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Issue no. 156 January 2012 Another New Year (They seem to come round more quickly as time goes on). Traditionally, the January issue of the Newsletter is the most crowded of the year and this one is no exception. Hence we need to start with some thanks to those contributors who have generously agreed to see publication of their work deferred to April. For similar reasons, we owe an apology to authors whose work in this issue has been trimmed and compressed — by just about every device known to editors — to get it to fit the space available. We hope that no material damage has occurred. Finally, while the spirit of regret is in the air, we need to apologise for three errors that appeared in the last issue. Firstly, we transferred Andy Mullineux from the Birmingham to the Bristol Business School; we delayed Adam Smith’s arrival in Panmure House by ten years — it should have been 1778, not 1788 — and we managed at least one misspelling of what should have been ‘Heriot-Watt’. Apologies to all. Recent issues of the Newsletter have featured contrasting views on the pros and cons of austerity packages. In this issue, Prof Robert Neild, whose career involved working through some difficult times in the 1960s and 1970s, argues the case for a calmer approach to deficits, based upon the UK’s long-run history. In the last Newsletter we wondered whether there was a case for a ‘plan B’ and if so what it might look like. Since then, little has changed. The prospects of economic growth coming to the aid of deficit reduction have not improved. The thought that ratios might be brought down to tar- get levels purely by slashing the numerator is a bleak one with which to start the year. On a brighter note, Alan Kirman reports that attempts to introduce some rationality into French rail timetables has produced outrage while the future of the French nuclear industry is set to become a major electoral issue. Also encouraging is the update from the ‘Pro bono economics’ project. David Collard argues that economists should be more critical of the mechanisms behind the setting of some top salaries. And, being the January issue, we have reports from the editors of the society’s two journals. In this issue — • Letter from France 3 • Economic Journal, Editor’s Annual Report 5 • The Econometrics Journal, Editor’s Annual Report 8 • Hyperbolic disasters 12 • Economists, protests and positional rents 14 • Obituaries 16 • Pro bono economics - an update 18 • The national debt in perspective 20 • RES news 24 • Conference diary 26 ROYAL ECONOMIC SOCIETY ROYAL ROYAL ECONOMIC SOCIETY Published quarterly in

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Prof Peter Howells, Centre for Global Finance, Newsletter No. 157 - April 2012 Bristol Business School, UWE Bristol, Articles, features, news items, letters, reports etc. should be Coldharbour Lane, sent to the Editor by: Bristol BS16 1QY

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Mrs Amanda Wilman, 16 March 2012 Royal Economic Society, School of Economics and Finance, University of St. Andrews, St. Andrews, Fife, KY16 9AL, UK Contributions from readers

Fax: +44 (0)1334 462444 The Newsletter is first and foremost a vehicle for the dis- Email: [email protected] semination of news and comment of interest to its readers. Contributions from readers are always warmly welcomed. We are particularly interested to receive letters for our cor- respondence page, reports of conferences and meetings, and news of major research projects as well as comment Newsletter - subscription rates on recent events. Readers might also consider the Newsletter a timely outlet The Newsletter is distributed to members of the Society free for comments upon issues raised in the Features section of of charge. Non-members may obtain copies at the following The Economic Journal. We can normally get them into subscription rates: print within three months of receipt. • United Kingdom £5.00 Visit our website at: • Europe (outside UK) £6.50 www.res.org.uk • Non-Europe (by airmail) £8.00

