Public investment: the case for an increase

The most recent edition of the Economist magazine argued that publicly funded investment in infrastructure is currently too low in a number of rich countries, including the UK and US. With interest rates on government debt continuing to run at very low levels, the case for public borrowing to fund such investment would seem clear. Continue reading

Thatcher was wrong: there is such a ‘thing’ as society and One-Nation posturing proves it

Margaret Thatcher famously said: ‘there is no such thing as society. There are individual men and women and there are families’. Her point was that she was railing against the identification of society with the state, and her negative view of the reliance of the individual on state support, whether through welfare or nationalised industries. Continue reading

The inevitability of market distortions

Free-market economists espouse an ideal: eliminate market distortions, and the economy will flourish. This makes them somewhat starry-eyed. Show me a capitalist economy, especially a successful one, without such distortions. They can occur as market ‘imperfections’ such as imperfect competition in the form of oligopoly or monopoly, or as externalities such as the costs of pollution. Continue reading

Musings on thought processes: do we start or finish with our conclusions?

I sometimes wonder how the thought processes of economists and other social scientists (although this could apply to any kind of thinking) proceed from beginning to their outcome or conclusion. Do we start at the finish line and then work out how to get there, making adjustments to the conclusions along the way if necessary, or do we simply run with our analysis from logical beginning to end? Continue reading

Marx without the socialism?

What does Karl Marx offer economics without the baggage of revolutionary socialism? The post-Keynesian economist Steve Keen, in several papers, particularly here and here, and in a chapter in his excellent book Debunking Economics, attempts to bring about the demise of Marx’s Labour Theory of Value (LTV). The latter posits that labour is the only source of value production under capitalism. Continue reading

National development goals and evolving institutions and policy

As economies grow and inevitably evolve over time, they require different sets of government policies and institutions to maintain prosperity. In his 2007 book ‘The European Economy since 1945’, Barry Eichengreen argues that Western European economies, devastated to various degrees by World War II, managed to grow fairly rapidly during what became known as the ‘Golden Age‘, broadly the 1950s and 1960s. Continue reading

Education for development: necessary but not sufficient

Few economists would dispute the argument that improving the educational level of the population is necessary for developing countries. But it is clearly not sufficient. Simply raising the supply of educated labour in a stagnating economy with poor prospects for growth and employment is likely to lead to mass emigration as potential workers seek better opportunities abroad. Continue reading

Human intelligence as the source of wealth creation

In my first economics class at school, I was taught that the three factors of production, land, labour and capital (and sometimes a fourth, entrepreneurship) were responsible for wealth creation in human society. The efficiency with which these factors are used ostensibly determines productivity, economic output and material well-being. Continue reading

Two concepts of liberty: the relevance to economics

I was reminded recently of the thinking of liberal philosopher Isaiah Berlin on liberty, first propounded in his famous lecture of 1958. Specifically he described two concepts of liberty, positive and negative freedom. The first represents freedom to achieve self-mastery, which could be promoted through the influence of collective action. The second kind of freedom represents freedom ‘from’ interference by others. Continue reading

Building the green economy

Since the recent UK budget, the government has announced plans to water down a number of ‘green’ policies. Before he was Prime Minister, David Cameron promised to lead the ‘greenest government ever’, but the realities of politics have resulted in a significant U-turn. Various governments around the world have been supporting green industries, from electric and hybrid cars, to renewable electricity generation. Is it important to do this? And can the development of these industries be simply left to the market? Continue reading