{"id":8068,"date":"2020-11-27T15:49:34","date_gmt":"2020-11-27T15:49:34","guid":{"rendered":"http:\/\/www.economicsobservatory.com\/question\/news-27-nov-2020"},"modified":"2021-02-26T15:18:36","modified_gmt":"2021-02-26T15:18:36","slug":"news-27-nov-2020","status":"publish","type":"question","link":"https:\/\/www.economicsobservatory.com\/test\/news\/27-nov-2020","title":{"rendered":"(Mis)understanding economics"},"content":{"rendered":"

Newsletter from 27 November 2020<\/strong><\/p>\n

The UK public has a limited understanding of the basics of economic statistics like GDP, unemployment and the government\u2019s deficit, according to a worrying\u00a0report<\/a>\u00a0from the Economic Statistics Centre for Excellence (ESCoE) published this week. \u2018Many feel economics is confusing and complicated, and regret they are unable to understand it\u2019, co-author\u00a0Johnny Runge<\/a>\u00a0explains. What\u2019s more, \u2018people are often sceptical and cynical about any data they see\u2019, findings that echo what came out of a\u00a0survey last year<\/a>\u00a0by ING and the Economics Network.<\/p>\n

At the Economics Observatory, we aim to bring economics to the public in an accessible way and respond to some of the doubts around data. Similarly, the annual\u00a0Festival of Economics in Bristol<\/a>\u00a0is a longstanding effort to engage with the public on economic issues central to their lives. This year\u2019s festival was co-programmed by\u00a0Diane Coyle<\/a>, who founded the event eight years ago and is one of the lead editors of the Observatory, and our director\u00a0Richard Davies<\/a>, the country\u2019s first professor of the public understanding of economics.<\/p>\n

Our gathering last week was unfortunately confined to Zoom, but it did mean that we were able to bring together speakers and audiences from around the world. Some of the highlights have been summarised on the Observatory in recent days, including two sessions on sectoral and geographical prospects for recovery.<\/p>\n

The first asked\u00a0how the arts can recover<\/a>, concluding that this vital sector needs further state support and a clear, realistic road map for how audiences can return safely, equitably and profitably.<\/p>\n

The second discussed the pandemic as an opportunity to return to something better than \u2018normal\u2019 by \u2018building back better\u2019 \u2013 in this case for\u00a0the city-region of Bristol and the West of England<\/a>. Panellists agreed that the recovery process could give local policy-makers the chance to shape the revival.<\/p>\n

The economics festival also featured\u00a0John Kay<\/a>\u00a0and former Bank of England governor\u00a0Mervyn King<\/a>\u00a0on \u2018radical uncertainty\u2019;\u00a0Dieter Helm\u00a0<\/a>on the future of farming and the food supply chain (summarised by Richard\u00a0here<\/a>); and a panel on state intervention to protect public health combined with large-scale fiscal support for the economy during the pandemic \u2013 and whether these measures mean that\u00a0Big Government<\/a>\u00a0is back.<\/p>\n

How broke is Britain?<\/h3>\n

The Big Government conversation provided useful background for this week\u2019s main event in economic policy-making \u2013 the spending review announced by Chancellor of the Exchequer Rishi Sunak on Wednesday \u2013 and a key question surrounding it: when and how do we pay for the Covid-19 crisis?<\/p>\n

At a time when the health and economic effects of the pandemic have required a rise in government borrowing to levels not previously seen outside wartime, one particularly dangerous misperception is the widespread view that public finances are just like household finances \u2013 and that the UK has somehow \u2018maxed out its credit card\u2019. \u2018People generally understand economic issues through the lens of their familiar personal economy rather than the abstract national economy\u2019, as the ESCoE report notes \u2013 something that\u00a0Roger Farmer<\/a>\u00a0calls the \u2018household fallacy\u2019.<\/p>\n

Roger\u2019s\u00a0must-read contribution<\/a>\u00a0to the Observatory this week outlines the dangers of the government seeking to reverse the spike in public borrowing quickly by raising taxes too soon and\/or by cutting back on spending, including public sector pay. Taking a long view \u2013 he looks at UK public debt and deficits since 1920 \u2013 we have had much higher public debt-to-GDP ratios in the past and they have been reduced by post-crisis economic growth. Trying to pay off accumulated debt in the near future is likely to delay recovery.<\/p>\n

