tag:blogger.com,1999:blog-17232051.post544881721622783892..comments2024-03-28T03:16:14.104-04:00Comments on Noahpinion: Department of "Huh yourself!": British demand editionNoah Smithhttp://www.blogger.com/profile/09093917601641588575noreply@blogger.comBlogger39125tag:blogger.com,1999:blog-17232051.post-43454271952021047482015-05-16T12:27:04.276-04:002015-05-16T12:27:04.276-04:00Isn't a tax hike a negative supply shock?Isn't a tax hike a negative supply shock?Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-38582543465253331282015-05-16T11:05:15.135-04:002015-05-16T11:05:15.135-04:00Noah,
I'm not sure you really addressed Andre...Noah,<br /><br />I'm not sure you really addressed Andreas Paterson's point about the VAT. The VAT increase was captured in the consumer price index. You could think of it as an upward shift in the supply curve causing a price rise across all commodities. That's really not the kind of inflation (at least measured inflation) that we associate with robust aggregate demand. So I think Brad's point stands and the fact that the measured inflation rate ticked up because of the VAT does not mean aggregate demand was okay.2slugbaitsnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-82386067970592885982015-05-16T10:06:16.249-04:002015-05-16T10:06:16.249-04:00It was DeLong who wrote that sentence, not me.It was DeLong who wrote that sentence, not me.Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-85023568593243648772015-05-15T11:44:16.953-04:002015-05-15T11:44:16.953-04:00One reason im sceptical this is the whole explanat...One reason im sceptical this is the whole explanation is that the slump in UK gdp already started (very strongly) in 2009/2010 when the Eurozone was doing slightly better better than the US. So i would suspect the initial suspect somewhere in the financial sector that blew up and maybe that has not recovered on time as well. strong housing usually seems to lead to strong growth as well so quite a gap to fill here.Makrointelligenzhttps://www.blogger.com/profile/07305478203133746792noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-37305729159884477242015-05-15T11:32:43.495-04:002015-05-15T11:32:43.495-04:00Noah--very few, if any, people on the left want to...Noah--very few, if any, people on the left want to increase the size of the state as an end in itself. A lot of people support government spending because they don't want to see their hospitals dismantled and so on, but no-one is thinking "boy I love a nice big government." That's what right wingers think left wing people think, because they themselves actually do want to shrink the state as an ideological goal.Samhttps://www.blogger.com/profile/06743143177414830201noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-23584529507679458832015-05-15T06:45:25.869-04:002015-05-15T06:45:25.869-04:00I reckon that IS the whole explanation.I reckon that IS the whole explanation.reasonhttps://www.blogger.com/profile/10958786975015285323noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-81967856157633225502015-05-14T19:27:57.906-04:002015-05-14T19:27:57.906-04:00every country in close proximity to the Eurozone h...every country in close proximity to the Eurozone has done exceptionally bad. UKs current account deficit rose from 1% to 5.5% from 2010 to 2015. The reason probably at least partially was weak demand from the Eurozone. So maybe people had to wander from high value added sector jobs in the tradable industry to lower payed jobs in the service sector? That s the best i can come up with right now, it s probably not the whole explanation though.Makrointelligenzhttps://www.blogger.com/profile/07305478203133746792noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-28717949154681653432015-05-14T12:47:44.000-04:002015-05-14T12:47:44.000-04:00Noah,
I think the real question is why inflatio...Noah, <br /><br />I think the real question is why inflation did not fall by more in the UK in 2009. Using Eurostat data, the (headline) rate of inflation fell by 5.2 percentage points in the US, 3 percentage points in Switzerland, 3 percentage points in the euro area, but by just 1.4 percentage points in the UK. Thereafter, changes in the UK's inflation rate track changes in rates of inflation on the Continent quite well (particularly for countries that also saw increases in the VAT).<br /><br />"Abrupt and sustained bursts of inflation" might just be VAT increases and tuition hikes on top of the 2009 rate of inflation of 2.2%. Since 2011 - the last year of an increase in the VAT - core inflation has been falling sharply (as we can see in your graph above!), something we would expect if there is an aggregate demand story.<br /><br />(All this isn't to say that there wasn't an adverse supply shock as well. After all, there's got to be a reason why inflation never fell as sharply as it did everywhere else.)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-28548006886898972172015-05-14T11:12:52.007-04:002015-05-14T11:12:52.007-04:00Sometimes it seems like every econ policy debate i...<i>Sometimes it seems like every econ policy debate is an argument over distribution where each side pretends it just wants to boost efficiency.</i><br /><br />Awesome. If someone ever writes a book about the econ blog wars, this should be the epigraph.o. natenoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-91504865165769824922015-05-14T02:30:07.298-04:002015-05-14T02:30:07.298-04:00>The Bank of England's inflation target is ...>The Bank of England's inflation target is 2% (whether that's a ceiling or a target is not certain). But in 2010-2013 - four years!! - UK core inflation was above that target. <br /><br />It's a symmetric target - as you note, the Bank's been happy to let inflation run well above 2% in the fairly recent past. The governor of the bank has to issue a public letter of explanation if the rate is more than 1% off target in either direction.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-15904245526747348782015-05-14T02:04:51.354-04:002015-05-14T02:04:51.354-04:00Marko: Love the 'drunk' analogy.
