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More on Larry Summers
Read blogger Daniel Drezner on Larry Summers as President of Harvard.
Money quote: “Those dumb enough not to recognize Summers’ smarts are headed for a great fall. The next few years are going to be fun for those who write about Harvard.”
Larry Summers in The New York Times
The New York Times Magazine from today (registration required) has a good article on Larry Summers as President of Harvard. His bracing manner, and willingness to engage in frank debate, is more popular with students than with faculty. He wants a world where an ignorance of scientific knowledge is as embarrassing as ignorance of a Shakespeare play. He thinks knowledge of literature is more important than a knowledge of the latest in literary theory. He is still thinking about whether affirmative action is a good idea, he would like to see more facts. Some parts of Harvard, including some of the sciences, appear to be moving to Allston and out of Cambridge. Most of all, he is willing to make enemies to be an effective leader.
The Harvard Crimson discusses whether Larry is a secret conservative. Slate gives a useful and analytical biography. And here is a piece on how Summers likes to ask tough questions of his faculty.
Stansbury and Summers on the declining bargaining power of labor
In one of the best papers of the year, Anna Stansbury and Larry Summers present what is to me the best non-“Great Stagnation” story of what has gone wrong, and I have read many such accounts. Here is their abstract:
Rising profitability and market valuations of US businesses, sluggish wage growth and a declining labor share of income, and reduced unemployment and inflation, have defined the macroeconomic environment of the last generation. This paper offers a unified explanation for these phenomena based on reduced worker power. Using individual, industry, and state-level data, we demonstrate that measures of reduced worker power are associated with lower wage levels, higher profit shares, and reductions in measures of the NAIRU. We argue that the declining worker power hypothesis is more compelling as an explanation for observed changes than increases in firms’ market power, both because it can simultaneously explain a falling labor share and a reduced NAIRU, and because it is more directly supported by the data.
There is a good deal of critical thinking about how different macroeconomic trends fit together, and a willingness to consider disconfirming evidence, so I do recommend you read through this one.
I have five main worries about the argument:
1. Rather than labor losing bargaining power, I think of the key development as “management measuring the marginal product of labor more precisely.” Admittedly that does lower the bargaining power of the majority of workers, given the 20/80 rule, or whatever you think the proper proportions are (Stansbury and Summers themselves presumably are underpaid, but in general wage dispersion has been going up in high-skilled sectors).
A minority of highly productive workers have much more bargaining power than they did before, which doesn’t quite fit the “lower bargaining power per se” hypothesis. And under my interpretation, easier unionization may not be much of a solution, since the problem here is the actual reality of who produces what. Consistent with my view, labor’s share is not really down if you consider the super-talented labor/owners/capitalists who start their own companies. That is a return to labor as well.
2. It is a noted advantage of the Stansbury and Summers approach that is explains the now-lower natural rate of unemployment. The puzzle, I think, is to explain both lower NAIRU and the slower labor market matching observed over the post-2009 labor market recovery. Their hypothesis seems to predict a higher degree of worker desperation, and thus quicker matches, than what we actually observed.
If you think, as I do, that employers are now better aware of the diversity of worker quality, and that only ex post do they learn that quality, employers will be more careful upfront, which probably does slow down matching speeds, thus fitting the data better.
3. If you play down market power, and postulate a fall in the share of labor, you might expect investment to be robust, but measured investment clocks in as mediocre. The authors discuss this point at length on pp.45-46 and offer multiple rebuttals, but I suppose I still think the first-order effect here ought to be stronger than what we (seem to) observe.
4. If corporate profits are so high, how is this consistent with the persistently low demand postulated by Summers’s “secular stagnation” hypothesis? The paper does consider this question very directly on p.56, but I genuinely (just as a matter of grammar) do not understand the answer the authors are suggesting. Here goes:
A fair question about the labor rents hypothesis regards what it says about the secular stagnation hypothesis that one of us has put forward (Summers 2013). We believe that the shift towards more corporate income,that occurs as labor rents decline,operates to raise saving and reduce demand. The impact on investment of reduced labor power seems to us ambiguous, with lower labor costs on the one hand encouraging expanded output and on the other encouraging more labor-intensive production, as discussed in Section V.So,decreases in labor power may operate to promote the reductions in demand and rising gap between private saving and investment that are defining features of secular stagnation.
I suppose I had thought of low rates of profit as a (though not the?) defining feature of secular stagnation, but again I may not have understood this passage correctly.