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2 Letter from France — The politics of nuclear energy In France, which generates most of its electricity from nuclear sources, the recent accident at Fukushima has provoked strong reactions. In his latest letter, Alan Kirman explains how the French electoral system is likely to turn the future of nuclear energy into a critical political issue. rance is a strange country. This has been a year of understand and remember, (the train from Besancon to Lyon economic upheaval, the EU has had many ‘last will leave at 7 and 37 minutes past the hour for example). It Fchance’ meetings, and Sarkozy has done his very also added a significant number of trains. best to convey to the world the idea that the leaders in the But the reaction was remarkable and immediately taken up EU are France and Germany. The rating agencies have by the press, radio and television backed up by blogs and threatened to downgrade France’s rating. The EU failed on petitions on the internet. There was an interview with a man December 9th to reach an unanimous agreement and who explained that he had built his life around one train and Britain stood to one side provoking the ire of all and his existence was being shattered by the SNCF’s arbitrary sundry. The ‘Entente Cordiale’ disappeared, as the resent- decision to remove this train. The press explained that all the ment in France at the UKs stance boiled over and the gov- small towns near Paris needed most trains when people left ernor of the Banque de France announced that if any coun- to go to Paris and similarly in the evening. The new try should be downgraded it should be the UK and not timetable did not achieve this and several mayors were tak- France. This was reinforced by similar remarks by the ing action! A new association was set up on the internet for French prime minister and the outcry in the British news- the victims of the change to protest and it proudly papers was predictable with headlines categorising Noyer announced that it had 600 members, which, given the mil- the governor of the Banque de France as a grade AAA lions who use the trains daily seemed underwhelming! idiot. In any event the putative agreement, does not seem, However, France is a country with a strong tradition of com- at the time of writing to have been enough to calm the cri- plaining and those who gained from the changes were sis of the euro. The treaty has to be ratified by the gov- unlikely to express their opinions. One transport economist ernments or parliaments of the countries in question and it was asked on the radio to confirm that this radical change is the improbability that this can be done rapidly that con- was unnecessary and harmful, and when he started to argue tributed to Fitch’s pessimism. Curiously enough, the U.K. that for the majority of people, it was beneficial, the inter- may be a necessary participant in this process given the viewer counter-attacked by asking why the changes could EU rules. not have been made progressively!! When he started to Some French economists are now starting to join the many explain about the interdependence of trains, connections and who express concern about the survival of the euro. so on, he was thanked for his time. Despite the rather optimistic assertions of Angus Deaton in his Letter from America, as ex-Governor Trichet said, he This should indicate the sort of order of priorities in France felt ‘abandoned by economic theory’ and all that he and and therefore it would be of little use to add to the millions other policymakers had to go on was ‘wisdom and experi- of words that have been written about the eurocrisis here ence’. This may be the result of bad communication and I am in an uncomfortable position to comment on the between good economists and the ECB but might also Franco-British spat. I might just add that Francois Fillon reflect the fact that our current macroeconomic models tried to pour oil on troubled waters with Cartesian logic. As have little to say about real crisis periods. With little con- he pointed out, his argument that the UK should be down- sensus on what are the appropriate policies to adopt by graded was conditional on some country suffering that fate. those who are supposed to understand what is going on, Since, in his view, no EU country was in that situation he market prices continue to reflect a pessimistic outlook. was not therefore, actually criticising the state of the UK economy! In his view the austerity measures already taken On top of this, France is heading towards presidential elec- by la France were more than enough to guarantee its future tions next year and there are many serious and gloomy things success. In any event, ‘passons’, and let me come to my to discuss. The whole short term future of the French econo- main theme, France’s nuclear dependence. my may be in jeopardy. However, is this what has been the predominant preoccupation of the French in recent days? Why should this be of current interest? Let me offer a brief Not at all. We have had headlines about how the life of explanation. France is heavily dependent on nuclear power, French citizens was going to be ‘bouleversé’ on December 75 per cent of its electricity is generated by nuclear power 11th and headlines with the equivalent of this is ‘DDay-n’ plants. The accident at Fukushima has focused attention on appeared. What was this imminent domestic Tsunami? Well, this and no presidential candidate could afford not to take a it was the first major overhaul of the SNCF timetables in position. The current president is now committed to main- years. 85 per cent of train times were to be modified. This taining the nuclear industry but with new ‘stress tests’ and was to rationalise the timetables to make them easier to the closing of some older plants. Across the border

