The chancellor intends that from 2013 household benefit payment will be capped at around the median earned income after tax and national insurance for working families – estimated at about £500 a week.

That's from the UK and I was surprised to see that benefits could run so high.  Keep your eyes on this story: the UK is the first Western country in recent memory to attempt a comprehensive overhaul of its welfare state.  The UK does a lot of things first (e.g., decline, revitalization) because its parliamentary system allows for relatively rapid and decisive legislative action.

I see a few prime candidates:

1. Richard Thaler joint with Robert Schiller.  

2. Martin Weitzman and William Nordhaus, for their work on environmental economics.

3. Three prominent econometricians of your choice, bundled.

4. Jean Tirole, possibly bundled with Oliver Hart and other game theorists/principle agent theorists.  But last year the prize was in a similar field so the chances here have gone down for the time being.

5. Doug Diamond, bundled with another theorist or two of financial intermediation, such as John Geanakopolos.  Bernanke probably has to wait, although that may militate against the entire idea of such a prize right now.

6. Dale Jorgenson plus ???? (Baumol?) for a productivity prize.

I see #1 or #2 as most likely, with Al Roth and Ernst Fehr also in the running.  Sadly, it seems it is too late for the deserving Tullock.

In general I think Robert Barro has a good chance but I don't see him being picked so close to a financial crisis; the pick would be seen as an endorsement of Barro's negative attitude toward fiscal stimulus and I don't expect that from the Swedes.  The financial crisis is a problem for Fama especially, though he is arguably the most deserving of the non-recipients.  Paul Romer is another likely winner, although they may wait until rates of growth pick up in the Western world.  He is still young.  The Thomson-Reuters picks seem too young and for Alesina the political timing probably is not right for the same reasons as Barro.

Here is a blog post on the betting odds for the literature prize; NgŠ©gÄ© wa Thiong'o is rising on the list.  Not long ago the absolute favorite was Tomas Tranströmer, who perhaps should start his own line of toys or have his name put on a school of engineering.

Iain Duncan Smith has got the go ahead for his “revolutionary” plan to transform the UK’s welfare system, David Cameron, the Conservative party leader, has confirmed.

Under it a clutch of out-of-work and in work benefits, including income support, jobseeker’s allowance, disability and housing benefits will be combined in to a single universal credit.

A single means-test will be applied to ensure that “it will be worth it for everyone to work, wherever they are in the income scale, whatever benefits they receive. It is truly revolutionary,” Mr Cameron told the Sunday Telegraph.

There is more here (possibly gated) and also here and on scrapping the child benefit for high earners, here.   In some ways this is a move towards Milton Friedman's guaranteed annual income proposal.

The details remain open, but strict means-testing will be applied to the single bundled transfer payment.  This will lower the net benefit for people who can earn money, but who earn money with pain or otherwise at high cost.  In relative terms, it will help people who have a single reason why they cannot earn or work, and hurt people who have multiple reasons why they cannot earn or work.  Under the current system, people with multiple "burdens" (e.g., jobless, child, disability, etc.) can claim benefits from multiple distinct programs (though there is a scaling back of some benefits as total benefits income rises).  You can think of the new reform as a lower net subsidy for "comorbidity."

The new reform seems to bundle two changes: 1. a greater emphasis on means-testing and less measurement and subsidization of "conditions," and 2. more will be done on a sliding scale and less will be done using discrete notches, based on definitions of conditions.  Furthermore there seems to be 3. means-testing brings higher implicit marginal tax rates, but this is to some extent offset by lower net benefits.

Here is Scott Sumner:

Master of None, Just to be clear, I am not one of those monetarists who argues that you should expect to find a correlation between current movements in M, however defined, and future movements in AD. Indeed if you did find this sort of correlation, it would suggest extraordinary incompetence on the part of the Fed. If they are inflation targeting, there should be no correlation between M and P. And yet M would still be causing P.

These studies don't seem to incorporate recent advances in monetary theory, such as the Woodford model where current movements of AD are caused by changes in the future expected path of monetary policy. It's almost impossible to pick that up with Granger causality.

I agree with the logic of Scott's point, but I might interpet it differently than he does.  I would file this one under "Good macroeconomic knowledge is hard to come by."

What does anyone keep his or her money, in any sizable amount, in an Irish bank when you can have a euro-denominated account in a German or English bank?  Admittedly the interest rate on Irish deposits may be higher, but that has to be matched by a comparable rate of return on bank assets, which right now doesn't seem possible for Ireland.  (One fear I have is simply that it isn't and that Irish banks are falling more deeply under.)  No matter what bailout is promised, at the end of the day your "euro" might no longer be a true euro.

Yet once deposits flee Irish banks in large enough numbers, the Irish government has to suspend convertibility into the euro or in other words restrict capital movements, whether that is legal or not under EU law.  And then suddenly Ireland has a new currency, whether they admit it or not.

There is also a contagion effect.  Let's say that Portugal, Spain, Ireland, and Greece are the weak members of the eurozone.  A pending bank run in any one of these countries could trigger a convertibility suspension in the others.

Do you think that all of these countries have a strong enough (or maybe I should say "weak enough"?) political economy to impose ongoing cuts in living standards on their voters, to pay back their debts in full?  These countries not only have to do the hard work behind the payback, but they have to convince investors and depositors in advance that they will follow through consistently.

That's why I don't think the current configuration of the eurozone will last.  A collapse would require only one weak link in the chain.

Right now I would not keep my money in any Irish bank, but presumably some of the people in Ireland remain loyal to their institutions.  It's odd how the eurozone is premised on a cosmopolitan Europe, but right now it is hanging by the thread of some very provincial preferences.