Another Event!

In addition to the Al Roth lecture on February 4th (note room has changed to Vaughan Jeffreys due to demand for the event), on January 29th (Tuesday of week 4) David Smith, economics editor for the Sunday Times and blogger at economicsuk.com, will be speaking at 5pm in the Law Building Lecture Theatre 1.

As with the Al Roth event, you need to sign up for this event, so please do so quickly before space runs out!

Inflation

On Tuesday in econ101b we looked at inflation alongside unemployment for the first time. We're going to return to these later in term in more detail, but for now we thought a little about the different types of inflation (CPI, GDP deflator, producer price inflation and wage inflation), and also the theoretical concepts of demand-pull and cost-push inflation.

Simon Wren-Lewis, who I've mentioned previously, blogs today on inflation, and in particular the idea that we're about to see a 1970s style explosion in inflation.  As Simon points out, it isn't fools that are warning about this - he links up to Andrew Sentance, who until recently was on the Monetary Policymaking Committee (more later in term on what this does - suffice to say for now it does what it says on the tin).

A regularly aired concern is that because of quantitative easing (again, more later in term), which can be described in a simplification as printing money, inflation is just around the corner - once people spend all that money that's out there.

Wren-Lewis though makes an astute observation - wage inflation has been lower than price inflation, something I pointed out in the lecture yesterday - which means that people simply don't have the extra money to spend, which may then lead to inflation - what happened in the 1970s, as Wren-Lewis's graphs show.

Wages are increasing at a slower rate than the general price level, which means that we are all getting poorer in terms of what we can actually afford with our wages - which means we are unlikely to start spending more, a precursor to higher inflation (aggregate demand increasing).

Farmer and Fiscal

Continuing on the theme of interesting and useful contributions by macroeconomists writing on blogs, John Quiggin is an economist based between the US and Australia, and along with some co-bloggers organises a blog called Crooked Timber. He's also well known for a book called Zombie Economics, where he looks at ideas that we might think are way past their sell-by date yet persist.

The day before yesterday he blogged on the current state of macro with regard the effectiveness of fiscal policy (part of a series on big macroeconomic issues - well worth reading the others too). He requested views from a particular kind of macroeconomist, ones who work on what are called DSGE models (particular kinds of theoretical models at the forefront of research in macroeconomics), and he got at least two responses - one from Simon Wren-Lewis, who I flagged up yesterday, but also one from Roger Farmer.

The particular point about Roger I'd like to make is that while he is based at a US university, UCLA, he will be visiting the Bank of England in the coming year, and in fact at the end of April he'll be in Birmingham for a conference being organised by John Fender, Christoph Goertz and myself. As you'll learn from his contribution on fiscal policy, he is very good at explaining things well. He's written a number of very important contributions to theoretical macroeconomics. I'd highly recommend a read of what he has to say about fiscal policy - it'll be handy for when we get there later in term.

Borrowing

As I mentioned in today's lecture, amidst the administrative and technological chaos, this blog serves to link what we look at in the lectures to the real world. I'm not the only lecturer that does this, and so I'll regularly post interesting and useful blog posts by other economists.

Simon Wren-Lewis lectures in Oxford, and writes a blog called Mainly Macro which is a treasure trove of well written and thought out contributions. He's written yesterday on the "B word", borrowing, and it's a nice response to those, often on the political right, who oppose any kind of suggestion of borrowing.

Well worth a read.

GDP and indicators thereof

On Monday, we're going to learn about national income, the amount produced in an economy, and how we measure it - Gross Domestic Product, or GDP. GDP is only ever available with a significant lag - so currently, we have no real idea what happened in the last three months of 2012, and won't know for a few weeks yet.

Because of this, many other bits of information are often used to get some sense of what is going on.  David Smith (Economics Editor at the Sunday Times and a keen blogger), points out that the Purchasing Managers' Index (PMI) serves just that purpose, and if it is to be believed, then GDP numbers for 2012Q4 may well be disappointing (in the sense that suggest low or even negative growth).

The PMI considers the actions of those charged with making orders at private sector companies in the economy, surveying them to ask whether they believe conditions are getting better, worse or not changing. If the index falls, it suggests that the general perception amongst those active in the economy is that things are getting worse, and if it rises, it is a suggestion of growing confidence, which usually translates into growth.

More about this in the coming weeks...

Not the Treasury View...

