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Crisis? What crisis?

Political leadership is missing in action as the UK faces a host of challenges – from sharply rising prices and stagnant wages to growing numbers of extreme weather events. Economic researchers, here and around the world, are working to understand these issues and inform effective policy responses.

Newsletter from 19 August 2022

The UK is up against a sea of troubles. Inflation is in double digits for the first time in over four decades – considerably above the annual rate of increase in the world’s other big economies and expected to go higher. The costs of energy and staple foods are rising even more sharply, leaving many households facing a potential winter choice between warmth and sustenance. And the country is stricken by drought, floods, strikes and the looming prospect of recession – to mention just a few of today’s challenges.

Yet the country’s leadership seems unaware of the gathering crisis. The lame duck prime minister has gone on holiday before he leaves office next month. The two candidates to succeed him are pandering to the tiny electorate of Conservative party members that will decide between them with fantasy economics about ‘lazy’ workers, tax cuts and a smaller state. And all politicians remain in denial, at least publically, about the self-inflicted harm of Brexit on business, trade, investment, science and the labour market.

Summertime blues

So what do economists have to say about the UK’s perilous position? Contrary to one particularly ill-informed commentator, a great deal. For example, just this week in response to the latest official data on inflation and the labour market, the National Institute of Economic and Social Research (NIESR) has reported on falling real wages and the rising cost of living. The NIESR commentary includes a piece by one of our lead editors, Huw Dixon (Cardiff University), on surging food prices and the likely future path of inflation.

Yesterday, another essential institution of UK economic policy analysis, the Institute for Fiscal Studies (IFS), posted evidence on the likely impact of permanent tax cuts on the public finances under the August Bank of England forecasts of inflation reaching a high of 13% and remaining elevated for some time. And the IFS director Paul Johnson published an exasperated newspaper article about the ‘cakeism’ of UK politicians – and what really needs to be done to tackle weak growth, stagnant living standards, energy market problems and creaking public services.

Here at the Observatory this week, Jonathan Wadsworth (Centre for Economic Performance, CEP) has provided detailed insights into the relationships between prices, pay and productivity, addressing the question of whether wages are keeping up with the cost of living. And Stuart McIntyre (University of Strathclyde) has explored the considerable differences in unemployment rates, economic inactivity and wage growth relative to inflation both across and within the regions of the UK.

We’ll be posting new pieces on the UK’s economic crisis over the coming weeks, following up some of our recent analysis of energy markets, industrial action, the Bank of England’s response to inflation, the Russian invasion of Ukraine, climate change policy, and much more.

We’ll meet again

Meanwhile, next week, there are four big international meetings in economic research and policy-making that are likely to interest Observatory readers. Let me also alert you to three notable events upcoming in the UK in the autumn, not least the second edition of our annual #TalkingEconomics gathering in November in Bristol, now fully integrated with the Festival of Economics presented by Bristol Ideas.

European Economic Association (EEA) 2022 annual congress (#EEAESEM2022), Milan, 22-26 August

Starting on Monday is the annual gathering of economists from across Europe. This will be the first time back in person since the summer of 2019 – but with many plenary sessions available to watch online – and this year combined with the annual European meeting of the Econometric Society

The EEA congress programme features a presidential address by Oriana Bandiera (London School of Economics, LSE) on the evolution of women’s employment during the process of economic development. There’ll also be a keynote lecture by Michele Tertilt (University of Mannheim) on the economics of women’s rights in the United States, an issue we’ve touched on in a recent piece on the potential impact of the removal of constitutional protections on access to abortions.

Seventh Lindau Meeting on Economic Sciences 2022 (#LINOecon), Lindau, Germany, 23-27 August

The Lindau Nobel Laureate Meetings, which have taken place since the early 1950s, bring together acclaimed scientists with the next generation of researchers. The first economics meeting since 2017 begins on Tuesday, with 19 laureates and several hundred young economists.