5. Matt Rognlie found that the decline in labor’s share went to housing and land ownership, not capital.
In any case, here is a whole paper full of economics, go and enjoy it.
Summers on the Wealth Tax
Larry Summers is my favorite liberal economist because even while maintaining his liberal values he never stops thinking like an economist. That makes him suspect among the left but it means that he is always worth listening to. The video below with Saez, Summers and Mankiw (with Rampell moderating) is excellent throughout. I cribbed a number of points from Summers:
“I have studied last week’s twitter war very carefully and I have to say that I am 98.5% convinced by the critics that the Zucman-Saez data are substantially inaccurate and misleading.”
The arguments around political power are not persuasive. Most of what is wrong with politics is because that is what the people want (I’m filling in a bit here from comments throughout). A wealth tax does nothing about corporate lobbying and would increase the incentive to give to political organizations. If you cut wealth at the top by 30% that wouldn’t change relative political power in the slightest.
Wealth is up in large part because interest rates are down which means that permanent income hasn’t increased.
Forced savings programs like social security and unemployment insurance mean that people at the bottom need to save less and thus their wealth falls even as their welfare increases.
A wealth tax increases the incentive to consume instead of save and invest.
On employee stock ownership plans: “When you put workers in control of firms and you give them substantial control–see Israeli kibbutz’s, see Yugoslav cooperatives, see universities where faculties have a powerful voice–the one thing you do not get is expansion. You get more for the people who are already there. That does not seem to be an attractive position for progressives.”
In the Q&A Summers just goes to town on Saez when Saez claims 90% tax rates are a great American invention. “The people who were around in the Kennedy administration who were at least as progressive as you are were united in the belief that 90% tax rates were a bad idea….The number of people who paid those 90% tax rates was trivial and it wasn’t because there weren’t a lot of rich people.” Greg Mankiw, who gives a nice parable in his remarks, has to stifle a laugh as Summers lets rip.
The body language in the Q&A is very interesting.
Summers on Arrow
Larry Summers reflects on Ken Arrow with a memory that captures well the academic life. I had similar experiences watching my father, a professor of mechanical engineering, interacting with his students in our home.
My mother’s brother, the Nobel economist Kenneth Arrow, died this week at the age of 95. He was a dear man and a hero to me and many others. No one else I have ever known so embodied the scholarly life well lived.
I remember like yesterday the moment when Kenneth won the Nobel Prize in 1972. Paul Samuelson—another Nobel economist and, as it happens, also my uncle—hosted a party in his honor, to which I, then a sophomore at MIT, was invited. It was a festive if slightly nerdy occasion.
As the night wore on, Paul and Kenneth were standing in a corner discussing various theorems in mathematical economics. People started leaving. Paul’s wife was looking impatient. Kenneth’s wife, my aunt Selma, put her coat on, buttoned it and started pacing at the door. Kenneth raised something known as the maximum principle and the writings of the Russian mathematician Pontryagin. Paul began a story about the great British mathematical economist and philosopher Frank Ramsey. My ride depended on this conversation ending, so I watched alertly without understanding a word.
But I did understand this: There were two people in the room who had won Nobel Prizes. They were the two people who, after everyone else was exhausted and heading home, talked on and on into the evening about the subject they loved. I learned that night about my uncles—about their passion for ideas and about the importance and excitement of what scholars do.
Summers, Lomborg, Tabarrok, and Cowen on climate change
There was a brief symposium, here are the results:
Larry Summers
President Emeritus of Harvard University, Former Chief Economist of the World Bank
My sense is that cap and trade is not the route to the future. It did not make it politically in the US at a moment of great opportunity in 2009. And European carbon markets have been plagued by constant problems. And globally it’s even harder. My sense is that the right strategy has three major elements. First, as the G20 vowed in 2009, there needs to be a concerted phase out of fossil fuel subsidies. This would help government budgets, drive increases in economic efficiency and substantially reduce global emissions. Second, there needs to be assurance of adequate funding for all areas of basic energy research. As a practical matter my guess is the world will produce non fossil fuel power in the next 25 years at today s fossil fuel prices or it will fail with respect to global climate change. Third, there is a strong case for concerted carbon taxes to further discourage greenhouse gas emissions. But this is a follow-on step for after the elimination of fossil fuel subsidies.