In preparing for the lectures this coming term, I've been looking over Chapters 14 to 17 in Sloman, the textbook we use. Particularly Chapter 16 looks at the development of macroeconomics, and the role the UK Treasury, alongside John Maynard Keynes, played in this development.

It's a fascinating story that we'll think about much more in the first few weeks of term. In the meantime though, it reminded me of an excellent blog that I subscribe to the posts from, called Not the Treasury View, and is written by Jonathan Portes at the National Institute of Economic and Social Research. The name harks back to what was the Treasury view back in the time of Keynes, around the Great Depression of the 1920s and 1930s - namely to balance the budget and trust that in the long run the economy would return to equilibrium and growth.

Keynes provided the alternative view, namely that government could, and should do more than this, and actively intervene in the case of deficient demand, as it was argued was the case back then. It's argued by many (for example, see another interesting blogger, John Quiggin here on unemployment) that Keynes was the founder of macroeconomics as we know it, pointing out that the economy as a whole could experience long periods of disequilibrium, characterised by high unemployment.

I'd really recommend subscribing to the RSS feed from Not the Treasury View. You may initially think Portes to simply be a leftie hence a critic of Tory policy, yet if you dig far enough back you'll find he's critical of all government policy that flies in the face of simple economic theory and evidence. Part of the course this term is to start forming coherent analyses of government policy - you can do much worse than become an avid reader of Not the Treasury View.

Marginal Revolution University!

If not yet, I hope to encourage you whilst you study economics to become avid readers of blogs written by economists. After all, this is one of them. They are a great resource - they make available to you high profile economists in real time, as you get their reflections on every day events. This is a really important aspect of learning to think like an economist.

One really intriguing development has recently been announced by Marginal Revolution, a very popular blog - Marginal Revolution University, or MRUniversity as they seem to be dubbing it.  The blog post introducing it is here, and the website to get more information about it is www.MRUniversity.com.

They plan to offer courses freely online it appears, and in formats that are not prohibitively costly to access (e.g. data plans on mobile phone contracts).

Well worth keeping an eye on - it's always good to get as much good tuition as possible, and one thing is quite sure about this initiative is that it will provide high quality tuition.

Be Inspired!

Even if you're not a football fan or even a Man City fan, City have potentially given you a boon today - see http://www.youtube.com/watch?v=ikm52r7RlKc&feature=youtu.be.

City are making available incredibly detailed data on all football matches from last season - could make for an ideal extended essay when you reach your third year!

Sign up here: http://www.mcfc.co.uk/Home/The%20Club/MCFC%20Analytics

Results Day!

Today is the big day for many prospective econ101b students for 2012-13, so wishing you all the very best as you get your results today and digest them!  Hope to see many of you in the lecture halls of the University of Birmingham next academic year!

The Olympics

Well, I must admit I got caught up in the euphoria - I spent many moments when I ought to have been being more productive checking the latest medals for Team GB, and refreshing on the tickets website, and as an economist that leads me to think a little about the economic impact of the 30th Olympiad that have just finished here in the UK, in London to be most precise.

Can we ever measure it? Can we say that the net economic benefit was x million pounds? The BBC have tried today to enter into the debate, pointing out not just the basics (e.g. we built stadia which created jobs), but also the subtleties - how many tourists were put off coming to the UK because of the Olympics? How many Brits holidayed abroad to avoid the games? How much productivity was lost as Brits checked up on the BBC website how many golds we'd won? Did we do it more than the French, the Americans, the Irish, etc?

Then, how do we measure the "feel-good factor" which undeniably was created by the games? It was wonderful to walk through London and Hyde Park last week and experience the vibrant atmosphere, but what, if any, was the actual benefit of that? As happier people will we become more productive, have better ideas and be creative in the workplace?

Of course, a response can be that this doesn't really matter - why should we always be so bothered about the economic benefit of something like this? Of course, the bottom line is that we have all had to pay for it, one way or another, through either the tax system or in other ways, such as funds that might otherwise have been spent on local services in the regions rather than London and the games. So given we all had to pay for it, we ought to be thinking about whether it was good value or not.

Most likely, on paper, the games won't turn a profit - but that's mainly because things like the feel-good factor can't be measured. There's little doubt that while economists remain, in general, negative on the impact of such large events, the general Joe Bloggs remains unabashedly positive, and many would dearly love the next Olympics to be in London too...

