By
Tim Leunig
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Published
25th September 2009 - 10:20 am
It is 1946, and Labour have just won a landslide under Clement Attlee. Harold Laski, head of Labour’s National Executive Committee, tells Attlee that he must not sign a peace treaty at Potsdam, because it is the NEC, not Attlee or the parliamentary party, which is the sovereign body of the Labour Party. Attlee replied that
You have no right whatever to speak on behalf of the Government. Foreign affairs are in the capable hands of Ernest Bevin . … a period of silence on your part would be welcome.”
Now imagine the Liberal Democrats win the 2010 election. For financial – or other – reasons the party leadership decide to defer or abolish our pledge to abolish tuition fees.
By
Tim Leunig
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Published
7th January 2009 - 11:20 am
A year ago I predicted that “oil prices will not end 2008 materially higher than they are today, and that they will be at least a third lower in 5-10 years.”
The first prediction was right, in spades – I will write again in 5 and 10 years time about the second.
The prediction provoked a short but high quality exchange in the comment column. Not everyone agreed: Nick Rouse wrote of a “primitive economist’s models that bear no resemblance to reality” while in May, Mary Matthews wrote that “Boy, did you get it so wrong”, before adding “Economists cannot predict the future and trying is a waste of time.” (NB: I respect the fact that neither of you hid behind Anonymous in your commenting).
Economists’ predictions will always have large error bounds because we are trying to predict the aggregate results of individuals’ idiosyncratic decisions. But oil producers and users need to think about likely price trends when making investment decisions. Forecasting is necessary.
Predicting that a price will fall when it is more expensive than usual, and demand and supply are elastic, is likely to be right. As petrol prices rose in the forecourts, people cut back. The number of miles driven fell a little, sales of fuel inefficient cars fell (particularly in the US, where the price rise was highest in percentage terms), and people slowed down on the motorway, quite dramatically. In addition, the prospect of getting more than $100 a barrel for stuff that had been worth much less only a year before led oil producing nations to increase supply.
Demand fell, supply rose, and today Bloomberg report that West Texas Intermediate is $48.58 and Brent is $49.23. These are lower than long term prices, since at these levels deep water exploration, and Canadian and Venezualan oil shales will not be profitable. But oil prices may not rise this year, for three reasons.
By
Tim Leunig
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Published
3rd December 2008 - 6:02 am
Following the debate for and against university fees, LSE lecturer Tim Leunig gives his take on that contest.
What are the benefits of going to university?
Going to university is profitable for individuals, on average, and for any given A-level grades. Although a handful of degrees (e.g. medicine) are particularly profitable, once you take into account A-level grades, most subjects are equally valuable (classicists earn more than media studs grads because classicists generally have better A-level grades).
Second, the “profitability” of going to university remains even as graduate numbers have increased. This tells us that demand for graduates is elastic: if …
By
Tim Leunig
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Published
29th November 2008 - 11:30 am
This week Liberal Democrat Voice is running a series of articles from Tim Leunig about the economy – how we got here and what we should do next. So far the series has covered bank bailouts, bank lending, fiscal policy, interest rates and tax policy. Today’s final part looks to the long term future.
Getting the long term picture right
In its panic and determination to “do something now” government must not forget its role in securing the long-term underpinnings of the economy. There are three areas in which Britain has serious problems.
Our education system fails …
Posted in Op-eds
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Tagged economy
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By
Tim Leunig
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Published
28th November 2008 - 11:30 am
This week Liberal Democrat Voice is running a series of articles from Tim Leunig about the economy – how we got here and what we should do next. So far the series has covered bank bailouts, bank lending, fiscal policy and interest rates.
Tax policy
The rapid deterioration in the fiscal position should worry us all. The British tax system is much more pro-cyclical than people previously thought, so that tax revenues fall dramatically even when the downturn is relatively small. (Remember, the economy has only just started to decline, so the fall in tax revenue so far …
Posted in Op-eds
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Tagged economy
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By
Tim Leunig
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Published
27th November 2008 - 11:30 am
This week Liberal Democrat Voice is running a series of articles from Tim Leunig about the economy – how we got here and what we should do next. So far the series has covered bank bailouts, bank lending and fiscal policy.
Interest rates and the Bank of England
The Bank of England’s monetary policy committee has done well. They did not rush to cut interest rates when inflation still looked to be a real threat (don’t forget that this summer saw the highest level of inflation for a decade). But as soon as there was a serious prospect of …
Posted in Op-eds
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Tagged economy
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By
Tim Leunig
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Published
26th November 2008 - 11:30 am
This week Liberal Democrat Voice is running a series of articles from Tim Leunig about the economy – how we got here and what we should do next. So far the series has covered bank bailouts and bank lending.
Fiscal policy
Much has been written about the need for a fiscal boost. The debate has been poor, with politicians and the media muddling up underfunded tax cuts, tax cuts funded by spending cuts, and tax cuts funded by rises in other taxes. The last two have no impact in this context, and will not be considered.