3 Germany has committed itself to denuclearising. The most intrinsic measurement difficulties there is also the fact that likely rival in the second round of the presidential elections the nuclear industry, in France in particular, has always been for Sarkozy, Francois Holland, has a more ambivalent posi- far from transparent in its communication. Again there is the tion. He has decided that a national debate should be organ- spectre of a terrorist attack. However, one has not to forget ised on the future of the nuclear industry but does not feel the steady loss of life and the increased frequency of respira- himself committed to the agreement signed by the socialist tory disease due to thermal power plants, but it is part of party with the ‘Verts’, the ecologists, to reduce the number of human nature and the livelihood of the press to emphasise nuclear power plants according to a fixed timetable. I will spectacular losses of life rather than their slow accumulation. come back to this but this is a key element in the discussion. To the negative aspects of the nuclear industry must be added the problem of radioactive waste, its treatment and storage. As to the problem itself, many people have asked why the This debate will continue in France as in other countries but economists cannot come up with a clear answer as to the rel- the nuclear industry is unlikely to disappear and many still ative costs and benefits of going non-nuclear or of reducing pin their hopes on fusion with the installation of the interna- France’s dependence on nuclear power. To the readers of tional fusion experiment (ITER) in the South of France. this letter it will immediately be clear that no unambiguous answer is possible, the problem has so many dimensions and What about the cost of getting out of the nuclear business? even the basics such as the appropriate discount rate to use The current official estimate of doing this by 2022 is 750 bil- are the subject of huge dispute. But let me mention a few of lion euros, but this is obtained by using, as a basis, the the most salient aspects of the debate. What are the costs and German figure put out by the Kfw of 250 billions for shutting the benefits? For the latter, it is usually argued that nuclear down 17 reactors which includes the creation of new gener- power plants are, and have been, non-polluting in terms of ating capacities and the increased import bill for oil and gas. greenhouse gas emission and their existence has made com- Since there are 58 reactors in use in France the amount has to pliance with the Kyoto agreement much easier. be scaled up. However, none of these figure is likely to be Furthermore, as oil prices have climbed nuclear power has even close to the real cost and it is not even clear what pre- become a relatively cheap source of energy. Added to this is cisely that cost should include. A more interesting and impor- the fact that France’s trade balance is significantly more tant figure is that of how much could be saved by improving favourable in this regard than those of its oil and coal energy efficiency in buildings and transport. However, with importing neighbours. In addition France has built up a sub- the crisis the idea of investing in improvements to economise stantial nuclear industry and AREVA the major firm in this on energy use, by building with better insulation for exam- area contributes substantially to French exports. The nuclear ple, together with the idea of investing in renewable energy industry in France employs 410,000 people, and has 450 sources has disappeared from current plans. firms with a total value added of 12 billion euros (approxi- Why is all this important now in France? The nuclear issue mately 0.7 per cent of GNP) according to one report in 2009. has suddenly come to the forefront, partly because of the All of this would, of course, be subject to substitution in Fukushima accident but also because of the French presi- other areas but some of the obvious substitutes such as the dential elections which will take place at the end of April development of alternative renewable energy sources are and the beginning of May 2012. But why is this issue so rel- now threatened by the current austerity measures. evant to the latter? When getting out of the nuclear business is in question, one The party which has emphasised the importance of the has also to calculate the costs of dismantling the existing nuclear issue in France is the ‘Verts’. They have been a force nuclear plants and making them inoperative and secure. Here in the past but their importance has been growing with the the cost is extremely difficult to assess, particularly as secu- importance of the environment in the political debate. They rity standards are being tightened up, ( it has recently been have always had a strong anti-nuclear position but have also suggested that all nuclear installations in all countries should been traditionally associated with the left. With a view to be inspected by the UN atomic energy authority). The UK being properly represented in parliament after the election of estimate for the dismantlement of a plant is 10 times that of a president, (preferably one from the left) they undertook the French estimates for example, though this depends heav- negotiations with the socialists. The agreement that they ily on the type of plant in question. reached was on the following points: But what about the costs of the nuclear industry? First and • Pass a law by 2013 on the future transition of energy to foremost in most peoples’ minds is the possibility of a clean and renewable sources; nuclear accident and the assessment of its consequences. • Impose a carbon tax; This sort of ‘black swan’ event has been, of course, the sub- • Reduce the share of nuclear generation in electricity ject of a considerable literature in economics. There seems production to 50 per cent from 75 per cent by 2025. to be no obvious solution to the quantitative assessment of • Shut down the oldest nuclear power plant now with 24 such an event which would achieve even a minimal con- more to follow sensus. The consequences in terms of human life and sick- • No new nuclear power plant project will be initiated. ness of Chernobyl, for example, are still far from being • Put in place measures to ensure 600,000 new jobs in completely quantified, in terms of numbers, let alone in renewable energy production. terms of value or diminished welfare. In addition to the Continued on p.11....

