Dodgy data, working workers and back to basics on benefits

Top of the Charts

Afternoon all,

Welcome back to TOTCs, and apologies again for abandoning you for the past fortnight. Then again, those two weeks haven’t really been about economics, as Afghanistan has surged from being totally ignored by UK politics to centre stage.

As ever having policies but no plans can seem fine, until it’s suddenly not (an eternal truth in economic and foreign policy). Having no clue how Britain navigates the 21st Century globe as we find it, rather than as we’d like it to be, isn’t cost free (for us or those we aim to support). Muddling through – economically, geopolitically and the rest – is what we’re doing. Ideally it wouldn’t take a humanitarian catastrophe to make us face up to that fact.

This week’s reads also encourage some honesty –  about the challenges of the (essential) net zero transition, the never ending nostalgia for grammar schools and… in not just making up data. Have a good weekend.

Torsten Bell
Chief Executive
Resolution Foundation

Withdrawal symptoms. Economists clearly don’t have the answers to the foreign policy and security questions thrown up by the planned withdrawal of NATO troops from Afghanistan. But I thought I should highlight that some have been working on the issue. A very recent paper combined data on the withdrawal of NATO troops from localities in Afghanistan alongside survey and combat data, finding a consistent pattern: during the first phase of a security transition there is a short-term fall in violence as the Taliban “lay-low” and reduce their activities to encourage foreign forces to leave before then stepping up violence when exit occurs. Against that backdrop it’s hard to argue the big picture of what’s happened after US troops pulled out is a surprise, even if the timing is. And the strategic pattern of behaviour by the Taliban also reinforces the case for judging the new government on what they do in the future rather than say right now.

UBIs to MIGs. The extent to which debates about welfare policy are subject to fashions is traumatising: the gap in the market over the past decade wasn’t for yet another report on a Universal Basic Income… The new black this year is a Minimum Income Guarantee, that promises everyone they’ll have enough cash to pay for their essentials. Tonally it aims to pretend you’re still talking about a UBI, while in reality being a normal (and correct) argument about needing a higher level of basic social security provision (it’s therefore means tested so not a UBI at all). The Scottish Government this week kicked off a debate about a MIG in Scotland – have a read of their consultation. Obviously we’re supportive, but for it to mean anything we need to focus less on new three letter acronyms and more on the usual difficult trade-offs inherent to welfare policy (e.g. between costs, poverty levels and work-incentives).

Selective memories. You all know that grammar schools don’t help poorer children today, due to it being proved over and over again by research. But because the idea that grammar schools supported social mobility back in the day is a zombie that refuses to die, have this new paper to hand for next time a grammar school evangelist starts wittering on about the 1950s. Using data about pupils who attended schools in England between the years 1956 -1972 and what happened when they left school, it shows there was no social mobility dividend in areas with lots of selective schools. Obviously.

Fake news data. For a bit of light relief read this investigation by the journalists at Datacolada. In too good/bad to be true news, it finds massive data fraud in a paper on… dishonesty. The backstory here is a high-profile paper back in 2012 that used three different studies to show that you get more honest answers from the public if you ask them to sign a statement about being honest before they provide the answer, rather than afterwards. Everyone loved the paper because it fitted the rampant fashion for nudges. The only problem? It was nonsense. Two of the studies were lab based and six attempts to replicate them have failed. But the remaining study was supposedly based on real world data (about the mileage people report to their car insurer). The only problem? Data investigators show with hilarious detail that it was almost certainly fabricated using a random number generator in Excel… People, it turns out, will be dishonest about the weirdest things.

Transition trouble. We’re doing a lot of net zero/climate change pondering/reading at present as we get our own work in this area up and running. To have some thoughts provoked, read a new note from Jean Pisani-Ferry who cautions that we can’t just state our optimism about “green growth” or the necessity of the net zero transition as a means to ignore its macroeconomic implications. Pricing carbon means a big supply shock (the whole point is to make it more expensive). The huge investment required means not doing other things we’d like (largely consumption now or later). The fiscal trauma will be significant (mainly on the loss of tax revenues side, although that may underestimate the role of government spending in tackling problems with the timing of when, and distribution of on whom, the costs fall). Climate Change policy is at last moving out of the evangelists vs denialists phase, and into the what do we actually do era. That’s 1) good 2) hard.

Chart of the Week

it’s been a good news week on the jobs front. The latest labour market data shows that July was the third month in a row that saw a 200,000 or so increase in employee numbers. And vacancies have continued rising, hitting new record highs. But the good news is being combined with lots of nonsense about what it means. The no. 1 nonsense at present is that record vacancies mean workers aren’t taking jobs. This is usually followed by moral panic or dire warnings of wage surges that will destroy the economy. It’s also garbage, as this week’s chart shows. In the real world, record vacancies are matched by… record numbers taking employee jobs. Firms are advertising and (outside of sectors most affected by changes to migration flows) hiring. This is exactly what we should expect to see as we reopen our economy post-pandemic.