That e...Marko: Love the 'drunk' analogy. <br /><br />That economists are unable to grasp this state of affairs is my position as well. Although some of it is institutional bias, the rest is methodological bias: Macro is a correlative method, as opposed to micro, which is a causal method. Keynesian econ studies how much we can 'lie' to encourage economic velocity, Austrian econ studies how we can improve our truthful cooperation with one another to encourage economic velocity. You don't learn much about a correlative and descriptive model, unless you are able to express it as an operational sequence. And to some degree, while this operational description is unnecessary in the physical sciences because we do not know the first principles of the universe, is misapplied for convenient obfuscatory political reasons in to the social sciences where we *do* know the first principles of human decision making - we are each of us an exceptional instrument for testing the rationality of incentives. <br /><br />They aren't weird. They're incorrectly incentivized, and insufficiantly chastized for what technically, is using untested (uncriticized) pseudoscience for the purpose of engaging in deciet, for the purpose of achieving full employment. <br /><br />Now, once we get that this is an elaborate system of 'lying' not seen since the invention of scriptural monotheism, it's clear why the 'cult' cannot grasp reality.<br /><br />That isn't to say most economists are bad people, any more than priests were and are, bad people. It's that they bought the nonsense, found a place in the church of the academy, and practice its rituals: correlative non-causal justification of deceit for ostensibly moral ends.<br /><br />The truth is enough. Too bad that's hard to grasp.<br />Curthttps://www.blogger.com/profile/07783643071088103705noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-63533812367476666842015-05-13T21:11:42.644-04:002015-05-13T21:11:42.644-04:00And shock of shocks the efficiency of Keynesian mu...And shock of shocks the efficiency of Keynesian multipliers doesn't sell as well as the efficiency of lower taxes in the English heartland.Tom Warnerhttps://www.blogger.com/profile/11247836188106712069noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-46587467334245159452015-05-13T20:17:45.239-04:002015-05-13T20:17:45.239-04:00Yeah, I could see what you were thinking. I was ju...Yeah, I could see what you were thinking. I was just wondering whether that was enough to offset falling nominal EZ physical capital prices.pithomhttps://www.blogger.com/profile/13997094225496018110noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-52878300778387918162015-05-13T19:35:41.741-04:002015-05-13T19:35:41.741-04:00They need the money? I think Noah meant that unem...They need the money? I think Noah meant that unemployment benefits pay better than the jobs. Not sure but that would make sense.Larry Siegelhttp://www.larrysiegel.orgnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-69272811744466735442015-05-13T18:39:15.117-04:002015-05-13T18:39:15.117-04:00Good point. Then again, tax hikes elsewhere around...Good point. Then again, tax hikes elsewhere around the same time didn't seem to cause such abrupt and sustained bursts of inflation.Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-3229779551577307462015-05-13T18:35:12.158-04:002015-05-13T18:35:12.158-04:00Yeah. But then again, the long-term size of the st...Yeah. But then again, the long-term size of the state seems to be a big concern of austerity proponents and Keyensian detractors too.<br /><br />Sometimes it seems like every econ policy debate is an argument over distribution where each side pretends it just wants to boost efficiency.Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-84229516300280248552015-05-13T15:06:52.596-04:002015-05-13T15:06:52.596-04:00The last sentence is key:
"Is this about sta...The last sentence is key:<br /><br />"Is this about stabilization policy, or about the size of the British state?"<br /><br />Pretty clear that it's the latter. It would be much more productive for some people to be more up front about that. Not much to learn in the Econ 102 mode.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-39143927467566143942015-05-13T14:02:51.522-04:002015-05-13T14:02:51.522-04:00"From my point of view, why so many Britons h..."From my point of view, why so many Britons have taken so many low-pay low-productivity jobs in the past three years is a mystery." <br /><br />#outoftouchDavid Andolfattohttps://www.blogger.com/profile/12138572028306561024noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-82152935025013652912015-05-13T10:35:03.372-04:002015-05-13T10:35:03.372-04:00On inflation, it's worth noting that VAT (sale...On inflation, it's worth noting that VAT (sales tax) rose from 15% to 17.5% in early 2010 and from 17.5% to 20% a year later. In addition there was a tripling of university tuition fees. Both these changes had a fairly significant effect on the inflation figures.Andreas Patersonhttps://www.blogger.com/profile/06431120459465519240noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-61766389758273848902015-05-13T10:19:32.219-04:002015-05-13T10:19:32.219-04:00the UK had obviously a demand problem back in 2007...the UK had obviously a demand problem back in 2007 too.Krzyshttps://www.blogger.com/profile/15794655390770135247noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-7004099013967927852015-05-13T10:17:18.774-04:002015-05-13T10:17:18.774-04:00I can only say: lol. How can we say if we have a d...I can only say: lol. How can we say if we have a demand problem and a stimulus is required? We always have a demand problem and a stimulus is required. Krzyshttps://www.blogger.com/profile/15794655390770135247noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-19176043224988993412015-05-13T10:03:18.879-04:002015-05-13T10:03:18.879-04:00My thinking is that zero hour contracts distort th...My thinking is that zero hour contracts distort the figures and inflate employment numbers<br /> http://www.bbc.com/news/business-23573442<br />MBAeconhttps://www.blogger.com/profile/09697450092966118543noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-67944244150931653142015-05-13T08:31:59.450-04:002015-05-13T08:31:59.450-04:00I was more thinking along the lines of demand for ...I was more thinking along the lines of demand for things that can be made in a high volume, high productivity industries and sold euro wide being replaced with demand for things that are made on a smaller scale, less productively and sold in the local UK economy. So the UK would have enough demand but be more limited in the quality of that demand by factors outside of their control (controlled by the ECB).Benoit Essiambrehttps://www.blogger.com/profile/09777196965771952105noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-3252133206637455322015-05-13T08:01:41.589-04:002015-05-13T08:01:41.589-04:00That would be a perfect example of underemployed.That would be a perfect example of underemployed.Anonymoushttps://www.blogger.com/profile/02681526348633581059noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-4213924805180215482015-05-13T07:44:03.617-04:002015-05-13T07:44:03.617-04:00There is something unusual going on with the UK. T...There is something unusual going on with the UK. The low unemployment is good, but the deficit is still too high. Maybe higher labor productivity would generate more tax income? In most other countries, the deficit is cyclically related to the unemployment level. One would almost have to conclude that the technology level of the UK is regressing. That is the worst possible conclusion - a slightly more favorable interpretation is that the labor statistics are imprecise (effects of underemployment), or manipulated.<br />I think that the post-crisis response in the UK was also unique in so far, as that the divergence between monetary stimulus and fiscal stimulus was uniquely wide. Monetary policy was very expansionary, but fiscal policy was contractionary and continues to be so. That's probably the reason why inflation was so high in spite of fiscal contraction, there was just so much money going around and the money multiplier, which must be an especially powerful force in a finance-dominated economy, pushed inflation upward.<br />I wonder if the British dependence on finance, its quasi-monopoly on the political economy, is hollowing out the economy in a way that other skills wither away, and so the productivity declines. Though I guess, the oil price decline also plays a role in that, but the productivity puzzle already existed before that.Alexander Sebastian Schulzhttps://www.blogger.com/profile/15135338616598357444noreply@blogger.com