GDP figures

Today saw the announcement of the first round of GDP figures, the Office for National Statistics' first attempt at working out what happened in 2012Q2, or April, May and June of this year. They base these numbers on something like a quarter of the total amount of data available for that period, and hence sometimes these numbers can be a little inaccurate.

The announcement today was that GDP fell by 0.7% in April, May and June of 2012, contributing further to the recession that began in the last three months of 2011. Overall, according to these figures, GDP is now lower than it was when the Coalition came to power. There's plenty to be sceptical about in the figures though, as David Smith points out. There's more reflection at the FT also, and following the link about hysteresis takes you to the IMF's recent prognosis on the UK - the prospects are not particularly promising.

The IMF, contrary to its previous pronouncements on the UK economy, is now recommending continued loose monetary policy and fiscal policy - calling on the Coalition to abandon its austerity drive.  Of course, the government is never going to admit it's changing to Plan B, but recent announcements regarding public spending, as Jonathan Portes points out, are a tacit acknowledgement of this.  The deficit remains eye-wateringly large, while interest rates are only low because of a lack of growth prospects rather than any confidence in the government's economic policy (despite the government's insistence to the contrary), hence little has changed since 2010 when there was no alternative to austerity...

What would Keynes do?

The philosopher John Gray has written an article on the BBC News website entitled A Point of View: What would Keynes do? It's well worth a read to get some feel for who Keynes was, and how he thought.

Gray makes an important distinction in his article, notably that what Keynes might propose if faced with today's economic environment is different to what is generally described in the press as "Keynesian economics", i.e. tax and spend policies.

The other important thing about this article is the following - it's written not by an economist but a philosopher. What is always important is not to be parochial when studying economics - others can, of course contribute and we shouldn't be so arrogant as to think we can't learn from those in other fields. However, unlike any other science, almost everyone thinks they know something about economics, and often what they think they know is fused with their political beliefs, meaning that it will be very hard, if not impossible, to reason in such a situation. It's a good practice ground to try though - helps you to think about what you know about the economy if you're forced to think quickly on your feet in a discussion with a friend who shares different political beliefs to you...

And, of course, it's great if you can challenge your own political beliefs using what you've learnt in economics. Try not to simply take the bits of economics that suit your political beliefs but instead let your beliefs be shaped as much as possible by what you learn as an economics student...

LIBOR and Fixing Rates

I doubt this story has passed anyone by; Barclays bank decided to attempt to manipulate a market through lying about the price it was paying. According to this article summarising the whole thing by Sloman, they may have succeeded. If it did, it would then have ended up giving a better impression about how "safe" the bank was at the height of the crisis, thus most likely avoiding as much of a share price fall, and as high rates to pay to borrow money from other banks (that's what the interbank market is for).

There's a lot that will come out in time about this, but the whole episode neatly fits within a module I teach each year in Birmingham called Contemporary Issues in the UK Economy.  We have a section on the financial crisis, and naturally by the time I get round to teaching it next (February 2013), I will certainly be talking about this crisis, and the likely proposed response to it.

What should be noted most importantly though is that is shows the limited information available to regulators. Surely the regulation that was already heading through parliament should have been sufficient to "prevent a repeat of the crisis ever happening again"? It won't take you an economics degree to be sceptical about that commonly expressed sentiment, but hopefully it will help you to be constructive about it.

Of course, what's being talked about is the regulation heading through parliament being amended - amended already, before it's even got through? Then we'll amend it again next time something emerges - the point is that government doesn't have all the necessary information to prevent everything happening, and hence will like this always be fighting the next war. They may legislate against some manner in which the rate was "fixed" - banks will continue to have an incentive to do this, and will just find other ways to do that.

Probably the most important point though is the general direction of response - our response has been "let's regulate more!", because the problem was "there wasn't enough regulation!". Yet nobody ever explains why the regulation pre-crisis wasn't enough, and why adding more to the mix will somehow solve the problem.

What would be a much simpler response, and probably more effective, would be to empower us as customers in a more fundamental way - offer us more choice. Allow more competition in the banking sector. Change competition policy such that we don't encourage market consolidation until there are dominant players like Barclays and RBS who can abuse their position and get away with it because there isn't any realistic alternative. Why is it that the only way a new bank could emerge from the crisis was by Virgin buying the carcass of an old one?

