Economics

Inflation is back

What’s at stake: After years of deflationary pressures and anaemic economic performance, inflation seems to be on the rise again, both in the US and the euro area. Does this comeback mark a return to target? Will it be sustained, and what should central banks be thinking? These are among the questions raised in the blogosphere.

Dieter Wermuth is happy […]

February 17th, 2017|Economics, Pia Hüttl|0 Comments|

Taking uninformed consumers for a ride

Let me begin with a thought experiment. Imagine you have a Platinum health plan, meaning that your insurance covers (almost) all the costs for a very large variety of treatments and diagnostic tests – in exchange, of course, for a high monthly premium. After years of paying the premium without ever needing to use medical insurance, eventually the day […]

Don’t give up on Europe as an investment destination

“Europe is uninvestable,” a fund manager declares, while carving a slice of roast lamb over dinner in Mayfair, London. “With Marine Le Pen in France, Brexit and populists all over the place, we prefer to avoid any Eurozone risk.” The other fund managers in the room nod, in silence. The case for investing in Eurozone assets has never been […]

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    How changes in the prices of milk and beef affect deforestation in Brazil

How changes in the prices of milk and beef affect deforestation in Brazil

At first glance, this may seem like a trivial question but in the context of the Brazilian Amazon, heavily deforested over the last half-a-century, understanding the links between commodity prices and deforestation is important given ever-increasing demand for beef and dairy products. Tropical forests host critical biodiversity ‘hotspots’ as well as providing a range of important ecosystem services, in […]

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    The ‘Dutch disease’ reexamined: Resource booms can benefit the wider economy

The ‘Dutch disease’ reexamined: Resource booms can benefit the wider economy

Do resource booms enhance growth in a country or lead to a ‘crowding out’ of other tradable industries, such as manufacturing? Traditional theories suggest that crowding-out effects dominate. The idea is that gains from the boom largely accrue to the profitable sectors servicing the resource industry, while the rest of the country suffers adverse effects from increased wage costs, […]

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    Work improves general happiness, but are you happy while you work?

Work improves general happiness, but are you happy while you work?

Most research on happiness relies on surveys that ask people to reflect back on and evaluate their experiences ‘these days’ or ‘nowadays’. In doing so, respondents usually attach weight to events that are related to their overall sense of wellbeing or satisfaction with their lives.

These studies find consistent evidence that paid work contributes substantially to overall life satisfaction and […]

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    The contradiction of classical liberalism and libertarianism

The contradiction of classical liberalism and libertarianism

A standard assumption in policy analyses and political debates is that classical liberal or libertarian views represent a radical alternative to a progressive or egalitarian agenda.

In the political arena, classical liberalism and libertarianism often inform the policy agenda of centre-right and far-right parties. They underpin laissez-faire policies and reject any redistributive action, including welfare state provisions and progressive taxation. […]

Brexit and its likely impact on the UK creative industry

UK Prime Minister Theresa has begun to set out her vision for Brexit. She was clear that the UK will be leaving the Single Market, but she also alluded to a possible sector-by-sector approach to trade negotiations with the EU.

Presumably this will focus on sectors of great economic relevance. The financial and automotive industries have already received much attention, […]

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    The population centres that Columbus found in 1492 persist as major cities in the Americas

The population centres that Columbus found in 1492 persist as major cities in the Americas

Does economic fortune persist in the long run? This question has been the object of intense research; while some studies find a reversal at the national level for colonised countries (Acemoglu, Johnson and Robinson 2002) others show that fortune has largely persisted for thousands of years (Comin et al. 2010; Ashraf and Galor, 2013), especially in terms of populations […]

National minimum wages improve productivity

Quite unexpectedly, George Osborne, the Chancellor of the Exchequer at the time, used his first Conservative Budget, in July 2015 to slash benefits for low-paid workers – and simultaneously forced businesses to pay them more. The British Government’s new National Living Wage became law on 1 April 2016. The wage starts at £7.20, increasing to £7.50 from April 2017, […]

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    Data on electricity demand shows a slowdown in manufacturing post-Brexit

Data on electricity demand shows a slowdown in manufacturing post-Brexit

Like many others we were frustrated about the absence of both reliable and (almost) real-time economic indicators about the true state of the economy post-Brexit. Survey data was plentifully available, but often contradicted itself, and appeared to be heavily biased towards the political leaning of the sponsor. Hence, we decided to look for a truly independent and reliable indicator, […]

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    Is financial regulation driven by ideas or by material and structural changes?