Bjorn Lomborg
Director of the Copenhagen Consensus Center and adjunct professor at Copenhagen Business School
The only way to move towards a long-term reduction in emissions is if green energy becomes much cheaper. If it cost less than fossil fuels, everyone would switch, including the Chinese. This, of course, requires breakthroughs in green technologies and much more innovation.
At the Copenhagen Consensus on Climate (fixtheclimate.com), a panel of economists, including three Nobel laureates, found that the best long-term strategy to tackle global warming was to increase dramatically investment in green research and development. They suggested doing so 10-fold to $100bn a year globally. This would equal 0.2% of global GDP. Compare this to the EU’s climate policies, which cost $280 billion a year but reduce temperatures by a trivial 0.1 degrees Fahrenheit by the end of the century.
Alex Tabarrok
Bartley J. Madden Chair in Economics at the Mercatus Center, George Mason University
Neither the developed nor the developing world will accept large reductions in their standard of living. As a result, the only solution to global climate change is innovations in green technology. A carbon tax will induce innovation as people demand a way to avoid the tax. A carbon tax, however, will be more politically acceptable if technologies to avoid the tax are in existence before the tax is put into place. Prizes for green innovations can blaze a path down a road that must be traveled, making the trip easier. The L-prize successfully induced innovation in LED technologies, the X-Prize put a spacecraft into near space twice within two weeks and Google’s Lunar X prize for putting a robot on the moon is close to being awarded. Prizes have proven their worth. To speed both the creation and diffusion of green technology, green prizes should be awarded at the rate of $100-$200 million annually.
Tyler Cowen
Professor of Economics, George Mason University
This is a problem we are failing to solve. Keep in mind it is not just about getting the wealthy countries to switch to greener technologies, but we also desire that emerging economies will find green technology more profitable than dirty coal. A carbon tax is one way forward but the odds are that will not be enough and besides many countries are unlikely to adopt one anytime soon. Subsidies for technology could occur at a very basic level and we could make a gamble that nuclear fusion will finally pay off. We also need a version of green technology that will fit into existing energy infrastructures and into countries which do not have the most reliable institutions. The most likely scenario is that we will find out just how bad the climate change problem is slated to be.
There are further responses at the link.
Addendum: Ashok Rao adds comments.
Why they call it Green Energy: The Summers/Klain/Browner Memo
The LA Times reports that Larry Summers and Timothy Geithner “raised warning flags” about the loan guarantee program for renewables long before the Solyndra bankruptcy. The article doesn’t have a lot of new information (the key players are clearly protecting themselves) but it does link to a fascinating briefing memo written for the President in October of 2010 by Summers, Ron Klain (then chief of staff to the Vice President), and energy advisor Carol Browner.
The memo says that OMB and Treasury were concerned about three problems, “double dipping” (massive government subsidies from multiple sources), lack of “skin in the game” from private investors and “non-incremental investment,” the funding of projects which would occur even without the loan guarantee.
The memo then illustrates with one such program, the Shepherds Flat Loan guarantee. Here is the relevant portion of the memo:
The Shepherds Flat loan guarantee illustrates some of the economic and public policy issues raised by OMB and Treasury. Shepherds Flat is an 845-megawatt wind farm proposed for Oregon. This $1.9 billion project would consist of 338 GE wind turbines manufactured in South Carolina and Florida and, upon completion; it would represent the largest wind farm in the country.
The sponsor’s equity is about 11% of the project costs, and would generate an estimated return on equity of 30%.
Double dipping: The total government subsidies are about $1.2 billion.
Subsidy Type Approximate
Amount
(millions)Federal 1603 grant (equal to 30% investment tax credit) $500
State tax credits $18
Accelerated depreciation on Federal and State taxes $200
Value of loan guarantee $300
Premium paid for power from state renewable electricity standard $220
Total $1,238
Skin in the game: The government would provide a significant subsidy (65+%), while the sponsor would provide little skin in the game (equity about 10%).
Non-incremental investment: This project would likely move without the loan guarantee. The economics are favorable for wind investment given tax credits and state renewable energy standards. GE signaled through Hill staff that it considered going to the private market for financing out of frustration with the review process. The return on equity is high (30%) because of tax credits, grants, and selling power at above-market rates, which suggests that the alternative of private financing would not make the project financially non-viable.
Carbon reduction benefits: If this wind power displaced power generated from sources with the average California carbon intensity, it would result in about 18 million fewer tons of CO2 emissions through 2033. Carbon reductions would have to be valued at nearly $130 per ton CO2 for the climate benefits to equal the subsidies (more than 6 times the primary estimate used by the government in evaluating rules).
