exercise greater control over bosses has been criticised by Liam Murray and Kardinal Birkutski on the grounds that workers are often unable to judge the quality of bosses. This raises a point which was perhaps better grasped by Tocqueville and Montesquieu than [...]
Compass wants the government to set up a High Pay Commission to limit top incomes. This is a bad idea. It’s an example of what Boffy, in another context, rightly calls the Left’s “debilitating reliance on statism.” The thing is, high salaries lie along a spectrum. At one [...]
Daniel Hannan is copping some stick for his criticism of the NHS. But there’s one thing he said which seems defensible. It’s this: If the Americans came to me and said, ‘Would you recommend us taking up a system just like the British NHS?’, I think I [...]
Does it matter how much a country spends on healthcare? My chart, taken from OECD data for 2005, raises this question. It plots total health spending (public and private) as a share of GDP against life expectancy, for 32 OECD nations. What leaps out here is that the US [...]
Martin Jacques argues that as China gets rich, it will not become westernized, but it will become a hegemonic power, using its economic might for political, military and cultural purposes. This, he says, will lead to a “different kind of world”, in which economic and political progress are no [...]
In the FT, Robert Skidelsky takes yet another fact-free pop at the efficient market hypothesis. The facts, however, tell a different story. Figures from Trustnet show that, over the last five years, only a minority of unit trusts in the UK all companies sector (91 of 254) [...]
Lord Myners has proposed, to someacclaim, that longer-term shareholders should have more voting rights. I’m not sure. First, fund managers have no especial expertise in running companies - partly because any outsider is always at a huge disadvantage in knowing what is really going on inside [...]
To what extent can state intervention reduce inequality? The lesson of the New Labour government is that it can’t much; since 1997 inequality has either barely changed, or risen a little depending upon whether you take ONS or IFS data. However, a new paper by [...]
What’s the difference between men and women? It’s this question that underpins Harriet Harman’s claim that a mixed-gender team makes “better decisions”. After all, if the only difference between the genders is that women have funny plumbing, it’s not obvious why a political leader’s gender should matter.[...]
John Rentoul highlights a curious claim by Neal Lawson: The relationship between markets and socialism is not complimentary but contradictory. Depending on your conception of democracy, this is both true and false. It’s true if you regard democracy as Neal does - as a way in which we [...]
The Tory right is, yet again, showing its ignorance of the income distribution and tax system. The Speccie’s leader says: Mr Cameron has been criticised for telling Mr Marr that he would remove tax credits for households which earn more than £50,000 a year. This…would hit 130,000 families immediately [...]
This discussion between Edmund Conway and Andrew Lilico on the Today programme on the alleged crisis in economics seems to me to rest upon a misunderstanding of what economics is. Conway says the crisis has been “an earthquake for economic thought” and Lilico says we need “new theories.“ [...]
In this new paper (pdf),Gregory Clark of A Farewell to Alms fame makes a gobsmacking claim: Pre–modern England, all the way from 1250 to at least 1860, was a society without persistent social classes. It was a world of complete social mobility, with no permanent over-class [...]
The Office for National Statistics today published its latest figures (pdf) on income inequality. These show that, in 2007-08, the richest 10% received 28% of all post-tax income - that is, incomes including benefits after direct and indirect taxes - whilst the poorest 10% got just 2%. That means [...]
What should we infer from the fact that productivity in education has fallen (pdf), as higher spending hasn’t led to proportionately higher attainments?
