by Andy Beharrell and John Sloman
Reviving the lost art of letter writing
In 1997 the new Chancellor of the Exchequer, Gordon Brown, granted independence to the Bank of England as one of his first gestures. As part of that independence, the Bank is required to keep inflation within 1% of the target set by the Chancellor.
The winds of change are blowing through markets?
2006 and the start of 2007 have seen a lot of economic news – some of it quite positive. However, as is often the way with economics, the positive is counter-balanced by the negative. As economists, however, we should not be surprised at this, as we know that economic activity is characterised by trade-offs. Keynesian macroeconomic theory tells us that, in the short run, as economic growth rises, so wage pressure grows, inflation increases and our balance of trade deteriorates. This is more or less exactly what has been happening in the UK in 2006/7. In the first short article below, we look at the UK’s stronger than expected economic growth performance and the impact this has had on other macroeconomic indicators.
Productivity – a new passion for progress?
Productivity is hardly a subject to set pulses racing in many circles. However, as economists we realise how crucial it is to long-term economic success and so we tend to spend a lot of time looking at it. It is also a topic that gets a high profile in the Pre-Budget Report that the Chancellor issues each November/December. It would have to be argued though that the emphasis on productivity in the report is much higher than media attention to the issue. The headlines in the media will always focus on the higher profile issues in the Pre-Budget Report – taxation and spending rather than productivity.
A Stern warning on climate change?
One of my daughter's favourite bedtime stories is A Birthday for Frances. I like it, too, for the charming illustrations, hilarious dialogue, and instruction in cutting-edge behavioural economics.
"You would not eat Gloria's Chompo bar, would you?" asks her father, anxiously. "It is not Gloria's yet," replies Frances, but her reply is muffled because she is already chewing on Gloria's bubblegum.
Tim Harford MSN Slate 25th November 2006
Tim Harford, aka the Undercover Economist, used the above story as part of the article in MSN Slate to illustrate the “pull of the now”. That is the overwhelming desire for people to want to consume something now, even when there may be more on offer tomorrow. This is behaviour that we, as economists, may not regard as rational and yet it clearly happens everywhere. So how do we explain it?
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