So, the economics correspondent of the Observer and Guardian looks at the Nobel Prize just awarded for economics (and I would note, just in passing, that the work for which the prize was awarded is entirely consistent with Richard Layard\’s work on the same subject at the same university. It is absolutely the sort of stuff which has underlied Welfare to Work, the New Deal for the unemployed, welfare reform in the US and so on).
The economics correspondent for the Observer and Guardian then decides that because, while it\’s very good science, while it describes the real world very well and is, in fact, you know, true, we can\’t do it because, well, the implications are icky.
Pissarides has worked hard informing the European Union on how to free up labour markets with a mix of benefit cuts, tax incentives and a bonfire of restrictive regulations.
As his boss at the LSE, John Van Reenen, said: \”He has shown how labour market regulations, entry barriers to setting up new service firms, tax and welfare policies affect differences in employment across the world.\”
Pissarides argued for more flexible labour rules to be included in the Lisbon Agenda on job creation and won.
Van Reenan said they were based on \”the right economic principles but the main barriers to implementing them was lack of political will\”.
These \”right economic principles\” were ditched because they hurt ordinary voters.
There is merit in examining in detail how markets work, but there is a political game here that undermines the labour market protections built into continental rules in order to force workers to take lower-paid work when they lose their job.
Well, yes, you see, while the economists are right and correct, we really shouldn\’t do that anyway. Far better, in Observer and Guardian world, to have the job protections, the high benefits and the high unemployment.