4 Economic Journal — Editor’s Annual Report

The annual report of the editor of Economic Journal was presented to Council in November. This is an edited version.

Headlines Features and the Conference Volume into the main office under Heather’s management. There have been a number of changes in the Editorial team and management structure of the Economic Journal The team as of January 2012 will be: this year. Joint Managing Editors • Total submissions increased by 4 per cent to 822. Wouter den Haan, University of Amsterdam Andrea Galeotti, University of Essex • Average turnaround times continued to fall, and are now Rachel Griffith, University of Manchester and IFS 7.9 weeks across all submissions. Steve Machin, University College London • The acceptance rate is roughly 5 per cent (822 new David Myatt, London Business School papers submitted in the previous 12 months with 40 Jörn-Steffen Pischke, London School of Economics papers accepted during the same period). Publishing Editor • The impact factor for the journal continued to rise and Heather Daly, London Business School is now 2.271. Submissions Journal and editorial performance Submissions continued to increase, although at a slower Changes in Editors rate than last year. In 2010-11, 822 submissions were received compared with 789 in 2009-10 and 627 in 2004- This year has seen a number of changes to the Editors and 05. management structure of the journal. Andrew Scott stepped down as Managing Editor. We The geographical distribution of submissions is shown in would like to thank Andrew for his excellent stewardship Table 1. Regarding topics, there was an increase in sub- of the Journal. Antonio Ciccone will step down as Editor missions in Public Economics and Economic in December 2011. Development, along with a decrease in International Economics. We moved from a system of a single Managing Editor with several sub-Editors to one in which we have a team Editorial processing time of Joint Managing Editors. Rachel Griffith and Wouter Editorial processing and turn around times continue to Den Haan joined as Joint Managing Editors improve. Average turn around time for the most recent period is 7.9 weeks across all submissions. This continues We are in the process of integrating Features and the the steady improvement of past years. Around 60 per cent Conference Volume with the main journal, meaning that of papers are dealt with in a period of one month; these all Joint Managing Editors will share responsibility for are mainly screen rejects. Less than 10 per cent of papers these. Steve Machin has moved from editing Features and took longer than 5 months and less than 2 per cent longer the Conference Volume to a standard Joint Managing than 6 months. Editor position. Andrea Galeotti will join as a Joint Managing Editor in January 2012. Two years ago the Editorial board introduced the innova- tion to allow authors the option to submit referee reports We have formalised terms and conditions of Joint from previous unsuccessful submissions at another jour- Managing Editors and agreed that the standard is to serve nals, along with responses to these referees, with the idea two 3-year terms, with a limit in exceptional circum- that this would facilitate our ability to speed up the refer- stances to serve one further 3-year term. eeing process. This option has been taken up by a number Heather Daly has taken on increased responsibility for of authors and has led to faster editorial processing times dealing with publication, production and administering in a number of cases and to a number of very good papers the journal. We are integrating the administration of being accepted for publication in the Economic Journal.

5 Table 1: Geographical distribution of submissions 1st July - 30 June

Region 2010-2011 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 2004-2005

UK 145 (18%) 144 (18%) 106 (15%) 106 (15%) 127 (18%) 110 (17%) 114 (18%) USA & Canada 208 (25%) 194 (25%) 206 (29%) 205 (29%) 202 (29%) 213 (33%) 205 (33%) USA 181 161 181 180 182 188 181 Canada 27 33 25 25 20 25 24

Europe 336 (41%) 316 (40%) 278 (40%) 277 (40%) 259 (37%) 224 (35%) 214 (34%) Belgium 14 9 9 8 12 11 4 France 30 28 22 21 26 18 14 Germany 88 73 55 55 46 52 54 Italy 49 28 42 44 37 24 26 Netherlands 20 32 36 30 26 28 22 Scandinavia 43 52 43 49 47 35 39 Spain 26 43 28 28 24 20 24 Other 66 51 43 42 41 36 32

