Isn’t the level of economic knowledge here remarkable?

UK productivity is dire, and will not improve on the basis of the paltry sums to be spent on training mentioned yesterday, welcome as such pittances are. In that case growth is not going to happen, and any inflation there is arises purely from exchange rate shocks, which cannot be addressed or corrected by Bank of England action. So, to put it another way, interest rate rises should be off the Bank of England agenda for a very long time to come.

1) The idea that productivity is something determined by government spending.

2) The idea that interest rates and monetary policy do not influence the exchange rate and thus cannot influence inflation caused by the exchange rate.

It’s worth our recalling that this man is employed to teach economics in a British university.

32 thoughts on “Isn’t the level of economic knowledge here remarkable?”

  1. You have to wonder why he is so averse to interest rate rises, we are after all in a period of absurdly, maybe, damagingly low, rates. Has he over-extended himself?

  2. Heard a good analogy on productivity on R4. It’s your batting average. Britain lower than France but Britain has full employment so we’ve got numbers 9, 10, and 11 going into bat contributing to the overall score but lowering the average whereas French lower order stay in the pavillion.

  3. In fairness the fact he has not been consulted at all by McDonnell shows what a stark position he is in. Clearly a man close to retirement age, with health issues who is certainly of marginal relevance on this he big stage, at least in the next couple of years. You can understand the sense of desperation in many of these posts. You could almost feel sorry for him – almost……

  4. It’s worth our recalling that this man is employed to teach economics in a British university.

    I read David Thompson’s blog. Spud probably isn’t even in the top quartile of halfwit mentalists in higher education.

  5. Perhaps it has now finally been accepted that Vermine is off the table for the foreseeable future.

    So the solitary occupant of the unimpressive end terrace in Ely is spending his free time sat around in his pants plotting how to engineer his appointment as a future Governor of the Bank of England. Hence the increasing number of his blogs targeting the BoE and Mark Carney.

  6. Government spending can certainly improve productivity. The idea that it doesn’t was put about by Keith Joseph in the early 70’s as he attempted to knife Edward Heath in the back by saying government spending was causing inflation when in fact it was caused by the USA closing the gold window and putting up oil prices catastrophically.
    .Fortunately, his leadership bid foundered with this Edgbaston Speech in 1974 which was so loony with its eugenic argument that Our National stock is Threatened by the lower orders breeding too much that he was advised by fellow Tories to pack it in.Margaret Thatcher his protégée took over the mantle and ,more subtly, engineered the growth of the middling orders by encouraging house price inflation. So she ruined the economy perhaps for ever and protected her mentor by not reporting him to the police for (allegedly) abusing 15 year old boys at Tory Conferences.

  7. Government spending can certainly improve productivity.

    And it can reduce. However, it doesn’t _determine_ it.

    I take it that the horror that was Keith Joseph has become your chosen bolt to hammer in to every discussion until the next change of meds?

  8. Surreptitious Evil

    I was going to note no mention of LVT or ‘Money creation in the modern economy’ – did mention Thatcher though which is one of his usual bete noires.

  9. “Spud probably isn’t even in the top quartile of halfwit mentalists in higher education.”

    Indeed, MC. And my hunch is that academia will be where an Ecksian purge will occur first. The public and many academics are weary of the likes of Glynis Breakwell and of the Marxist indoctrination happening in so many courses in the humanities.

  10. Violet Elizabeth Reed, what’s with the Keith Joseph obsession?

    Where you buggered as a 15yr old or is your issue that you weren’t?

  11. MC: Spud probably isn’t even in the top quartile of halfwit mentalists in higher education.

    Il capo grasso di tutti capi grassi.

  12. DBC Reed “Margaret Thatcher…. engineered the growth of the middling orders”

    Yes, outrageous. Everyone should remain poor and working class and wearing wooden clogs so they can all doff their flat caps at you as you pass by dispensing your wise socialist words to the lucky and grateful listeners.

    Twat.

  13. Is it just me or do you the rest of you hear the theme from the Magic Roundabout when you read posts by DBC Reed?

  14. @ AndrewC

    I can see why that happens to you – you actually read DNR’s posts.

    Just because the next full moon is ten days hence, that doesn’t mean that he’s even faintly rational at the moment.

    Sadly.

  15. So it was the USA who raised the price of me. Silly me, I thought it was OPEC. It is fascinating that among all the other things DBCR doesn’t really understand – history, law, politics, economics – he cannot even do chronology. In his world, 1860 is the same as 1974. And what about his obsessions with paedophilia, his casual anti-semitism and his bizarrely antiquated class hatred! Put this together with his inability to quote accurately nor present an accurate paraphrase of anybody’s ideas – even those of people he admires – and you have a strange animal indeed.

