IEA Economics Conference

A real pleasure to be able to host this conference.  A few brief notes from each of the speakers.


 

Professor Phillip Booth:

 

Economic Cycles

  1. Textbook idea of economic cycles is not accurate;
  2. 1992 – 2007 : great stability : Gordon Brown ‘we no longer have a boom and bust economy.’
  3. 3 theories of boom and bust. 1) mismanagement of monetary policy. Central bank uses the interest rate. ‘Loose’ monetary policy leads to a boom.  Rates raised to control inflation – once profitable enterprises then unable to service their debts.  The Lawson Boom – 1987 – then interest rates increased to 15%.  B of E independence possibly responsible for the stability during the noughties. 2)Labour market churn (10%) – continual frictional unemployment.  Recession caused by ‘real’ shocks such as oil, pandemic – can be positive such as tech etc.  3)Keynesian cycles – caused by lack of AD. Wages and interest rates are sticky downwards.  Solution is to increase AD.
  4. Identify the wrong cause, remedy will possibly also be wrong.
  5. “Cycles” are definitely not cycles.

 

Questions for discussion

Price controls and rationing were imposed during a war so that food and other necessities were affordable.  What should we do after the war and why?

 

There is a recession and we do not really know the cause.  Is lowering taxes less risky than increasing government spending?

 

What signs could central bankers look for that may indicate that a boom and bust is coming?


 

Professor JR Shackleton

Home working

  1. There’s nothing new about home working.
  2. Before the pandemic (2017), 13% working from home … home as office base but mostly working outside the home. Pre-pandemic a very small minority working from home.
  3. March 2021 (excluding the 15% of the workforce currently on furlough). 40% WFH. 30-49y/o 52% WFH. 16-29 only 33% – due to the nature of the jobs they do. NE35%, London 57%, Scotland 28%. Accommodation 6.6%.
  4. Workers have saved enormous sums. Mental health issues.
  5. Employers see a bigger pool of labour.
  6. Interaction over Zoom is very limited with new employees – also leads to less innovation.
  7. Productivity – increased during lockdown. Why? GDP/working hrs & working hours has fallen much faster than GDP.
  8. Employers’ and employees’ views of productivity are very different. Greater proportion of employers feel it has decreased.
  9. ‘Zoomshock’ people spend in the area to which they commute.
  10. What-if everyone who could WFH actually did? 75% in London, 22% Newcastle.
  11. If people have to travel less often to work, would they be prepared to travel further but less often? Greater accessibility to labour.  People moving out of the urban centres.  Inner cities become younger and more focused on ethnic groups.
  12. Levelling up of pay higher in the north and lower in the south.
  13. Internet shopping – changing patterns of retail.
  14. Hybrid working likely to increase.

Questions for discussion:

 

What factors make WFH more or less possible in a sector?

 

What are the implications of greater home working for places of entertainment and shopping?

 

How has home working affected you as a ‘remote learning student?’  What are the implications for schools and universities?

 


 

Chris Snowdon _ Head of Lifestyle Economics at IEA

Soda taxes and their consequences

Tackle obesity

Elasticity of demand

  1. Tax = higher price = fewer sales = few calories = less obesity = better health
  2. Retailers may absorb the tax and not pass to consumer – loss leader
  3. UK sugar tax in UK only raises price by 8p
  4. Substitution effects – cheaper supermarket, cheaper brand, black market
  5. Tax rise is passed on plus spare change – excuse to raise price
  6. Price rises do not always result in a fall in demand
  7. Discounters tended to raise price more – price rise still cheaper than traditional supermarkets
  8. Hoarding effects of tax rises
  9. People go to other countries for goods
  10. Pfizzy drinks up – people switch to substitutes -calorie consumption remains the same – unintended consequences
  11. US – individual cities have introduced their own fat taxes. Little evidence to suggest there has been a reduction in consumption
  12. Even when they work, the average reduction in calorie intake is very small
  13. Mexico – biggest per capita consumer of sugary drinks in the world
  14. UK – sugar tax – soft drinks industry levy 2018 – significant reduction but consumption of water and diet drinks was already well underway
  15. Irn Bru share price