Tuesday , October 27 2020
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Chris Dillow: Stumbling and Mumbling

Stumbling and Mumbling is a personal blog of Chris Dillow, an economist who spent eight years with one of Japan’s largest banks. He blogs about British politics and provides thoughtful analyses on the British economy and sports.

Profits before jobs

We live in a capitalist economy. It's this trivial fact that must determine how we view the Chancellor's so-called plan for jobs. The point is that much of what he's doing is a lot like corporate welfare. For example:  - The Job Retention Bonus - £1000 to an employer for every employee who remains continuously employed to January - will hand out cash to firms that would have retained staff anyway. At the margin, it will encourage firms to retain employees insofar as it reduces the cost of...

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Limits of evidence-based policy

There is something paradoxical about Michael Gove's recent speech calling for government to be "rigorous and fearless in its evaluation of policy and projects." It's that his praise for evidence-based policy has come in a year when we've seen that policy should sometimes not be based on rigorous evidence. The best time to have imposed the lockdown was as soon as possible after a few cases had been discovered. But this would have been a hard sell. Not just the grifter media but the public...

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What football teaches us

I was a little perplexed by Tom Chivers' nice defence of his love of football. For me, any defence can only be a rationalization: my love of the game long preceded the acquisition of whatever feeble reason I possess. Nevertheless, there is a lot that Tom has left out. Albert Camus famously said that "what I know most surely about morality and the duty of man I owe to sport and learned it in the Racing Universitaire Algerios." He might have added, though, that it teaches us so much about...

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The economic base of realignment

One finding of Labour's review of its election defeat is that politics is "organised more around cultural values than an economic 'left-right' divide." This is the theme of Stephen Davies new book, The Economics and Politics of Brexit, in which he argues that we've seen a realignment of politics: "the main division in society has switched from being primarily about economics to being about culture and identity" - between cosmopolitans and nationalists. The Tories won December's general...

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Ideology vs the triple lock

Centrists want to scrap the pensions triple lock. Matthew Parris says it is now "impossible to defend" and that the old should pay the costs of the lockdown. Also in the Times, Oliver Kamm writes: People of working age in their 30s, 40s and even 50s are disadvantaged by the way our economy favours pensioners. The cause of intergenerational equity demands some redress for this imbalance. And Polly Toynbee says it is "rational and inevitable" that the triple lock should go. I...

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Lockdown threats to capital

Many economists agree that a premature lifting of the lockdown will not necessarily boost the economy greatly. As both Simon and Jo say, if people fear catching the virus they'll avoid shops and restaurants even if they are open. Which poses the question. Why, then, are so many on the right so keen to lift the lockdown? In part, the answer might lie in a useful concept of Michal Kalecki's (pdf) - their "class instinct." This tells them that a prolonged lockdown - especially combined with...

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Why so little anger?

Richard Murphy asks why there is not more anger at the government's mishandling of the pandemic and predicts increased anger as unemployment rises. I agree that people should be angry: the UK's excess deaths per million exceed those of comparable countries and the government has not done enough to protect workers. But as recent history teaches us, the fact that something should happen doesn't mean it will. There are reasons for the lack of anger. One, I suspect, is that in crises people...

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Origins of a disaster

The FT reports that Johnson " is now convinced that the economy is facing a cliff-edge unless it starts to reopen." But as Simon says: [This] is a tragic error, not just because it will lead to yet more deaths but also because it will delay any economic recovery...The idea that there is a trade-off between protecting the economy and protecting people’s health is not only wrong, it is also dangerous. But why do so many ministers and their supporters believe otherwise? I...

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Tail risk in policing

One of the key things you learn in finance - often the hard way - is that averages and majorities are not sufficient statistics. What also matters - and matters a lot - is the distribution and in particular the extreme of the distribution. Making a profit in 99 days out of 100 is little use if the hundredth day wipes you out. This tail risk comes in many forms: bonds can default; liquid assets can suddenly become illiquid; uncorrelated assets can fall together; and the rare event such as...

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Racism as emergence

Instinctively, I have solidarity with those taking a knee to protest at racism. But I have a problem here. We cannot eliminate racism merely by being nice to each other, any more than we can prevent recessions by wanting to be richer. I say this because racial disparities aren't just the product of racist attitudes - important though these are. They can also arise from human action but not human design: they are also an emergent process. Such a possibility shouldn't surprise anybody. When...

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