If we could vote with our feet (and it may require some regulation to enforce that to be allowed since we share a lot of information with our bank that other banks haven't got to make us better more suitable offers), then we'd walk away from banks like Barclays who do things like they've been found to be doing. Then the incentive for Barclays not to do illegal, immoral things is that they will suffer on the bottom line - the most important thing for them.

Ideology or economics?

I blogged yesterday about a post on Liberal Conspiracy (LC) which I decried for being too ideologically motivated rather than motivated by scientific investigation. As I said, I file LC under politics in my Google Reader. However, I do file Marginal Revolution (MR) under economics - along with a number of other blogs written by economists of a libertarian persuasion - however, I'm wondering whether I should reconsider.

There's a constant, ongoing debate between libertarian economists, and non-libertarians of various stripes; the latest instalment is summarised in the post that has motivated this post by Tyler Cowen at MR. It appears a few non-libertarians have challenged libertarians on a point I consistently think about libertarians - they are a little loose in how strictly they apply the need for liberty amongst all members of society, ignoring the cases where the price mechanism will not operate to yield liberty to all but will in fact restrict liberties to many.

While I don't agree with everything the critics (at Crooked Timber, another interesting if politically slanted blog) have to say, I find Cowen's response striking. He basically says two things:

1) Show me some data.
2) Employees behave just as badly as employers so let's shine the light on them.

I find response (1) a little weak - it's the kind of response one says when one can't think of a good solid, analytical response. I mean, for sure, it would be great if we had empirical studies on all these things, yet it hasn't stopped economists debating for years and years and years. The appeal to empirical work is all the more ironic because many of the more staunch libertarians tend to ignore all economic data and attempts to use it as useless since the world is so complicated and it's hard to control for all possible causal factors involved.

There is probably a 1(b) here too - Tyler says essentially "are you sure workers want this, or is it just the bloggers that want it?". For me this has to count as the most stupid question ever. If you approach workers and say "would you like some more rights and representation?", I don't think that many will say "no thanks!".

But on to (2), this is the biggest point of contention for me. Apparently, two wrongs make a right, to use common parlance. But more importantly from the perspective of being an economist, the question is the following: Which way is the causality? For sure, workers will steal in the workplace if they can get away with it, and for sure, firms will try and shirk their responsibilities to their workers also, if they can get away with it.

But why doesn't Tyler consider the idea it might be that workers steal from work because they feel they get ripped off daily, paid way beneath what they are worth to the company, etc?  Could it not be the case that a firm that makes all its workers feel like they are part of the company, valued, paid their worth, included in decision making etc., sees less workplace theft?

The causality could, of course, be entirely the other way - it could be that workers are just thieves, and hence firms respond by being nasty to their workers. I'd love to see an empirical study on this!

But why doesn't Tyler explore this? My sense is it's because of the libertarian leanings in him, rather than anything else. The economist should be asking this question, and an economist of Tyler's calibre could analyse these things infinitely better than I ever could, and hence should be asking this question instead of mouthing off in the way he does - invoking personal experience, another common trait of the libertarian.

So I'd file this post from Marginal Revolution, often a great economics blog, more under the "politics/ideology" section of my Google Reader, if I could.

Read with Scepticism

If you're studying economics, one important aspect of your education will be to enable you to be discerning. It's particularly important I think in economics because the subject, especially at the macroeconomics level, is so infused with politics.

In my Google Reader, I have a blog called Liberal Conspiracy listed under politics and not economics, and this post about Tony Blair, not to mention this one about the supposed banking commission to be set up in the light of the Barclays fiasco, reveal precisely why.

On the Blair post, the writer criticises Blair for saying we should not “deny the financial sector a say in putting it [the financial system] right”.


The writer suffers from something many suffer from when they aren't students of economics, notably that of an over-confidence in their own ability and information.


How, exactly, does the reader know sufficient amounts about the financial sector such that he is able to tell what the right level of regulation is without even consulting those in the financial sector?


For example, why would it be so horrendous if we said to the financial sector "we plan on these regulations; what are the easy ways in which you would get around them?", in order to get some idea how good/bad any planned regulations might be?


Too many in government, and advising government, believe government has the kinds of information required to step in an regulate a market appropriately. This, generally, is not the case. Many economic studies, including some of my own, have established that information is disaggregated amongst market participants, those actually trading, buying and selling. To simply disregard all of this information is patently absurd and self-defeating - it just means the regulations that are set up will be totally ineffective at best, and harmful to the economy at worst.


