The UK economy seems to be continuing its slow recovery – today brought figures showing a modest rise in investment in Q3 after the previous quarter’s decline, although consumer spending is a bigger contributor to GDP growth, and the housing market seems – as ever – to be one of the main engines of growth. However, the Bank of England cast doubt on the quality of the investment figures, which have been volatile, and it would be good to see it expanding more consistently.
The uncertainties about the outlook make this a good time for us to have published in the Perspectives series Andrew Sentance’s Rediscovering Growth: After the Crisis.*
Andrew has blogged about the book himself – here at The Hawk Talks and here on some of the implications of the ‘new normal’ of slow growth for airports at (pdf) PWC. So I won’t try to sum up his views myself. Here’s what he says are not the reasons for a lacklustre outlook – read the book to discover his explanation!
There are many misunderstandings about the reasons for disappointing growth. It is not due to a deflationary global economy, as in the 1930s. Emerging market economies have not had difficulty finding growth opportunities – and their performance has been strong both before and since the crisis. Inflation has been a bigger problem than deflation for many economies around the world since the financial crisis – including the UK. Nor is weak growth the product of restrictive economic policies – fiscal austerity or a lack of monetary stimulus. Across most western economies, government spending restraint and tax increases have not been severe, and monetary policy remains extremely loose.
*Amazon has sold out currently and the e-book will be out around the end of this week – meanwhile, order direct with free UK P&P from the LPP website, http://londonpublishingpartnership.co.uk/rediscovering-growth-after-the-crisis/
In Bristol at the end of last week for the Festival of Economics (#economicsfest), I picked up a little book in the Arnolfini bookshop for some light reading. It’s John Armstrong’s How to Worry Less About Money from The School of Life. It filled a train journey back from Cambridge yesterday evening (after my talk to the Cambridge Society for Economic Pluralism).
It’s a self-help book and is actually full of perfectly sensible advice – for people who are not poor but not rich either. If you’re genuinely worrying about not having enough for housing, food and heat, there is not much anybody can say to help you worry less. However, for the rest of us, I think this book offers a useful reminder (a) that money carries all kinds of emotional baggage and (b) that what you do with money matters as much as having it. As I have enough money these days, I’m not very interested in personal finance, but some of the observations in the book struck a chord nevertheless. When I have some moments of respite from a whirlwind of activity at the end of this week, I might even try some of the exercises, before plunging into Christmas shopping.
However, I did look at The School of Life website in writing this, and note that it appears to be a shopping site. The Utopia candles looked particularly appealing.
Hmmm. I’m a fan of enterprise and profit-making, but what’s your relationship with money if you want to acquire £35 candles named after literary idylls (Walden, The Republic, Utopia).
I was mulling over the exchange at the Festival of Economics described in yesterday’s post, between those saying economics had little to contribute to the debate about public services because it is simplistic and reductionist, and the economists pointing out that economics as applied to this area actually addresses the critics’ claims. Needless to say, I’m on the side of the economists, and indeed wrote a whole book (The Soulful Science) pointing out all the richness and sophistication of modern applied economics.
To check my views, I looked through Lee Friedman’s The Microeconomics of Public Policy Analysis, a recent textbook in this field. The issue of equity is brought in by Chapter 3 (after an introductory/overview chapter and one on cost-benefit principles). Distributional issues feature strongly throughout. Profit versus non-profit behaviour is discussed at length. The interaction of markets and policy is thoroughly covered and a whole section discusses the pervasive problems of asymmetric information and externalities. The book is full of examples (all American) illustrating the unavoidable trade-offs in policy decisions.
Yet of course the critics have a point. Because although economists are doing all this subtle work, the policy debate still draws on the caricature version of the economic debate, the ‘markets good, government bad’ or vice versa. This is partly the usual problem of the people in charge having learned their economics a long time ago. It’s also clear that economists should redouble their efforts to communicate their work. But I wonder if there are other barriers to the policy world embracing the subtler and evidence-based work that is taking place now in economic research into public services?
The 2nd Festival of Economics in Bristol, which took place over Thursday to Saturday, was a great success. There were many more people attending than in the 1st year, and the quality of speakers, questions and debate was fantastic. The aim of the Festival is to get economists and members of the public in discussion about profoundly important trends and policy questions – obviously, the appetite to do so is quite large.
The Arnolfini Bookshop serves the Festival with an outpost selling books by various speakers. We also launched the Perspectives series there this time, with two of the first group of authors, Julia Unwin and Bridget Rosewell in attendance.
One of the liveliest parts of the day was a vigorous debate between David Walker (a sociologist by training, @Exauditor77 on Twitter) and economists Paul Johnson of the IFS and Sarah Smith of Bristol University’s CMPO. It even got the audience heckling, on both sides. The debate is on Twitter under #economicsfest. Briefly, Walker said economics has nothing to offer the debate on public service reform because of information asymmetry and spillovers. Sarah Smith pointed out that the economics of public services recognises exactly those features, but agreed that economics needs to pay more attention to the transactions costs and monitoring of outsourcing. Paul Johnson argued that the policy debate relies too much on a simplistic Econ 101 version of economics, and all the economists concluded that people need to learn much more economics…
Do we economists really make tendentious a priori assumptions about health competition? @Exauditor77 makes the accusation… #economicsfest
It’s the 2nd annual Festival of Economics in Bristol currently – webcast here if you can’t make it in person, hashtag #economicsfest. A number of the speakers have recent books out: Martin Ruhs is the author of The Price of Rights: Regulating International Labor Migration. Faisal Islam, in conversation at lunchtime today with Dan Franklin, wrote The Default Line: The Inside Story of People, Banks and Entire Nations on the Edge. Tim Harford is speaking on his new book, The undercover Economist Strikes back: How to Run or Ruin an Economy. Others with recent-ish books are Stephen King (When The Money Runs Out), Stewart Lansley (The Cost of Inequality) and Nick Crafts (The Great Depression of the 1930s: Lessons for Today)
There are also three authors from the new Perspectives series launching tomorrow: Bridget Rosewell (Reinventing London); Julia Unwin (Why Fight Poverty?) and Andrew Sentance (Rediscovering Growth: After the Crisis).
The lovely Arnolfini bookshop is running the Festival shop so I shall no doubt be heading home tomorrow evening laden with more books.