The consequences of ignoring the evidence [updated]

[this post was updated at 9pm on 29/6/2012 to respond to Sam Freedman (DFE)]


In justifying the decision to abolish the Educational Maintenance Allowance (EMA), the government argued repeatedly that the decision was justified by the evidence; in particular, that  EMA was ineffective in increasing educational participation among young people. For example, the Minister for Further Education, in November 2010, said: 

"we have focused on the evaluation evidence and other research which indicates that EMA does not effectively target those young people who need financial support to enable them to participate in learning.  It will be replaced by a scheme that does."

A manifesto for economic sense

The Manifesto for Economic Sense, authored by Paul Krugman and Richard Layard, has now been signed by a number of distinguished economists, including (but not limited to) the following:  


Alan Manning - London School of Economics
Andrew Graham - Oxford University
Charles Wyplosz - The Graduate Institute, Geneva
Chris Pissarides - London School of Economics and Political Science
Christopher Allsopp - Director, Oxford Insitute for Energy Studies, Oxford
Colin Thain - University of Birmingham, UK
David Blanchflower - Dartmouth College
David Soskice - University of Oxford
Eric van Wincoop - University of Virginia
Gary Mongiovi - St Johns University, New York
Geoffrey M. Hodgson - Professor, University of Hertfordshire, UKJ. 
Bradford DeLong - U.C. Berkeley
Jeffrey Frankel - Harvard University
Jeremy Hardie - LSE Centre for Philosophy of Natural and Social Science
John Van Reenen - Centre for Economic Performance, LSE
Justin Wolfers - Princeton University
Olaf Storbeck - Handelsblatt - Germanys Business and Financial Daily
Oriana Bandiera - London School of Economics
P.E.Hart - Emeritus Professor of Economics,University of Reading
Paul Anand - Open University/ HERC Oxford University
Paul Gregg - Professor, Dept of Social and Policy Sciences, University of Bath
Paul Krugman - Princeton University
Peter E. Earl - University of Queensland
Peter J. Hammond - University of Warwick
Philip Arestis - University of Cambridge
Philippe Martin - sciences po (paris)
Raquel Fernandez - NYU
Richard Jackman - London School of Economics
Richard Layard - LSE Centre for Economic Performance
Rick van der Ploeg - University of Oxford
Robert A. Feldman - IMF and Adjunct Professor Georgetown U. (retired)
Robert Skidelsky - Wawick University
Simon Wren-Lewis - Oxford University
Wendy Carlin - UCL
William Brown - University of Cambridge

Macroeconomics: what is it good for? [a response to Diane Coyle]

Diane Coyle is not just one of the UK's most eminent "public intellectuals", but also simply one of the most impressive people I know; how she manages to run her own economic consultancy, serve as Vice-Chair of the BBC Trust and as a member of the Migration Advisory Committee, write a book every year or two and tweet constantly is completely beyond me.  So I take it very seriously indeed when she disagrees with me, as she did (semi-) publicly in this blog last week.  I promised a response, and here it is. [Warning: longish,  and occasionally nerdy.]

Why Ed Miliband shouldn't apologise for making the right decision on Eastern European migration

[This is slightly updated version of an article that appeared first last September in the Independent here. For a discussion of some other immigration related issues, see here (on immigration and labour markets more broadly), here (immigrants and schools) and here (immigrants, public services and benefits)]

It appears to have become conventional wisdom in the Westminster village that the previous Labour government was wrong to give immediate access to the UK labour market to citizens of the new Member States of East and Central Europe that joined in 2004. The argument is that the decision was based on flawed analysis, in particular misleading forecasts of the numbers who were likely to come; and that influx of new workers from those countries damaged the employment prospects of British workers, especially the young and low-skilled.