And of course, this links us on to the second post, a supposed scoop on Andrew Tyrie, the Tory MP heading up the planned banking inquiry.  Shock, horror, he isn't a big fan of regulation, apparently. It's a bit of a "is the Pope really Catholic?" moment, really.


But moreover, the kinds of quotes in the article from Tyrie are actually simply questions that ought to be asked. We should not be willing to simply accept, as it seems the author of the post (Sunny Hundal) is, that regulation is always and everywhere a good thing. We should be inquisitive, asking why it is necessary and when. This is what economists do, and if as you read this, you're inclined to side with Sunny, and if you also so happen to be entering your second year next year at Birmingham, let me encourage you to take econ217.


In that module, we spend a lot of time looking at things like banking, the financial crisis, and more generally government intervention in markets. I hope to see some of you there!

When is competition a bad thing?

Over the years, various aspects of the UK economy have been privatised - taken out of the hands of the government, and their operations have been handed to private operators. The widespread perception of this is negative - it leads to higher prices and poorer service. Yet economists are unremittingly positive about competition - which kind of requires privatisation since if a government is the only provider of a service, by definition there's no competition. Why the contradiction?

One area in which it's generally perceived competition has been bad is in education - to be specific, in examining bodies, the companies that set exam papers at GCSE (and A-) level. Today apparently the government will announce an overhaul of this system. Apparently there's been a "race to the bottom" with having exam bodies competing with each other, and this should thus be changed, and the resulting system will have just one body providing exams - removing competition.

But why has competition between examining bodies led to this supposed race to the bottom, and reduction in standards that everyone believes has happened? What is distinct about the market for exams (particularly at GCSE - it seems A-levels are less susceptible to this criticism) that means competition is not helpful? Why do exam providers feel they have to make exams easier and easier, and provide greater proportions of A-Cs in order to look good?

What is acting in the market to prevent firms competing on how well their exams assess the ability levels of students (essentially the purpose of examinations)? Are there restrictions on new entrants to the market? Given the current climate, it strikes me if new bodies could set up to provide exams, a body that set up proposing to provide not the highest possible proportion of A-Cs but the most accurate assessments of students, that would be popular, at least amongst the popular press? I suspect there are many regulatory hurdles a new entrant would have to jump through - get certified by many bodies, checked over by other regulatory entities and so on. I doubt it's particularly easy to set up.

My sense is the race to the bottom is not caused by competition amongst exam bodies, but more the clamour of schools to be able to show an ever increasing percentage of A-C GCSEs, meaning that they want the exam bodies that provides them with that. And is that clamour just because of competition - competition to attract the best students?

Fundamentally, is there something wrong with competition in education? Again, I wonder whether this need actually be the case. Can new schools open up to provide a better service than the current lot? The answer is starting to change here - free schools are an example of this. Fundamentally, markets work because they provide incentives to others to provide a better service, and clearly if a school sets up and provides a high standard of education that employers (and society at large - schools needn't just be worker producers) values, then in a marketplace it would attract custom.

Now as I finish, of course there are difficulties with markets in education - information is a tricky thing and the consumer (the student) isn't necessarily fully informed about the value of what they are consuming. Nonetheless, that doesn't mean that competition won't work. Nor does examples of failed "competition" measures that have existed over the years. As a student of economics, it's important you realise that such examples are merely observations, and rather distorted ones for the reasons outlined in this post.

Summer activity

It's summer and although not formally term time, I tend to keep posting on here regardless with hopefully interesting stuff in case former students are still tuning in, so to speak.

Of interest yesterday, alongside the injustice handed out to Ukraine by human error (and some economics - why did UEFA really think adding more scope for human error was better than goal line technology?), was inflation falling to 2.8%, its lowest level for quite a while. Importantly, firmly back within the target range.

How is that possible, given all this quantitative easing and continued budget deficits? You'll recall the former adds liquid assets to the economy in place of illiquid ones hence should see more spending. The latter also adds more money into the economy by putting unearned money in the hands of unemployed people and such, and via spending projects for example related to the Olympics.

The answer is that this extra money, for now, isn't being spent. You'll also recall the aggregate demand (AD) aggregate supply explanation for price level determination and hence inflation. If AD stays in the same place since we don't spend then we won't get inflation despite supposedly inflationary policies.

