Ancient history, flat taxes and free rides across Estonia

Good afternoon,

The good news: this is not a GDPR email. Phew.

The bad news: they’re getting free rides over in Estonia (see below), while we’re all going to be spending half of the Bank Holiday weekend stuck on the A303 around Stonehenge…

Of course, if you’re stuck in traffic you probably shouldn’t be reading the interesting things below – but you can listen to our latest podcast featuring a Knight, a Dame and a Ballroom Dancer. In it I discuss Paul Tucker’s new book Unelected Power with the author (now escaped from his role as deputy governor at the Bank of England), Kate Barker and Ed Balls. There are some big questions – not least how should we reconcile the reality of powerful, but unelected, central banks with the whole democracy idea… if that doesn’t get the kids off to sleep in the car nothing will.

Have a great Whitsun,

Torsten

It was acceptable in the 1370s. A few years back it was all the rage to angst about secular stagnation – the idea that we were stuck in a new low interest rate, low growth world. More recently the angsting has gone quiet as growth has strengthened in most advanced economies and the talk has turned to interest rate rises. But a new piece of work aims to put the recent slight uptick in interest rates in context – in nearly 1000 years of it. Interest rates have been declining since 1379, when they peaked at 18% – read it and weep the big savers amongst you. The author’s conclusion: rates have been heading downwards for centuries and we’re not heading back to much higher rates anytime soon.

Three buses turn up at once. Last week we noted that Paris was moving towards free public transport – but it turns out they’re not the only ones. A whole country is already ahead of the game, and the idea is catching on (a bit) here too. From 1 July, all public transport in Estonia will be free. It’s been free in the capital Tallinn for the past 5 years following a referendum. And the Welsh are at it too – the first phase of an experiment with free bus transport at weekends has been going for a year now.

The wage puzzle – and down with Twitter. A blog by Paul Krugman this week is worth a read for two totally different reasons. Firstly it has a decent summary of the ‘why are wages rises so rubbish’ debate. But secondly it has an interesting brief moan about how the communication of economic debates is changing. Back in the mists of time (or the 1980s as some people call it) we had academic articles. Then in the 2000s serious economics blogs emerged – Krugman thinks these did a great job of encouraging a high quality debate during the financial crisis (which isn’t massively surprising given he was central to the blogosphere at the time). But now he thinks everything’s gone to pot because lots of the toing and froing happens on Twitter. He may well be right – or it might just go to show that none of us like change…

Millennial angst. Now you might think we’re a little obsessed with the whole intergenerational fairness thing. So just to show it’s not just us, here’s a new blog from the St Louis Fed analysing the intergenerational distribution of assets in the USA. It shows that, just as here in the UK, millennials have fewer assets than Gen X did at the same age.

Uber sized pay packets? Uber’s been in the news yet again this week for its offer of sickness insurance to its drivers, which has won a qualified welcome from unions. But how does the firm’s workers’ pay compare to those in the wider economy? A US study tries to answer that question and more. The answer isn’t pretty: about a third of what passengers pay goes to Uber as fees, and the drivers take home an average of $11.77 an hour –  less than the lowest paid major occupational group (service workers).

And finally. This week we’ve hosted a series of lunchtime discussions on the Grand Challenges of the government’s Industrial Strategy. The power of data was a recurring theme, making the award of the Rybczynski Prize for economics writing to RF alumnus James Plunkett for his article on how technology is transforming consumer markets all the more pertinent.

Chart of the week. This week’s chart comes from an RF blog reminding us all that there’s work to be done to make our tax system more progressive. Yes our income tax is really quite progressive (with the highest earners paying a much greater share of it), but if we look at our tax system as a whole it functions a lot like a flat tax, with each part of the income distribution paying a similar share of their income in tax. Time to turn up the progressivity…