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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.

In praise of trade frictions

Are restrictions on free trade a better idea than generally thought? I ask because, despite his lauding of it, it is reported that Johnson will impose customs checks upon goods imported from the EU. This lends credence to the estimate (pdf) by The UK in a Changing Europe that Johnson’s plan might eventually cut UK GDP by over six per cent. But might this estimate miss an important mechanism and thus over-state the costs of us leaving the single market? What follows cuts against all my...

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On socially influenced preferences

Some ideas are both radical and conservative at the same time. This is a thought triggered by reading Robert Frank’s latest book, Under the Influence. “Context shapes our choices to a far greater extent than many people realize” he writes. “In virtually every domain, evidence suggests that our consumption patterns tend to mirror those of others in our social circle.” He shows that behaviours such as smoking, becoming obese, committing crime (pdf) or even how many children we have are all...

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The bias against social science

We need the social sciences, but the media does not provide them. I say this because of a recent tweet by Frances Coppola: If there is one thing we should learn from Auschwitz, it is that atrocities are committed by ordinary, nice people with the full support of other ordinary, nice people. This contains an unpleasant truth, captured by Hannah Arendt’s phrase “the banality of evil”: at least some of the perpetrators of the greatest crime in history were just very ordinary...

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We don’t want economic growth

In launching a new 50p coin to mark Brexit, Sajid Javid seems to be interpreting the role of Chancellor in the same spirit that Trigger regarded Del Boy’s request to talk about money: “I saw one of those old £5 notes the other day.” We might have hoped that his energies would be better directed towards improving the UK’s lamentable productivity performance. In fact, though, we should not snark. Mr Javid has grasped an important point not understood by leftists and economists (two groups...

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The interest rate puzzle

Simon points to the widespread (but not universal) consensus among economists that house prices are high because (pdf) interest rates are low. For me, this raises a puzzle. On the one hand, this seems not just true, but trivially true. Housing is an asset. And the price of an asset should be equal to the present value of its future cashflows: rent if you’re a landlord or the rent saved if you’re an owner-occupier. Lower interest rates raise the discounted present value of future cashflows...

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Inequality under New Labour

Zarah Sultana’s recent claim that we have suffered 40 years of Thatcherism prompted Blairites to point to a big difference between Thatcher and New Labour – that whilst inequality rose a lot under Thatcher it largely levelled off under New Labour. Measured by the Gini coefficient, this defence is correct. According to IFS data for incomes after housing costs, this coefficient rose from 0.261 to 0.374 from 1979 to 1996-97, but edged up only slightly more (to 0.405) during the New Labour...

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A case for nationalizing pensions

One of the fundamental questions in politics is: what should be done by the state, and what by the private sector? In at least one respect, I suspect that we have the mix wrong because there is a strong case for nationalizing pension provision – stronger, I suspect, than is the case for nationalizing utilities. I say so because, as I point out in the day job, retirees and those approaching retirement face enormous uncertainties if they are managing their own pension: how long will I live?...

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Great economics, bad politics

Non-economists (and quite a few trained economists too) often claim that mainstream economics is a simple-minded defence of free markets and inequality. Abhijit Banerjee and Esther Duflo’s Good Economics for Hard Times is a superb refutation of this. They argue that: It is unreasonable to expect markets to always deliver outcomes that are just, acceptable or even efficient. A big reason for this is that the economy is “sticky” and that “resources do not always flow to their...

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Two conservatisms

The death of Sir Roger Scruton reminds us of an overlooked fact, that there is a massive difference between the sort of conservatism he championed and free market economics. Scruton defined conservatism as the “instinct to hold on to what we love, to protect it from degradation and violence and to build our lives around it.” The creative destruction of the free market economy, however, often endangers what we love. It is always threatening to destroy traditional communities and...

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The strange death of libertarian England

It wasn’t just the Labour party that took a beating in last month’s general election. So too, but much less remarked, did right-libertarianism. The Tories won on policies that repudiated many of their professed beliefs: a higher minimum wage; increased public spending; and the manpower planning that is a points-based immigration policy. And the manifesto (pdf) promise to “ensure that there is a proper balance between the rights of individuals, our vital national security and effective...

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