In my view, the Summers/Klain/Browner analysis was a damning indictment of the Shepherds Flat project. The taxpayers were expected to fund by far the largest share of the bills and also of the risk and in return they weren’t getting many benefits in terms of reduced pollution. In contrast, Caithness Energy and GE Energy Financial Services, the corporations behind the project, weren’t taking much risk but they stood to profit handsomely. I guess that is why they call it “green” energy.
In short, the Shepherds Flat project was corporate welfare masquerading under an environmental rainbow.
So are you surprised to learn that shortly after the memo was written the Shepherd Flats loan guarantee of $1.3 billion was approved? Of course not; no doubt you also saw that the memo authors were careful to inform the President that the “338 GE wind turbines” were to be “manufactured in South Carolina and Florida.” Corporate welfare meet politicized investment.
In the Solyndra case just about everything went wrong, including bankruptcy and possible malfeasance. Caithness Energy and GE Energy Financial Services are unlikely to go bankrupt and malfeasance is not at issue. As a result, this loan guarantee and the hundreds of millions of dollars in other subsidies that made this project possible are unlikely to create an uproar. Nevertheless, the real scandal is not what happens when everything goes wrong but how these programs work when everything goes right.
Summers Vindicated (again)
For the past week or so the newspapers have been trumpeting a new study showing no difference in average math ability between males and females. Few people who have looked at the data thought that there were big differences in average ability but many media reports also said that the study showed no differences in high ability.
The LA Times, for example, wrote:
The study also undermined the assumption — infamously espoused by former Harvard University President Lawrence H. Summers in 2005 — that boys are more likely than girls to be math geniuses.
Scientific American said:
So the team checked out the most gifted children. Again, no difference. From any angle, girls measured up to boys. Still, there’s a lack of women in the highest levels of professional math, engineering and physics. Some have said that’s because of an innate difference in math ability. But the new research shows that that explanation just doesn’t add up.
The Chronicle of Higher Education said:
The research team also studied if there were gender discrepancies at the highest levels of mathematical ability and how well boys and girls resolved complex problems. Again they found no significant differences.
All of these reports and many more like them are false. In fact, consistent with many earlier studies (JSTOR), what this study found was that the ratio of male to female variance in ability was positive and significant, in other words we can expect that there will be more math geniuses and more dullards, among males than among females. I quote from the study (VR is variance ratio):
Greater male variance is indicated by VR > 1.0. All VRs, by state and grade, are >1.0 [range 1.11 to 1.21].
Notice that the greater male variance is observable in the earliest data, grade 2. (In addition, higher male VRS have been noted for over a century). Now the study authors clearly wanted to downplay this finding so they wrote things like “our analyses show greater male variability, although the discrepancy in variances is not large.” Which is true in some sense but the point is that small differences in variance can make for big differences in outcome at the top. The authors acknowledge this with the following:
If a particular specialty required mathematical skills at the 99th percentile, and the gender ratio is 2.0, we would expect 67% men in the occupation and 33% women. Yet today, for example, Ph.D. programs in engineering average only about 15% women.
So even by the authors’ calculations you would expect twice as many men as women in engineering PhD programs due to math-ability differences alone (compare with the media reports above). But what the author’s don’t tell you is that the gender ratio will get larger the higher the percentile. Larry Summers in his infamous talk, was explicit about this point:
…if one is talking about physicists at a top twenty-five research university, one is not talking about people who are two standard deviations above the mean…But it’s talking about people who are three and a half, four standard deviations above the mean in the one in 5,000, one in 10,000 class. Even small differences in the standard deviation will translate into very large differences in the available pool substantially out.
If you do the same type of calculation as the authors but now look at the expected gender ratio at 4 standard deviations from the mean you find a ratio of more than 3:1, i.e. just over 75 men for every 25 women should be expected at say a top-25 math or physics department on the basis of math ability alone (see the extension for details on my calculation). Now does this explain everything that is going on? I doubt it. As Summers also pointed out it takes more than ability to become a professor at Harvard and if there are variance differences in characteristics other than ability (and there are) we can easily get a even larger expected gender ratio.
Does this mean that discrimination is not a problem? Certainly not but we need the media and academia to accurately present the data on ability if we are to understand how large a role other issues may play.
Addendum 1: Andrew Gelman points out that perhaps alone among the media, Keith Winstein at the WSJ reported the story correctly.