Other 133 (16%) 135 (17%) 112 (16%) 112 (16%) 116 (16%) 95 (15%) 94 (15%) Australia/NZ 39 38 19 20 15 16 20 China/ HK 30 20 15 13 25 18 7 India 2 7 2 3 4 4 5 Israel 20 10 13 14 12 12 11 Japan 16 19 16 16 25 14 15 Other 26 41 47 46 35 31 36

Total 822 789 702 700 704 642 627

Rankings and impact factors with the World Publishing Corporation (WPC), which is The 2010 citation ranking increased from 2009, from based in China and markets selected journals locally at a 1.902 to 2.271. The EJ’s relative ranking rose slightly to discounted rate. There were 64 in 2010. Table 2 shows the 28 (from 32 in 2009 and 24 in 2008). regional breakdown of institutional subscriptions to the Economic Journal at 30 September 2011. Circulation There are currently 1,821 institutional subscriptions to the Membership of the RES Economic Journal. This compares with 1,922 at the end Paid membership of the Royal Economic Society has of 2010. As in previous years we expect further renewals increased by over 4 per cent from 2,356 in 2010 to 2,461. to be confirmed well into the final quarter of the year. As usual we expect modest growth in the final quarter. Total membership currently stands at 2,746, compared Table 2: Geographical distribution of subscriptions with 2,726 at the end of 2010. Region 2009 2010 Sept 2011 The overall number of student members has increased by Australia & NZ 59 56 56 14 per cent from 580 in 2010 to 659. A new option for Canada 53 57 57 online only membership for students was introduced for China * 64 71 65 2011 to appeal to more students. There are currently 187 Europe 572 513 475 students with online only membership. Japan 240 229 221 Rest of World 332 333 321 Table 3: Geographical distribution of membership UK 157 150 143 USA 539 513 483 2009 2010 Sept 2011 Total 2,016 1,922 1,821 UK 1,077 1,055 1,061 *Excluding print subscriptions for the Economic Journal in China Europe 722 734 743 through our low-priced subscription programme with World Publishing USA and Canada 520 470 493 Corporation (WPC). There were 64 in 2010 and there are 58 in 2011. Japan 77 61 71 R of W (incl Aus/NZ and China) 371 406 378 In addition to the above there are 58 reduced rate institu- Total membership 2,767 2,726 2,746 tional subscriptions in China as part of our arrangement