  16. Just in case anyone takes DBCR seriously, here is what Keith Joseph actually said in his speech – compare it to DBCR’s accoiunt to see just how much common ground there is!<blockquote.Look at what has been happening. During the ‘go’ phase of the cycle we have expanded demand and government expenditure, either hoping for the best or trying to suppress inflationary symptoms by controls on prices and wages. But during the ‘stop’ phase, successive governments have acted by monetary and fiscal [end p731] measures which impinge principally on the private sector. Though, it is true, there is always talk of cutting public expenditure, it has remained almost entirely talk. Cutting public expenditure has come to mean juggling with figures, ‘cutting increased expenditure’, ie, increasing public expenditure by less than it would otherwise have been increased. When you study the expenditure figures ex post, you will see that for yourselves.
    [Footnote: The Financing of Public Expenditure, Vol I – Report, Vol II, Minutes of Evidence and Appendix, HMSO, 1975.]
    But whereas cuts in public expenditure rarely eventuate, squeezes on the private sector are ‘for real’. The interest rate is increased, bank lending is contracted, taxes are raised, other old-fashioned deflationary measures are used. The private sector is punished for the state sector's profligacy.
    So, each ‘go’ expands the state sector. Each ‘stop’ squeezes the private sector. And, as we have seen, when the squeeze comes, some enterprises go to the wall – or to the Government. The large ones go to the Government for aid. This is nothing to do with their intrinsic merits, though one can cook up an argument in favour of any decision once it is taken. It is their size hence their concentration of workers, hence their power in union and electoral and media terms, hence the Government's temptation to buy peace.

  17. “Fortunately, his leadership bid foundered with this Edgbaston Speech in 1974 which was so loony with its eugenic argument that Our National stock is Threatened by the lower orders breeding too much that he was advised by fellow Tories to pack it in”

    Perhaps he could have emigrated to the socialist paradise that was Sweden, where they continued with forcible sterilisation until the mid 70s……………..

  18. Government spending can increase *reported* productivity since GDP includes public sector wages as a proxy for value of output so increassing public sector wages increases reported GDP and hence reported productivity.
    Under Labour governments productivity *appears* to increase because raising public sector wages faster than inflation increases reported “real” GDP when it does nothing of the sort.
    The OBR has belatedly come to realise that productivity growth is not as high as that falsely claimed by New Labour which inflated the figures by overpaying public sector workers to satisfy their Union paymasters. In 13 years public sector wages rose to be over 20% (adjusted for all the appropriate factors analyses by ONS *and pensions*) too high relative to the private sector which inflated *reported* productivity growth by more than the 0.5% pa cut in the OBR forecast.

  19. @ Diogenes
    Thanks – helpful.
    I didn’t ignore you, just thought it might be worth dealing with DBCR’s firsat fallcy.

  20. “Heard a good analogy on productivity on R4. It’s your batting average. Britain lower than France but Britain has full employment so we’ve got numbers 9, 10, and 11 going into bat contributing to the overall score but lowering the average whereas French lower order stay in the pavillion.”

    I’ve never understood why productivity figures are quoted per worker in work, not per worker available for work, whether working or not, for precisely the reason you give. Plus of course the ludicrous situation regarding State employees, which have no calculation to work out what their actual output is, just their wage input is taken to be equal to their output.

  21. Britain has (nearly) full employment and also low real wages. So there is no incentive to increase productivity (by investing in machines, for example), because it’s cheaper just to take on one more underpaid E European to do the extra work. Raise the minimum wage a bit and see productivity soar, as the less productive workers get laid off…

    (Also, of course, productivity is lowered by the ever-increasing demands from the State for more boxes to be ticked, forms to be filled out, equality policies to be complied with, etc etc)

  22. If productivity is output divided by input, surely raising wages – a component of input – reduces productivity.

  23. @ DBS Reed
    Keith Joseph did not say anything like that. He said that *in one particular case* it was in the interests of a girl with a very low IQ that she should be sterlised to protect from multiple unwanted pregnancies as she was liableto bev taken advantage of by selfish males.
    Eugenics is a left-wing creed espoused by the Fabian society, and others, who believed that the human race could improve itself.

  24. @jgh:
    That’s just the silly thing – productivity isn’t output divided by input; it’s output divided by hours worked. Which seems to me to be quite uninteresting, except perhaps for the people doing the work…

  25. “UK: lower rises in productivity”: Why? – A question we can answer, but BBC, C4, MSM & Gov’t evades.

    .
    Gov’t should have not be meddling in Productivity or Industrial Strategy.

  26. Productivity as measured by the owner/manager of a factory – how many widgets did we produce today for how many man-hours (or, if you prefer, how much cost in wages)? – is an important and useful statistic. International comparisons of ‘productivity’ as measured by economists is little to do with this, being heavily influenced by currency fluctuations, public sector employees, etc etc.

  27. I hear that average wages may be lower in relative terms in 2030 than in 2008.

    Rather then shrieking and wailing like the Left that this is proof positive of the End of Days and the coming of the apocalypse, my response is simple advice; Don’t be average.

  28. AGN: Thanks, I’ve learned something. Coming from a maths/engineering background, it seemed obvious to me that productivity=output/input. How much tritium can I get from this lump of rock and this lump of electricity? I didn’t realise it was actually defined differently.

    So, changing wages, changing materials costs, has zero impact on productivity. Only changing hours worked. So, put everybody on half-day work, double the number of people employed, has no change in productivity but doubles employment. Bingo! Rinse and repeat, 100% employment.

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