Standout sessions, which will be available to watch online, include Paul Milgrom (Stanford University), the 2020 co-recipient of the economics Nobel, on the market for water in California; a panel discussion on social change and social media with 2001 laureate Joseph Stiglitz (Columbia University) and 2017 laureate Richard Thaler (University of Chicago); and a panel on the economics and politics of war and sanctions with 2017 laureate Oliver Hart (Yale University), 2007 laureate Eric Maskin (Harvard University) and 2010 laureate Christopher Pissarides (LSE).

American Association of Wine Economists (AAWE) 2022 annual conference, Tbilisi, Georgia, 24-28 August

This meeting, which starts on Wednesday, is the one I’m most sorry to be missing. It brings together wine economists from around the world for a combination of tastings and technical discussions of the industry.

The programme includes an opening keynote by Georgia’s deputy prime minister Levan Davitashvili – and presentations by Orley Ashenfelter (Princeton University), the godfather of wine economics, and Olivier Gergaud (KEDGE Business School), who has written for the Observatory about the future of the champagne industry after the pandemic. Orley and Olivier have done striking research on the role of ‘terroir’ and wine-making technologies in the quality of wines.

Jackson Hole 2022 Economic Symposium, Jackson Hole, Wyoming, 25-27 August

Thursday sees the start of the Federal Reserve Bank of Kansas City’s annual Economic Policy Symposium in Jackson Hole, one of the longest-standing central banking conferences in the world.

This year’s gathering of economists, financial market participants, academics, US government representatives and news media will discuss ‘Reassessing constraints on the economy and policy’. Highlights from previous meetings are available on the Kansas City Fed’s website.

Money Macro and Finance Society (MMF) 2022 annual conference, Canterbury, 5-7 September

MMF brings together researchers, practitioners and policy-makers in monetary economics, macroeconomics and financial economics. Standout sessions at its next annual gathering include keynote speeches by Catherine Mann (a member of the Bank of England’s Monetary Policy Committee, MPC) and 2019 Clark Medalist Emi Nakamura (University of California, Berkeley), and a Bank of England special session on ‘quantitative tightening’ and monetary policy normalisation.

With the Bank under fire for inflation well above its target level and politicians asking questions about its status as an independent central bank, there will be also a topical discussion of lessons from 25 years of the MPC.

The session, chaired by Paul Mizen (University of Nottingham) will feature Jagjit Chadha (NIESR’s director and one of our lead editors), former Bank governor Mervyn King and former Bank deputy governor Paul Tucker. One of the Observatory’s early videos in the summer of 2020 was a conversation between Jagjit and Mervyn on uncertainty, crises and central banks; Paul Mizen has written for us on the pandemic’s impact on commuting and businesses; and Paul Tucker has contributed a piece on whether we need a new constitution for central banking.

Seventh World KLEMS conference on productivity and growth accounting, Manchester, 12-13 October

The World KLEMS Consortium – the acronym standing for capital (K), labour (L), energy (E), materials (M) and service (S) inputs into economic growth – was an initiative launched over a decade ago by Dale Jorgenson (Harvard University), the doyen of growth accounting who passed away earlier this year. The seventh edition of the World KLEMS conference will be hosted by the Productivity Institute, a UK-wide initiative established to understand the drivers, measurement and impact of productivity.

Like the Observatory, the project is funded by the Economic and Social Research Council (ESRC), and it involves many of the researchers and institutions that work with us. Its October conference includes presentations by MPC member Jonathan Haskel (Imperial College London), who has written for us about the future of working from home, and Diane Coyle (University of Cambridge), another of our lead editors and founder of the Bristol Festival of Economics.

Festival of Economics 2022 (#economicsfest #TalkingEconomics), Bristol, 14-17 November

Finally, our event in Bristol in mid-November will bring together economic thinkers and practitioners from universities, thinktanks, business, politics, central banks and the media to discuss the immediate challenges of the UK’s cost of living crisis and war in Europe, as well as pressing issues around geopolitics, technology, cryptocurrencies, big data and financial market bubbles. The programme is here, along with audio highlights from our 2021 event.

Tickets will be available from September. We will be sharing registration details on our Twitter feed and in future newsletters. Please do share this sign-up link with any friends or colleagues who may be interested.

Author: Romesh Vaitilingam
Photo by Martin Holden for iStock
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