Addendum 2: The authors show variance ratios of 1.11 to 1.21, I take a VR of 1.16. If we set the female variance to 1 this implies the standard deviation for female ability is 1 and for male ability 1.077. Using an online calculator for the Normal distribution you can find that given their standard deviation .0102% of males have ability of 4 or greater (4 female sds) but given their sd only .0032% of females can be expected to have the same level of ability, thus a gender ratio of 3.18.
Note that we are assuming that mathematical ability is normally distributed – we know the data fit this distribution around the mean but we don’t know much about what happens at the very top.
How Were So Many Economists So Wrong About the Recession?
That is the topic of my latest Bloomberg column, I thought it was time to call out all the Orwellian rewriting of intellectual history going on, so here goes:
As Treasury Secretary Janet Yellen said last week: “So many economists were saying there’s no way for inflation to get back to normal without it entailing a period of high unemployment, [or] a recession. And a year ago, I think many economists were saying a recession was inevitable. I’ve never felt there was a solid intellectual basis for making such a prediction.”
Many of those economists may have been relying on the work of … Janet Yellen. Her own (highly regarded) macro research focuses on nominal price and wage stickiness and output-inflation trade-offs, predicting that if there is a significant fall in aggregate demand, employment should also fall, giving rise to a recession. She is also co-author (with many distinguished colleagues) of a well-known paper arguing that there is an output/inflation trade-off even at high rates of inflation.
Economist Christina Romer (often with co-authors) has provided some of the most persuasive evidence that negative monetary policy shocks induce recessions in output and employment. Her work has been especially influential — worthy of a Nobel Prize, in my opinion — because it does not rely on a complicated mathematical model of the economy, and it had been accepted on a bipartisan basis. Paul Krugman has been predicting for most of this year that the recent disinflation would not cause a recession, and he deserves credit for getting this right. Yet he is less keen to tell us that for many years he trumpeted the predictive virtues of old-style Keynesian macroeconomics, using models that predict disinflation will lead to a loss in output and employment.
Krugman has lately further explained his position — complete with unironic headline — suggesting that the untangling of broken supply chains had helped lower the rate of inflation. That point, too, is correct. He didn’t mention that there also has been a massive negative shock to aggregate demand: High rates of M2 growth became slightly negative rates of M2 growth. Fiscal policy peaked and then retreated. The Fed raised interest rates from near-zero levels to the range of 5%, and fairly rapidly. It also sent every possible signal that it was going to be tight with monetary conditions.
…There is a reason that so many economists had been predicting a recession — and it is not because they are out of touch, or repeating talking points from Donald Trump’s presidential campaign. They predicted a recession because that is what experts such as Yellen, Krugman, Romer and many others had been teaching for decades. I do not myself presume to have any immunity from the general confusion here, as all along I thought there was a reasonable chance of a recession.
Larry Summers was wrong about the recession, but at least he has been consistent in his application of model-based reasoning, and now somehow he is the whipping boy for having done this. Let’s hope that some historical memory holds and this one does not get swept under the rug…
Tuesday assorted links
Tuesday assorted links
1. The Reversal Curse (LLMs).
2. Crows use statistical logic.
3. The AI skeptics are starting to go a little quiet.
4. The crisis in UK universities (WSJ).
5. The wisdom of Larry Summers, recommended. YouTube here.
Saturday assorted links
1. Johnny Cash and Josef Stalin.
2. Noah Smith’s current take on libertarianism.
3. New Larry Summers talk on fiscal policy.
4. The business of giving private concerts to rich people (New Yorker).
5. Amitai Etzioni, RIP (NYT).
6. Japan patent fact of the day. Yikes.
7. Kaija Saariaho, RIP (NYT).
8. Legal bank stablecoins from Japan? And a summary of the new U.S. crypto bill.
Signs of encroaching mental GPT-dom
1. You use the word “token” more than you ought to, for reasons that have nothing to do with crypto.
2. If a friend says something incorrect, you tell them they are “hallucinating.”
3. You phrase your google queries like GPT queries, for instance using question marks.
4. “Please say more” is your new mantra. “Answer step by step” is another.
5. You ask your friends for answers in the third person: “But what would Larry Summers say to that?”
6. You start thinking your friend Claude is a walking encyclopedia, a wonderful and diversely talented literary stylist, and taking psychedelics.