After two wasted years, the G20 pivots back towards fiscal sanity

The G-20 has come (almost)  full circle.  In April 2009 in London, the communique set out leaders' commitment to a massive coordinated fiscal stimulus:

We are undertaking an unprecedented and concerted fiscal expansion, which will save or create millions of jobs which would otherwise have been destroyed, and that will, by the end of next year, amount to $5 trillion, raise output by 4 per cent, and accelerate the transition to a green economy. We are committed to deliver the scale of sustained fiscal effort necessary to restore growth.

While the degree of coordination was somewhat exaggerated,  there was a genuine collective determination to do what was necessary to ensure the financial crisis did not become a prolonged depression.

The Chancellor accepts the logic of more government-financed investment

My thoughts on the bank lending measures announced by the Chancellor and Governor yesterday are well reflected here.   But I wanted to focus on one particular part of the Chancellor's Mansion House speech that has got less attention.  The Chancellor argued:

"Credit is not the only area where we can use the global confidence in our balance sheet to boost private sector growth.  We are already taking action to support new house-building and infrastructure investment through government guarantees.  In the next month we will set out how we can do much more."

DWP analysis shows mandatory work activity is largely ineffective. Government is therefore extending it..

The Department for Work and Pensions today published an impact assessment of the Mandatory Work Activity (MWA) programme.  The analysis compares participants on the programme with "comparable" (as determined by sophisticated statistical techniques) non-participants.  Briefly, what the analysis shows is that the programme as currently structured is not working. It has no impact on employment; it leads to a small and transitory reduction in benefit receipt; and worst of all, it may even lead to those on the programme moving from Jobseekers' Allowance to Employment and Support Allowance.  

The Government continues to abuse the data on "troubled families"

The Independent on Sunday today says that "the Government is to call for an end to what it describes as an "it's not my fault" culture of excuses, which has allowed 120,000 "troubled families" to avoid taking responsibility for their own lives." Eric Pickles is quoted as saying the programme will be "more forceful in language, a little less understanding". He added: "Sometimes we've run away from categorising, stigmatising, laying blame."

Looking at Winter Fuel Payments without looking at the basic pension has no logic, either economic or moral

[This article appeared in the Independent on 10 June 2012]


The case for withdrawing the Winter Fuel Payment (and free bus passes) from better-off pensioners appears to have united all parts of the political and intellectual spectrum, from the Sun's argument that we should "stop wasting money on rich pensioners who don't need it" to the Independent's complaint that  "hundreds of thousands of very well-off people of advanced years who are being subsidised out of general taxation." It is supported by respectable centrist think-tanks such as the Social Market Foundation and CentreForum.  Indeed, is widely accepted that the only block to removing this absurd and wasteful subsidy to rich oldies is political - the Prime Minister's reluctance to renege on an explicit pre-election pledge, incorporated into the Coalition Agreement, particularly after the Budget fiasco over the "granny tax".

A welcome return to common sense: now for delivery

Two weeks ago, I wrote this:

When I'm asked in interview or articles to sum up concisely why I think the government should change course on fiscal policy, I usually say something like this:

"with long-term government borrowing as cheap as in living memory, with unemployed workers and plenty of spare capacity and with the UK suffering from both creaking infrastructure and a chronic lack of housing supply, now is the time for government to borrow and invest.  This is not just basic macroeconomics, it is common sense. "

From today's Independent:  

A senior government source told The Independent:

"While a lot of families are struggling and have no disposable income, there are others who are quite cash rich but have nowhere secure to put their money where they can be guaranteed a decent return. Because interest rates are as low as they are, there is the potential to tap into this money and get it invested in infrastructure which will have a dramatic effect on Britain's long-term growth."  

The benefits of investing in infrastructure were twofold, the source said.

"Not only will it provide a welcome kick-start to the economy at a time when growth is sluggish, but infrastructure improvement will also help Britain's long-term competitiveness and encourage investment from overseas. In that way it is a win-win situation."

There is no meaningful difference here: the argument about the economics of whether we need more government borrowing (on or off balance sheet) to increase demand and investment spending is over.  The issue for the government now is delivery and implementation: can they actually do it, quickly enough and on a scale big enough to make a difference?  Too much time has been wasted already.