Underfunded tax cuts, or unfunded …
Posted in Op-eds
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Tagged economy
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By
Tim Leunig
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Published
25th November 2008 - 11:30 am
This week Liberal Democrat Voice is running a series of articles from Tim Leunig about the economy – how we got here and what we should do next. Yesterday was bank bailouts, and today…
Bank lending
It is important not to resume borrowing levels of two years ago. Indeed, we can calculate the optimal level of mortgage lending. Net lending should equal the value of new houses built, minus deposits on those houses, plus the same for houses bought by newly-formed households, and those moving to larger houses, minus regular capital repayments on the existing mortgage stock. Housebuilding rates are low …
Posted in Op-eds
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Tagged economy
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By
Tim Leunig
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Published
24th November 2008 - 11:30 am
This week Liberal Democrat Voice is running a series of articles from Tim Leunig about the economy – how we got here and what we should do next.
Bank bailouts
The economic downturn was precipitated by financial problems. This is a sign of a successful financial sector: they are there to bear risks other people do not want to bear, and are correspondingly prone to crises from time to time. Since the underlying rationale of a bank is to borrow short and lend long, the threat of bank runs will always be with us.
Banks in Britain needed government assistance to distinctive reasons. …
Posted in Op-eds
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Tagged economy
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On Monday Vince Cable gave the 2008 Institute for Fiscal Studies Annual Lecture. (The Telegraph, among others, has highlighted his speech).
This lecture is the sort of thing that Chancellors and members of the monetary policy get to give, not opposition politicians. It says something of the respect with which Vince is held by serious economists that he was invited to deliver it. And did he deliver. This was a serious speech, by a serious economist, for serious economists. If that’s you, read it in full.
For most people it was a speech about bubbles, going back to the Tulip …
OK, I admit it, I have misquoted Nick’s speech to the LibDem City Forum last month – but not by much. This was the most Euro sceptic speech by a LibDem leader in living memory.
Let me quote him precisely: “the UK is enjoying the benefit of currency flexibility and the devaluation of the pound against the Euro is giving a stimulus to manufacturing.” Doesn’t sound like someone who wants to join the single currency, does it? He acknowledges that things may change, but he doesn’t exactly go out of his way to make it sound likely: “conditions may …
Nick Clegg’s speech to the LibDem City Forum was sufficiently interesting to make the BBC news homepage. Nick acknowledged that Vince wrote it – a deserved tribute to Vince’s credibility. Nick highlighted David Laws, Chris Huhne, and Susan Kramer as evidence that we have “the strongest team of economic expertise in British politics today”. True, but why are none in economic portfolios?!
Here are some of the proposals.
The good
1. The depositor protection system doesn’t work – as the Northern Rock queues show. It needs reforming – although Nick didn’t say how.
2. Bank charges should be transparent. Yes! But …
By
Tim Leunig
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Published
1st March 2008 - 2:31 pm
In 1996 a group of Oxford academics produced a book called Options for Britain. It was intended as a thought piece for an incoming (Labour) government. 12 years on, and with less clarity as to the makeup of the next government, we are working on a new volume along the same lines. To that end I have spent the last three days in Oxford at a policy conference.
The concept of pupil premium is was widely supported in the education session. I asked the obvious question: How large must the pupil premium be for the child of Somalian immigrants …
By
Tim Leunig
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Published
9th February 2008 - 7:42 pm
Nick Clegg gave his first speech on the economy yesterday, and for those of us who call ourselves “economic liberals” it was an enjoyable occasion. There is much to discuss about the 3500 word speech but I am going to concentrate on the big picture and discuss what it means for the party as a whole. I will return to other sections in future articles.
There was considerable criticism that Nick said little about his approach to the economy during the leadership election. It is clear from his speech today that there is little if anything that separates Nick …
By
Tim Leunig
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Published
7th January 2008 - 9:53 am
This is the first of a regular series of columns from economist Tim Leuning.
January is the time for predictions. Every year economists make them. Sometimes we are right, and sometimes wrong. Some predictions, like inflation, are easy, but others are not. The oil price is not.
For fifty years, 1921-71, the oil price was fairly stable at c. $20 a barrel (in today’s terms). That was surprising: the price yo-yoed in the mid-nineteenth century and was fairly volatile 1880-1921. But neither the booming 20s nor the great depression, a world war, nor a post-war boom seemed to affect oil prices at all. Oil prices were one thing you just did not have to worry about.
Posted in Op-eds
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Tagged saudi arabia
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By
Tim Leunig
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Published
10th October 2007 - 7:45 pm
Poor old John Redwood. He is upset at the way that the BBC treats him compared with our very own Vince Cable. On his blog he complains that the BBC are nicer to Vince than to him.
But let’s be clear here. Ming has made Vince our Shadow Chancellor. David Cameron has not appointed John to any position in his cabinet.
Do we really think that the Tories want to see John Redwood on television more often, treated with the respect that he thinks he warrants?