End of term - congratulations or otherwise...

Today is the last day of the academic year here in Birmingham - results day.  Well done to all of those that got the results they were hoping for, commiserations to those who didn't.

Hope to see those of you continuing students next year, and to those leaving us, all the best in the future - do keep in touch!

Eurozone Madness

The news seems ever ongoing and ever worsening from the eurozone, and perhaps more than any other subject area at the moment, attracts comments that are disingenuous - folk that are anti-EU make suggestions that they know will lead to only one thing - the break up of the eurozone and maybe even the EU.

One common suggestion is that Greece should leave the euro, and many suggest Greece would even be better off if it did.

Such statements are very simplistic readings of the situation, and I wonder if they are deliberately so because the people making them are ideologically predisposed against the euro.

Allowing countries to leave the euro would signal the end of the euro because of the precedent it would set - that countries can be forced out. When would it stop? Would even France be safe? The eurozone functioned pre-crisis very well because it was seen to be irrevocable, and credibly so. That meant an absence of speculation, something that has returned en masse now that the crisis has arrived.

Second, would Greece be better off outside? Its debt would be transferred into its new currency which would immediately depreciate, increasing the size of its debts significantly. That isn't going to help solve its problems any time soon...

Economists?

It's hard for me to know exactly what the readership of this blog is, but at least notionally it's students of econ101ab, which recently had its final examination for 2011-12. Hopefully those who sat the exam and read the blog will carry on, and those who are more casual readers of this blog will also carry on - I'll keep posting sporadically over the summer, and of course pick up again in the Autumn and Winter when econ101ab comes around again.

In the meantime I thought I'd point out a blog post which suggests that "economists tell the EU" that "austerity isn't working".

This blog post is a great example of where you, as first year undergraduates, have already surpassed the understanding of many people in the blogosphere who claim to be qualified enough to talk about the economy. Generally also of the left or right, what they exemplify is an inability to make a coherent, logical argument, and also an inability to distinguish causality from correlation.

The main reason I highlight this is that these are two common failings of many arguments put forward by well meaning folk, undergraduate students included - I'd like to encourage you in your essays as you move through your degree to try and ensure you do none of these things!

The headline says "austerity isn't working", yet no attempt is made to actually establish that fact. It's assumed - like we're having a chat over a pint in the pub. Unemployment is cited as an important factor we need to be concerned about. For sure it is, but how does the blog article, or the pamphlet it is based on, establish that unemployment is caused by austerity? It points out that unemployment is up "since 2008", as if that is the clincher. That is a correlation. We cannot run the UK economy (or the EU one for that matter) since 2008 without the two large policy measures that took place - the stimulus packages of 2008 and the austerity that followed. So it's impossible to know; how do we know the stimulus package didn't set in motion the causal events that led to the increased unemployment?

Now the intent here is not to be deconstructive. What have we learnt in econ101b about the macroeconomy, and hence unemployment? A number of things; early in the course we talked about labour demand and labour supply; we can have cyclical bouts of unemployment, caused generally because real wages don't fall far enough to clear the market, as we would have in a normal demand-supply diagram for a market.

We also learnt about aggregate demand (AD) - the total level of demand in the economy is the sum of a number of things: private consumption (C), investment (I), government spending (G) and net exports (NX). We usually jump from there and say "look, increase G and we increase AD and everything is plain sailing!".

However, we do also discuss factors that help determine, for example, investment - it's a function of business confidence (b), interest rates (r) and potentially also of government spending (either as firms invest to meet demands of government or as they are crowded out - call it g).  So I is a function of confidence, interest rates and government spending in potentially unknown ways: I=f(b,r,g).

The large logical jump the blog article makes is that increasing (or not decreasing) G will solve all the problems in our macroeconomy. Now regardless of what you feel about austerity, and I am personally not particularly keen on it, a case has to be made for why it is bad, and unfortunately the blog article cited above doesn't do that (and neither does this, for space reasons!).

You have to make a number of assumptions about investment behaviour, about consumption behaviour and about the behaviour of the rest of the world in order to arrive at the conclusion that austerity is harmful and that instead we should be stimulating the economy. I'll try and set them out in separate blog posts over the coming days. All assumptions ought to be testable, meaning that it is not inconceivable that real world data could be brought to bear on this issue - which would be a refreshing change from much of the loud voices out there at the moment.