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Fundamental economic changes require a departure from simplistic economics, writes Prof Diane Coyle.
The post Renewing economics appeared first on Bennett Institute for Public Policy.

When reading about controversial topics in economics (and I assume in other fields), it’s common to have the uncomfortable feeling that if you know what the authors argued in a previous paper, you will also know what they are arguing in the current paper. One interpretation of this pattern is that authors have biases that … Continue reading Gender, Academia, Economics
The post Gender, Academia, Economics first appeared on Conversable Economist.

Why leave a tip? You have already received whatever food or service you are going to receive. Maybe if you are a very regular customer, tipping could lead to better service in the future. But most people who leave tips do so even if they are stopping off at, say, a restaurant in a city … Continue reading Some Economics of Tipping
The post Some Economics of Tipping first appeared on Conversable Economist.

Apparently minks are a possible vector for the spread of COVID-19. Thomas Peacock and Wendy S. Barclay write about the issue in “Mink farming poses risks for future viral pandemics” (PNAS, July 19, 2023). They write (citations omitted): Mink are highly susceptible to infection with several viruses that also infect humans. In late 2020, government … Continue reading Some Economics of Minks
The post Some Economics of Minks first appeared on Conversable Economist.

Claudia Goldin's Nobel prize puts women's labour-force participation and the gender pay gap at the centre of economics.

After the 2008/9 recession the coalition government famously adopted a set of contractionary fiscal policies with the aim to reduce national debt. Elements of this austerity programme included significant cuts to government spending, public sector job reductions, and changes to welfare programs. Various Keynesian economists claimed that such policies would be detrimental to the British economy, including Nobel prize winners Paul Krugman, and Joseph Stiglitz. In some sense they were right, but for all the wrong reasons. Austerity in the UK was harmful due to the impact which it had on total expenditure. The reduction in government expenditure caused a reduction in public sector employment, which had a knock on effect in the private sector as lower total spending in the economy led firms to layoff workers. Primarily through these mechanisms austerity policy led to rising unemployment, and a general reduction in standards of living. However, this is not inevitable. Following the recession the US adopted a very similar set of austerity policies to the UK, if anything they were slightly more radical. Just as economists did in the UK, a letter signed by 350 Keynesian economists suggested that this might push the US economy into recession. The US budget deficit was then reduced from roughly $1,050 billion in 2012 to $550 billion in 2013. Despite this, there was never an equivalent 'double dip' recession, as was experienced in the UK and EU.This is because the Federal Reserve adopted sufficiently expansionary monetary policy to offset the impact of the reduction in government expenditure on NGDP (total expenditure). While government expenditure fell, this was negated by the increase in private sector expenditure, meaning there was no significant increase in unemployment. Had the Bank of England adopted similar monetary policy, the country undoubtedly would have fared far better during the austerity period. Austerity in the UK was not harmful because government expenditure fell, as many will often suggest, but instead because inappropriate monetary policy allowed total expenditure to fall. 

From the recent JRF report upon poverty in Scotland: Trapped in low pay – built on gender discriminationWhile the National Minimum Wage and the National Living Wage (NLW) have created a more predictable floor within pay levels, the real Living Wage (rLW) is now the widely accepted minimum rate for good employers to pay or aim for. When we refer to 'low pay' in this report, we mean pay below the rLW.Knowing the importance of the rLW, we show that 1 in 10 workers are in persistent low pay, that is, that they have earned below the rLW for at least four of five years. Very few people in low pay are able to sustainably move out of low pay with only 1 in 20 moving to pay above the rLW in the same 5-year period.To translate, "We and our mates made up a number for nice wages. If anyone disagrees with us that earning below this is poverty then we'll sthwceam until we turn blue."Just to emphasise how silly a number this is. At 1750 hours a year, that's £19,075. For a single person that's in the top 6% of global incomes. For a single parent with 2 kids that's top 15% of the global income distribution. Yes, of course that is PPP adjusted.That's not, in fact, poverty. All it is is a little less than other people in the same country get - and more than some others of course. And we really do insist upon this - in opposition to all the Ms Botts out there - that a little bit of inequality simply is not the same thing as poverty.Poverty is not having a bowl of rice a day - rather than this worrying about whether the second pair of sneakers is bought in JD Sports or Primark.

" Since everyone looks to prices for accurate information about relative scarcity, having prices that are being inflated artificially is misleading, and results in multiple different economic actors all trying to expand at once." ~ Michael Munger

There used to be a recognized academic field of “economic ornithology,” which emphasized the economic benefits of birds to agriculture, in their role reducing bugs and weeds. But with the advent of pesticides, economic ornithology had become obsolete by the 1940s. Robert Francis tells the story at his “Bird History” substack: “Economic Ornithology: Before pesticides, … Continue reading Economics is for the Birds
The post Economics is for the Birds first appeared on Conversable Economist.