Is financial regulation driven by ideas or by material and structural changes?

Imagine a world where Milton Friedman received more encouragement in art, and less in math as a child. Young Milton might have become an artist instead of an economist – titillating the art world with absurdist depictions of “free lunches”. Without Friedman the economist, wealthy collectors would rush to buy a “Friedman” to hedge against inflation, while grumbling about […]

January 14th, 2017|Economics, Michael Lee|0 Comments|
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    Brexit is changing the scenario for private equity in the UK

Brexit is changing the scenario for private equity in the UK

Private equity (PE) firms typically raise capital to establish limited life funds of 10-14 years duration. They use these funds to acquire a portfolio of existing firms. Each portfolio firm is acquired in a transaction which combines capital from the fund with third party debt finance. The debt is secured against portfolio firms’ assets and/or future cash flows. PE […]

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    Will Trump’s strategy repatriate highly-paid manufacturing jobs?

Will Trump’s strategy repatriate highly-paid manufacturing jobs?

Trump has set out a plan to repatriate highly-paid manufacturing jobs to the US. But the idea that manufacturing jobs are better paid than service roles is a myth. Moreover, labour markets are slow to shift between sectors. An aggressive trade policy may create some jobs in manufacturing but will not be a benefit to US citizens in general.

Incoming […]

The end of austerity? Not for the most needy

Just before announcing that he was bringing austerity to an end, Chancellor Phillip Hammond introduced a substantial reduction to the benefits cap – of £25,000 per year – that the Coalition government had imposed in 2010. The benefits available to workless households – over half of which are single parent families led by women – will now be reduced […]

More public holidays would boost national wellbeing

Holidays, by Jim Lukach, under a CC-BY-2.0 licence
On average, people are happier during festive seasons like Christmas and New Year celebrations. What’s more, increasing the number of mandatory public holidays would improve a country’s overall wellbeing. These are the consensus findings of a new survey from leading researchers on wellbeing from around the world. The wellbeing research group at LSE’s […]

Is the UK’s role in the European supply chain at risk?

Image by Francois Van, under a CC0 licence
Over the past decades the UK economy has become a party to global production chains in a number of sectors. Benefiting from tremendous investment by many of the world’s major multinational corporations, the UK has become an export leader, especially for automobiles and pharmaceutical products. We ask whether the UK’s engagement in European […]

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    Brexit can have profound implications for firms on both sides of the Atlantic

Brexit can have profound implications for firms on both sides of the Atlantic

Skyscrapers, by Unsplash, under a CC0 licence
Brexit is a monumental event that is likely to have serious consequences, raising challenges while creating international business and entrepreneurship opportunities for companies around the globe. This effect is likely to be felt acutely by North America, which has historically maintained strong political, cultural and economic relationships with the UK. The June 23, […]

Historical perspectives on austerity can mislead

Business/cash, by PublicDomainPictures, under a CC0 licence
Christopher Hood and Rozana Himaz’s retrospective on UK austerity argues that the current ‘period of public spending restraint’ fits into a pattern of longer but less deep government actions. But their account contains a logical error that leads to underestimating both the severity of the present action and the damaging effects on the economy as a […]

December 17th, 2016|Economics, Geoff Tily|0 Comments|

Fear of fracking affects house prices in the UK

© DesignRaphael Ltd
The UK government has recently given its approval for exploratory drilling and hydraulic fracturing – ‘fracking’ – for shale gas at two sites in Lancashire. This follows a similar decision for North Yorkshire earlier in the year.

Some will see these approvals as landmark planning decisions marking the way to a low-cost energy future for the UK. For others, […]