7. When you read or hear “davinci,” your thoughts do not jump to the Mona Lisa.
8. You start imagining all sorts of co-authorships, collaborations and even marriages that simply do not exist.
9. You decide Thomas Pynchon really was underrated after all.
10. You start expecting everyone else to be so eager to please you.
What else?
Are macroeconomic models true only “locally”?
That is the theme of my latest Bloomberg column, here is one excerpt:
It is possible, contrary to the predictions of most economists, that the US will get through this disinflationary period and make the proverbial “soft landing.” This should prompt a more general reconsideration of macroeconomic forecasts.
The lesson is that they have a disturbing tendency to go wrong. It is striking that Larry Summers was right two years ago to warn about pending inflationary pressures in the US economy, when most of his colleagues were wrong. Yet Summers may yet prove to be wrong about his current warning about the looming threat of a recession. The point is that both his inflation and recession predictions stem from the same underlying aggregate demand model.
You will note that yesterday’s gdp report came in at 2.9%, hardly a poor performance. And more:
It is understandable when a model is wrong because of some big and unexpected shock, such as the war in Ukraine. But that is not the case here. The US might sidestep a recession for mysterious reasons specific to the aggregate demand model. The Federal Reserve’s monetary policy has indeed been tighter, and disinflations usually bring high economic costs.
It gets more curious yet. Maybe Summers will turn out to be right about a recession. When recessions arrive, it is often quite suddenly. Consulting every possible macroeconomic theory may be of no help.
Or consider the 1990s. President Bill Clinton believed that federal deficits were too high and were crowding out private investment. The Treasury Department worked with a Republican Congress on a package of fiscal consolidation. Real interest rates fell, and the economy boomed — but that is only the observed correlation. The true causal story remains murky.
Two of the economists behind the Clinton package, Summers and Bradford DeLong, later argued against fiscal consolidation, even during the years of full employment under President Donald Trump [and much higher national debt]. The new worry instead was secular stagnation based on insufficient demand, even though the latter years of the Trump presidency saw debt and deficits well beyond Clinton-era levels.
The point here is not to criticize Summers and DeLong as inconsistent. Rather, it is to note they might have been right both times.
And what about that idea of secular stagnation — the notion that the world is headed for a period of little to no economic growth? The theory was based in part on the premise that global savings were high relative to investment opportunities. Have all those savings gone away? In most places, measured savings rose during the pandemic. Yet the problem of insufficient demand has vanished, and so secular stagnation theories no longer seem to apply.
To be clear, the theory of secular stagnation might have been true pre-pandemic. And it may yet return as a valid concern if inflation and interest rates return to pre-pandemic levels. The simple answer is that no one knows.
Note that Olivier Blanchard just wrote a piece “Secular Stagnation is Not Over,” well-argued as usual. Summers, however, has opined: “we’ll not return to the era of secular stagnation.” I was not present, but I can assume this too was well-argued as usual!
The overreaction to the Truss macro policy
It has been extreme:
I know an unpopular economic policy when I see one. And the consensus among economists about the tax cuts and deregulations announced last week by UK Prime Minister Liz Truss is almost universally negative. Larry Summers noted: “I think Britain will be remembered for having pursued the worst macroeconomic policies of any major country in a long time.” Willem Buiter described it as “totally, totally nuts.” Paul Krugman is skeptical. As Jason Furman summed it up: “I’ve rarely seen an economic policy that is as uniformly panned by economic experts and financial markets.”
That is from my latest Bloomberg column. I certainly can see reasons why one might oppose the plan, but the skies are not going to fall:
I see no evidence that the markets are beginning to doubt the UK’s ability to repay its debts. The UK, and earlier Great Britain, has arguably the best debt repayment history of all time (though it did default on some of its debts to Italian lenders in the 13th century). It even repaid its extensive debts from the Napoleonic Wars, though they were more than 200% of GDP.
There are different ways you might measure the marginal cost of UK government borrowing, but I don’t see any measure where it is high and under many measures it is negative in real terms. Remember when people used to tell us this meant there was no major problem on the fiscal side?
I do criticize the Bank of England for not doing more to reign in inflation, plus the government should have coordinated better with the Bank. And don’t forget this:
The Truss plan offers many admirable deregulations, including an attempt to get the UK economy to build more residential structures, as it so badly needs. It is difficult to say now just how successful this plan will be, but it is definitely a step in the right direction, as are most of the other deregulations, including lifting the ban on onshore wind generators. By calling the Truss plan the worst thing ever, commentators make it unlikely that these ideas will get the approbation they deserve.
Recommended.