Apparently we're to have less Net Zero. Or later. Or something at least:Rishi Sunak is facing a growing Tory backlash over plans to water down his key net zero policies, with MPs saying it would be "the greatest mistake of his premiership".Bans on petrol cars and oil boilers in the next decade are among the green pledges that could be loosened under the Prime Minister's plan to meet the 2050 net zero target in a "better, more proportionate way".Ahead of a major speech this week, he admitted that the Government has "not been honest about costs and trade-offs" of net zero.As the actual economic report - that Stern Review - says we shouldn't have an emissions target anyway. As the Nobel Laureate on the subject points out, Bill Nordhaus, we shouldn't have an emissions target. Because that's the wrong way to incentivise the innovation necessary to gain less climate change. We need to use prices and the market, not bureaucratic dictat.But OK, everyone's decided, wrongly, to use a target instead. As we've pointed out before, they're still getting it wrong even if we allow them that pass. For the economics here is terribly simple. There are costs of allowing climate change to happen. There are costs of stopping climate change happening. The costs we don't have to carry by not stopping it are therefore benefits of allowing climate change to happen. Equally, a benefit of stopping climate change is not having to bear the costs of climate change happening. This is obvious. So is it also obvious that there's a fairly delicate dance between those two sets of costs and benefits. We wish to optimise the outcome, maximise human utility over time. That means bearing the least cost we possibly can while gaining the largest benefits possible. Again, all entirely obvious.That delicate dance then changes when the costs of action change relative to the costs of inaction. We're just finding out that offshore wind power is three to five times more expensive than we were told. So, as we've noted, we desire less wind power in our mix.But we're also now being told the true costs of everything planned in emissions reduction. Those costs are higher than we had been led to expect. Therefore - and entirely rationally - we should be agreeing to have more climate change. Prices have changed to the correct answer is different. Anyone not arguing for less climate mitigation in the face of rising prices is therefore wrong.

It is a common belief, applicable across many different kinds of markets, that if you could just “cut out the middleman” and “pass the savings along to consumers,” everyone would be better off. Pharmacy benefit managers are quintessential middlemen. Thus, when it comes to addressing high drug prices, going after them has considerable political appeal. … Continue reading Some Economics of Pharmacy Benefit Managers
The post Some Economics of Pharmacy Benefit Managers first appeared on Conversable Economist.

China is not collapsing. Its very serious economic problems did not emerge this year or last year or in the past five years.
The post Failure of the China Economics Field appeared first on American Enterprise Institute - AEI.

In a recent paper in Journal of Economic Issues, I explore a particularly interesting variant on the problem of unexplored normativity, politicisation and its ethical consequences. Put simply, standard theory of tax evasion inadvertently treats everyone as a criminal. Moreover, while recent work on theory of "tax morale" seems different it is not as different as one might think. Both contribute to a world of biddable neoliberal subjects.
The post How tax theory in economics treats us appeared first on Progress in Political Economy (PPE).

Greedflation is this idea that recent inflation was driven by Big Business - you know, capital, them, they - upping their profit margins at this time of stress. The usual response to this is that if capitalists - them, they - had this power to push up prices then they would have used it already. If that power was newly arrived in this time of stress then it's the newly arrived ability which is to blame - so, macroeconomic or monetary conditions again - for their ability to do what they always would. They're capitalist, those they, them, after all.But the idea is still attractive to many. After all, it cannot be a failure of government, politics, Modern Monetary Theory or the Magic Money Tree, can it? Those are all nice things and sugar and spice do not lead to puppy dog tails.Which is what leads to this latest report claiming that, no, really, it's all them in their top hats and with their cigars: The report from the IPPR and Common Wealth thinktanks found that business profits rose by 30% among UK-listed firms, driven by just 11% of firms that made super-profits based on their ability to push through stellar price increases – often dubbed greedflation.Excessive profits were even larger in the US, where many important sections of the economy are dominated by a few powerful companies.Gosh. Researchers said the energy companies ExxonMobil and Shell, mining firms Glencore and Rio Tinto, and food and commodities businesses Kraft Heinz, Archer-Daniels-Midland and Bunge all saw their profits far outpace inflation in the aftermath of Russia's invasion of Ukraine."Because energy and food prices feed so significantly into costs across all sectors of the wider economy, this exacerbated the initial price shock – contributing to inflation peaking higher and lasting longer than had there been less market power," the report said.Ah. In fact, Snigger, Ahahahaha and even LOL in that non-Call Me Dave sense.The claim is that commodities prices (those raw foods like grains etc, oils, metals) went up more than inflation thereby boosting the profits of their producers. This must therefore be evidence of that market power to push up prices and so cause that excess inflation. We do agree that's what they're saying? Yes? Excellent - now, what's the definition of a commodity? "A commodity is a basic good used in commerce that is interchangeable with other goods of the same type." If it's interchangeable it's substitutable. That is, commodity producers have no market power. They have to take the market price, they cannot determine it. It's right there in the base definition of the thing we're talking about. Commodity producers take the market price.IPPR and Commonwealth have decided to use commodity margins - where there is no producer market power, by definition - as proof of producer market power. This isn't economics this is politics with counting.

Last month's G7 summit in Hiroshima and the G20 tourism meeting in Kashmir in February underscored the stark contrast between the two groups' rhetoric. While the G20 emphasised its 'one earth, one family, one future' ...