Autumn Statement 2013
The Chancellor gave his mid-year summary of the UK’s position to the House yesterday. He said
Mr Speaker,
Britain’s economic plan is working.
For those of you unfamiliar with the UK economy, here are some headline charts:
 |  |
 |  |
QOTD: Delong on targets and the ‘great stagnation’
Golden passage from Brad Delong. For once I’m going to put up a quote and not add my thoughts – as they’d just get in the way:
The focus on real GDP growth and its possible–or likely–slowing is a setup to panic us into making policy decisions we really do not want to make. The “great stagnation” literature as it is currently constituted seems to me at least to guide our attention in the wrong direction–and to quite possibly stampede us into making policy decisions we really would not want to make if we thought more deeply and calmly. The chain of logic is that measures to reduce inequality have a cost in terms of reducing the growth rate of the economy–that the bucket of redistribution is, in the terms of Arthur Okun’s Equality and Efficiency: The Big Tradeoff, a leaky bucket–and that when growth is slower we can no longer afford to engage in redistribution. This seems to me to be the wrong way to conceptualize it: the evidence that the bucket is leaky is weak–or, rather, there are many buckets, some very leaky, some not leaky at all, some anti-leaky–and in any event whether we should tradeoff potential growth for other objectives is not something the depends on how fast growth is. Policies that make sense if underlying GDP per worker growth is 3% probably still make sense if underlying GDP per worker growth is 1%. Policies that don’t make sense if underlying GDP per worker growth is 1% probably still don’t make sense if underlying GDP per worker growth is 3%.
But my aim here is simply to lay down a marker as far as point is concerned: to enjoin you not to get stampeded into going someplace you really do not want to go.
Comparing recessions: Unemployment in New Zealand
Keeping in mind Shamubeel’s point that we need to be careful looking at aggregates, I thought it would be nice to update the graph from this post back in early-2009 – when people were talking about 11% unemployment (Note: I have moved both series across a year).
Cheers Statistics NZ.
This supports the type of story we have seen from the employment rate data, and our suggestion here that the 87-92 period was incredibly ugly for NZ. As a result, even though in GDP terms the current slowdown looks like one of the worst NZ has experienced (though not so much in RGNDI terms – given the lift in NZ’s terms of trade) overall employment and unemployment outcomes have thankfully been nowhere near as bad as in the early 1990s. I’m looking forward to all the analysis that will appear sifting through the data and working out why this is the case 
Religion and institutions
I see the Pope made some comments about capitalism and social justice, and a bunch of economists were unhappy with this (Mankiw, Sumner) – or were unhappy with the way economists viewed the Pope’s comments. Note: This piece is a good discussion.
My view is easily summarized. Meh. I grew up in a Catholic family, going to church every week and doing all the classes – and if there was anything I learnt from reading all the “social justice literature” it was that Catholicism as an institution likes to frame things as battles between “right” and “wrong” rather than actually trying to understand the subtle undertones of what is actually happening. The Pope seems like a nice guy, who is well intentioned, but he relies on “common sense” views of rising injustice – rather than looking at the facts. While this makes Catholics feel good about themselves, it is a lazy way to talk about justice and fairness – which implies that there is some truth to what he says (we should talk about these matters) but it also propagates dangerous falsehoods.
Note: If anyone is wondering, I’m not being bitter here. Growing up my church was filled with good people who were incredibly supportive, who gave me good life advice, and who were always kind – I have nothing but good feelings about any of this. But the general attitude that exists in society as a whole, that there are obvious good and evil things, is dangerously naive.
Yes, many Catholics have different value judgments than wider society – with far more redistribution desired (I will of course admit to being in this direction on a personal level). And this is cool! But I just don’t see this as a reason to employ empty rhetoric to persuade others to introduce policies that favour your value judgments, which is what they are doing.
Of course, this brings us to the actual subject of this post – religion is an institution, an institution that fills a certain role within society and the lives of an individual. When we think about ideas of ‘social capital’, religion offers us a lens on the type of community/social institutions we are talking about when thinking about this issue. This is a common idea, and with the use of a little game theory we can even state that Jesus was an early applied economist.
Global income inequality
Via Overcoming Bias I spotted this paper on global income inequality, 1970-2009. Robin points out to be careful, as this doesn’t capture non-financial inequality, and it doesn’t look at the “lifecycle” of individuals – just snapshots of income dispersion at a point in time. Of course, these missing bits are due to data limitations, the authors would have known this full well.
It shows the global static income inequality has fallen, especially over the last decade. Lovely. However, we only get a small part of the story by looking at that graph – the paper also decomposed changes in the global Gini coefficient into ‘between’, ‘within’, and ‘overlapping’ components. In fact, this decomposition was really the main purpose of the paper!
So let us talk about these things, talk about what happened with them, and see where that leaves us 
‘Fake food’ and ‘empty calories’: An assault on value?
On Thursday I was in the supermarket after a long day of reading – with a long night of reading ahead. Next to me was a deal, dark chocolate Tim Tam’s, two packets for $5. They are great with coffee and so I reached to grab them – however, then the barrage of health related stories I’ve seen at the moment came into my head.
These are empty calories, fake food, there is no nutritional value, they are not good for me. I could do with losing a couple of kgs, and my weak willpower ensures that future me will find it just that little harder to get to the size I want to be!
Then I thought, blah blah blah. Information is great, but looking solely at the cost of “empty calories” without thinking of the subjective benefit I get is as dumb as Boris Johnson presuming that maximising the GDPs is all we want. Yes there is a time inconsistency issue, but as I am aware of it, and surprisingly active at trying to deal with it, I am pretty comfortable that I can make my own choices …
In my view economists, and other forms of social informers, have a role to provide information and help describe trade-offs for the public. But lets not get on people’s back because they enjoy action that has a corresponding cost to themselves. Analysts that go too far in telling other people how to act have moved past acting in the public interest, and are starting to act more in terms of ego or an inflated sense of confidence about their own understanding [to be clear this comment is NOT pointed at anyone, it is a hypothetical - accusing anyone in NZ of this would be strawmaning them].
In this case I purchased the Tim Tams and had a few with a coffee. I spent the rest of the afternoon reading about economics and many utils were gained. I have no doubt that other people, with different preferences, would not have gained the utils in this case – but that is completely irrelevant, these are my preferences, which are revealed by my action. Not your preferences.