The largest and longest unemployment gap since WWII

Our chart on the historical experience of recessions and recoveries has got a lot of attention. But it's largely descriptive.  For the current UK economic policy debate, I think this one is far more important (click to enlarge): 

Fiscal policy: what does "Keynesian" mean?

On Sunday, David Smith described me as “a former Cabinet Office economist who has taken the institute [NIESR] back to its Keynesian roots”.  Then on Wednesday, Nadhim Zahawi MP talked of “Keynesians such as [Ed Balls] and bodies such as the NIESR”. This prompted a couple of thoughts. What do they mean?  And am I, in fact, a Keynesian? 

Education, inequality and social mobility

A summary of my talk on this topic at LLAKES (the ESRC Centre for Learning and Life Chances in Knowledge Economies) is here, along with a link to my presentation slides, which consist mostly of interesting (I think) charts nicked from other people.

Recessions and recoveries: a historical perspective

[Note: this is now slightly out of date. An updated version is here.]

Following the GDP numbers published January 25, here is a further updated version of NIESR's chart showing the path of recession and recovery in various previous downturns.  The chart shows that this "depression" - defined, admittedly somewhat arbitrarily, as the time period during which output remains below its previous peak, shown as the X-axis above - is now longer than that experienced during the Great Depression, and is not likely to end any time soon. It also shows how what was initially a reasonably strong, albeit patchy, recovery stalled in the autumn of 2010; since then there has been very little growth .  

Fiscal space: what does the IMF mean?

The IMF, now under new management, is being increasingly vocal in saying that countries which can afford to do so should be slowing the pace of fiscal adjustment, and that failure to do so will damage growth.  They've used some strong language again today, saying:


"those [advanced countries] with very low interest rates or other factors that create adequate fiscal space, including some in the euro area, should reconsider the pace of near-term fiscal consolidation. Overdoing fiscal adjustment in the short term to counter cyclical revenue losses will further undercut activity, diminish popular support for adjustment, and undermine market confidence." 

David Smith finds me puzzling..[updated 24 January]

[updated to reflect David's response, below]


David Smith ties himself in all sorts of knots in yesterday's Sunday Times (£).   He quotes me as saying: “Our historically very low level of interest rates is — just as in Japan — a sign of economic failure, not success. ” David says: " I find this puzzling...We should celebrate the fact that borrowing costs are so low. "

Apparently my views reflect the fact that I've taken NIESR back to its "Keynesian roots".  But of course my view on this has absolutely nothing to do with Keynes; it simply reflects the standard neo-classical view (normally credited to Irving Fisher) that, as the Bank of England puts it in its handy beginners guide to monetary policy, "long-term interest rates are influenced by an average of current and expected future short-term rates".  

Anecdotal evidence, chocolate, Pret, and general equilibrium

I have been writing quite a lot about immigration recently - here and here.  But there’s an unfortunate tendency for dialogues on this topic (oral or in response to my columns) to go something like this:  I, or other economists who work in this area, say that the empirical evidence suggests that immigration has little or no impact on employment or unemployment overall. A respondent points to an example – they personally, or someone they know, has lost out on an employment opportunity to an immigrant. Or they note that a particular local business or sector seems to employ mostly immigrants – Pret a Manger in London is a frequent target.  We respond, saying that this is “anecdotal evidence”, sometimes (although I try not to use this phrase too much) referring to the lump of labour fallacy, and explaining again what the evidence says about overall or average impact.  The respondent then concludes, perhaps understandably, that economists live in a statistical world which has little or no connection with reality; and worse, that when confronted with reality they are not interested.

I’d like to try to explain why “anecdotal evidence”, in this specific context, is indeed irrelevant, not because it’s anecdotal, but because it is a partial rather than general equilibrium concept.  That is, by definition, it tells you only the local or partial impact of something, which may or not be offset by developments elsewhere in the economy, which – by definition – the anecdote cannot tell you anything about.