The UK’s new fiscal rule won’t last

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:

  1. It requires the Government to forecast a cyclically-adjusted, current account surplus within three years, rather than the previous five years.
  2. Public sector net debt should fall as a percentage of GDP in 2016-17, a year later than in the previous Charter.

Now compare against the lessons from history.
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The equation for happiness

As the world starts to move from focusing on growth to wellbeing a group of neuroscientists decided to test people’s brains to check whether ‘happiness’ occurred as predicted. The BBC reports that they found

“We can look at past decisions and outcomes and predict exactly how happy you will say you are at any point in time,” said lead author Dr Robb Rutledge from University College London.

The experiment tested decisions under uncertainty, which is a well-researched topic in economics. The best model we have at the moment derives from Kahneman and Tversky’s development of prospect theory. Read more

Politicians vs policy analysts

Jonathan Portes has an interesting post on the Department of Work and Pensions’ analysis of Mandatory Work Activity. Jonathan does a great job summarising the research and it’s fantastic to see good evaluation coming out of the Department. The political headline of the post is less positive: “DWP analysis shows mandatory work activity is largely ineffective. Government is therefore extending it…”. The implication is that, whatever the evaluation shows, the Government is committed to the policy.

Iain Duncan Smith’s welfare reforms have not been universally welcomed.

That sad state of affairs is not unusual: many studies have been unable to link bureaucrats’ cost-benefit analyses with any change in regulatory efficiency. Read more

The UK: agglomerating since forever

Agglomeration externalities are the hot thing in policy these days. For believers they’re one of the things that economists have missed by excluding geography in the past. To sceptics they’re just another excuse for the Government to justify picking winners and organising the country. I recently came across a couple of VoxEU articles that might point the way to a reasonably middle ground. Read more

Quote of the day: The debt burden, and the use of burden

I have just moved house, and while doing so I discovered a bunch of old books that my brother had loaned to me.  One of these was the Foundations of Economic Thought (1990) – a good title, so I figured I’d give it a bit of a read.

Within the book is a series of self-contained essays which mix economic history with economic ideas and methods – I am a big fan of this sort of thing.  I’ve just been reading the essay “the debt burden” by Brian Hillier and M. Teresa Lunati.  In this essay they discuss the issues I was trying to get across to a general audience in the series on tax, specifically in my last post.  In the final post I make the point that borrowing is really another form of broad “taxation”, but as when discussing different types of taxation we are asking where the burden lies.

However, the quote I’m going to pull isn’t directly about that.  It is about the use of the word burden.

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