\"Figure<\/p>\n

A number of previous pieces on the Observatory have explored the lessons from history on paying for this crisis, dealing with the aftermath and promoting growth \u2013 including Roger\u2019s\u00a0Warwick Economics<\/a>\u00a0colleague\u00a0Mark Harrison<\/a>\u00a0on\u00a0running a wartime economy<\/a>; LSE economic historian\u00a0Jason Lennard<\/a>\u00a0on\u00a0paying off public debt through the ages<\/a>; and Nicholas Crafts, founder of the Centre for Competitive Advantage in the Global Economy (CAGE<\/a>), on\u00a0rebuilding after the Second World War<\/a>.<\/p>\n

Nick made an appearance on BBC Radio 4\u2019s\u00a0The Briefing Room<\/em>\u00a0programme this week, which also focused on debt and recovery, asking\u00a0How Broke is Britain?<\/a>\u00a0In what felt a little like some of our most prominent economists offering a quick first response to the clear demand for improved public understanding, he was joined by Oxford\u2019s\u00a0Abi Adams-Prassl<\/a>, who has been documenting\u00a0the impact of the pandemic on workers<\/a>; Gemma Tetlow, chief economist at the\u00a0Institute for Government<\/a>; and\u00a0Jagjit Chadha<\/a>, director of the National Institute of Economic and Social Research (NIESR<\/a>) and one of our lead editors.<\/p>\n

The general message was to worry less about public debt in the short term (especially with interest rates currently so low) and focus more on efforts to promote renewed economic growth, including tax reform and investment in training, public infrastructure and the care economy.<\/p>\n

Rashford rebooted<\/h3>\n

The Observatory was set up back in June to be responsive to questions from policy-makers and the public about the crisis on which economic analysis and evidence can shed light. An early question we were asked was what difference the campaign by footballer\u00a0Marcus Rashford<\/a>\u00a0to provide food vouchers to children from low-income families over the summer holidays might make to their lives.<\/p>\n

Claire Crawford<\/a>,\u00a0Ellen Greaves<\/a>\u00a0and\u00a0Birgitta Rabe<\/a>\u00a0gave\u00a0some answers then<\/a>\u00a0\u2013 and with the government scheme now extended as the Covid Winter Grant Scheme, they have\u00a0updated their analysis<\/a>. The evidence suggests that it should increase spending on food, and reduce hunger and usage of food banks. It may also lead to a fall in obesity and an improvement in children\u2019s performance at school.<\/p>\n

Today\u2019s Observatory piece<\/a>\u00a0continues the theme of football rather more explicitly, looking at how the sport is coping with the crisis. A summary of the latest evidence by\u00a0James Reade<\/a>,\u00a0Carl Singleton<\/a>\u00a0and\u00a0Peter Dolton<\/a>\u00a0indicates that playing without spectators prevents matches from becoming Covid-19 super-spreaders, but it has potentially devastating financial consequences for lower tier clubs. The empty stadiums are also revealing the influence of crowds on refereeing decisions \u2013 in particular reducing the social pressure on refs to punish the home team more harshly and thereby diminishing home advantage.<\/p>\n

\"Figure<\/p>\n

Finally, a reminder<\/h3>\n

We are looking for a\u00a0Data Editor<\/a>\u00a0to join the ECO team.\u00a0We need someone who loves working with data, enjoys coming up with creative ways to present ideas and can quickly develop news skills and techniques. Please pass this on to anyone you think might fit the bill.<\/p>\n

Romesh Vaitilingam, Editor in Chief<\/em><\/h5>\n","protected":false},"featured_media":2733,"template":"","categories":[492,225,222,237],"tags":[489],"yoast_head":"\n(Mis)understanding economics - Economics Observatory<\/title>\n<meta name=\"description\" content=\"The UK public has a limited understanding of the basics of economic statistics like GDP, unemployment and the government\u2019s deficit.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.economicsobservatory.com\/test\/news\/27-nov-2020\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"(Mis)understanding economics - Economics Observatory\" \/>\n<meta property=\"og:description\" content=\"The UK public has a limited understanding of the basics of economic statistics like GDP, unemployment and the government\u2019s deficit.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.economicsobservatory.com\/test\/news\/27-nov-2020\" \/>\n<meta property=\"og:site_name\" content=\"Economics Observatory\" \/>\n<meta property=\"article:modified_time\" content=\"2021-02-26T15:18:36+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.economicsobservatory.com\/test\/wp-content\/uploads\/2020\/12\/Debts-and-deficits.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1387\" \/>\n\t<meta property=\"og:image:height\" content=\"764\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:site\" content=\"@econobservatory\" \/>\n<meta name=\"twitter:label1\" content=\"Estimated reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.economicsobservatory.com\/test\/news\/27-nov-2020\",\"url\":\"https:\/\/www.economicsobservatory.com\/test\/news\/27-nov-2020\",\"name\":\"(Mis)understanding economics - 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