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Have a great Christmas and we’ll be back in the New Year. If you’re feeling starved of economics over the next ten days The Atlantic has a selection of beautiful Christmas cards to send to your loved ones:
If you need something a little more stimulating then you can catch up on some of the debates you missed on the blogs over the past week. Read more
This post draws upon a blog I wrote for The Reformer.
A few days ago I wrote about the lessons that can be drawn from the recent history of the UK’s fiscal rules. This post measures the Government’s new Charter for Fiscal Responsibility against them. The Charter sets out the Government’s fiscal rule and requires the Office for Budget Responsibility (OBR) to assess Budgets against it. The new Charter lightly updates the previous version in two ways:
Now compare against the lessons from history.
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It’s taken me a month to read it but Deirdre McCloskey’s essay on Piketty’s Capital is just as persuasive as you’d expect. Print it and read it with your family over Christmas!
The review doesn’t break any new ground but it is eloquent and engaging. Her central themes are: Read more
Earlier this week the UK Government announced its new fiscal rule, which defines the fiscal envelope. For those of you who aren’t British, the deficit exceeded 10% of GDP during the recession and fiscal sustainability has become an important political issue, even for people who aren’t econ junkies! Unfortunately, this new rule is unlikely to encourage the sort of sustainability that the Government is hoping for. To understand why, I’m going to write a short series of posts on fiscal rules. This first post will briefly review the history of fiscal rules in the UK. For people who love technical details, this paper by Simon Wren-Lewis and Jonathan Portes is a great review and I’ll be coming back to it later.
A fiscal rule is simply a set of objectives that guide and constrain the Government as it makes policy. The rule usually comprises targets for debt and the deficit, with many variations in the details. Rules were introduced to the UK in 1997 by the then-Chancellor, Gordon Brown. Since then they have had a rocky history, as the chart shows:
I’m sure you’ve all noticed that, with the exception of Patrick’s great post on productivity yesterday, it’s been a bit quiet around here lately. Matt’s busy working two jobs in addition to writing a PhD, agnitio has decided that a house and family are more important than blogging, and I have descended into the laziness of failing to test my ideas in public. One of those things is a really bad reason not to blog, so my Christmas present to myself is to get back in the saddle and spend at least one day a week being told off by Eric! But I want to write about some different things than I did previously.
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On the 8th of December this year Martin Weale, of the Bank of England’s Monetary Policy Committee, highlighted concerns with the UK’s recent productivity growth. In the UK total output per worker is now no higher that it was 6 years ago. The UK is not the only country experiencing weak productivity growth. Many OECD countries have experienced slower productivity growth (GDP per hour worked) from 2010 to 2013 than before the Great Recession. Indeed, of the 34 OECD countries only Australia, Chile and Spain experienced faster productivity growth from 2010 to 2013 than from 2000 to 2007.
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