6 Prizes and EJ Lecture RES 2011 Annual Conference RES Prize and EJ Conference Volume The 2010 RES Prize for the best non-solicited paper pub- The EJ Lecture this year, ‘Efficient Mechanisms for lished in the Economic Journal was decided by a com- Level-k Bilateral Trading’, was given byVince Crawford mittee consisting of Richard Blundell (RES President), of Oxford University. It will not be published in the Tony Venables (Oxford University) and former EJ Conference Volume, but a video of the talk is available Managing Editor, Andrew Scott and was awarded to on-line at http://www.fsmevents.com/res/. Kevin J. Lansing of the Federal Reserve Bank of San The special session on Foundations of Revealed refer- Francisco, for his paper ‘Rational and Near-Rational ences, presented at RES 2011 and cofunded by Bubbles Without Drift’, Volume 120, p1149. CeMMAP, will appear in the Conference Volume includ- The next Royal Economic Society Prize of £3,000 for the ing papers by Sydney Afriat, Erwin Deiwert, Hal Varian best paper in the Economic Journal for the year 2011 will and an Introduction written by Frederic Vermeulen. be decided in the coming months. Features Austin Robinson Prize We are in the process of integrating ‘Features’ into the The Austin Robinson Memorial Prize was introduced in main journal. The job of organising ‘Features’ will be 2007 for the best paper published in the Economic Journal shared amongst the Joint Managing Editors. Here we by an author who is within five years of completing their summarise the position as of September 2011. PhD. The prize, chosen by the Economic Journal editors, is given annually and includes an award of £2,000. Economic Journal ‘Features’, February 2012 The 2010 Austin Robinson Memorial prize was awarded Feature: Price Setting Behaviour in the UK to Manuel Oechslin of the World Trade Institute, for his ‘Introduction’, Jennifer Greenslade; ‘New Insights into paper ‘Government Revenues and Economic Growth in Price-Setting Behaviour in the UK’, Jennifer Greenslade Weakly Institutionalised States’, Volume 120, p631. and Miles Parker; ‘How Do Individual UK Producer Prices Behave?’,Philip Bunn and Colin Ellis; ‘Examining EJ Referee Prizes the Behaviour of Individual UK Consumer Prices’ Philip The Economic Journal depends greatly on the service of Bunn and Colin Ellis many referees for the functioning of the peer review Articles process. In previous years referees were give a token pay- ‘Gender Differences in Risk Behaviour - Does Nurture ment for their services. Following feedback from many of Matter?’ Alison L Booth and Patrick Nolan; ‘Employment our referees, and guided by findings in the research liter- Outcomes and the Interaction between Products and Labor ature (e.g. Gneezy and Rustichini, QJE, August 2000) we Market Deregulation: Are they substitutes or comple- decided to discontinue these payments. We would like to ments?’, Giuseppe Fiori, Giuseppe Nicoletti and Sefano thank all of our many referees who continue to provide Scarpetta their services without compensation. Book Review Feature While many referees help us tremendously with their ‘The Minimum Wage and Labour Market Outcomes’, comments, some of our referees contribute beyond the Eric French (Federal Reserve Bank of Chicago) and Alan call of duty through their thoroughness and constructive Manning (London School of Economics) feedback to the authors, and sometimes through the num- ber of reports that they write. This service in the profes- sion rarely gets acknowledged. Starting in 2010, the Looking forward Economic Journal has decided to recognise the contribu- The main job of the Joint Managing Editors and tion of these exceptional referees with an annual referee Publishing Editor is to ensure that turn around times prize. The Editors chose 9 winners for the first referee remain low and that the best quality papers are accepted prize for 2010. We thank all of these individuals for their for publication; this will remain the focus of our efforts outstanding support of the Journal, and the service they and attention. Looking forward, one of the main chal- have provided to the authors. The 2010 winners were: lenges to the new team will be to integrate the Joint Managing Editors into an effective team. • Vasco Carvalho, CREi, Universitat Pompeu Fabra • Andrew Clark, Paris School of Economics The Joint Managing Editors are looking at the possibility • Emilia Del Bono, University of Essex of introducing a policy that requires authors to make data • Peter Neary, University of Oxford and programmes that allow empirical results to be repli- • Karen Norberg, Washington University in St. Louis cated available via the Economic Journal website. • James Reade, University of Birmingham Further details will appear on the EJ website in due • Bent Sorensen, University of Houston course. The RES and EJ websites are undergoing a major • Martin Weale, NIESR overhaul and redesign, and we expect the new, much • Lucy White, Harvard Business School improved website to be launched early in 2012.

7 The Econometrics Journal Managing editor’s annual report The managing editor, Richard J Smith, made the annual report covering the period July 2010 to June 2011, to the Council of the Royal Economic Society in November. This is a shortened version of that report.

The Econometrics Journal was established in 1998 by the Progress Royal Economic Society with the original intention of creating a high-quality refereed journal with a standard of Impact Factors intellectual rigour and academic standing similar to those The fourth set of data from the ISI Citation Index on The of the pre-existing top international field journals for Econometrics Journal became available for 2010. The econometric research such as Econometric Theory, journal impact factor is 0.691 (0.733, 0.750, 0.479) with Journal of Applied Econometrics, Journal of Business the immediacy index at 0.176 (0.125, 0.065, 0.034); and Economic Statistics, Journal of Econometrics and 2007-9 data are given in parentheses. The eigen-factor Review of Economics and Statistics. score is 0.00352. The first of these data ranks The Econometrics Journal at 167 (127) out of 305 (247) eco- The Econometrics Journal is a general journal for econo- nomics journals. metric research and included all areas of econometrics, whether applied, computational, methodological or theo- The journal impact factor is rather similar to those for retical contributions. As a journal of the Royal Economic 2009 and 2008. The corresponding figures for competitor Society, The Econometrics Journal seeks to promote the journals are Econometric Theory 1.015 (107), Journal of general advancement and application of econometric Econometrics 1.815 (68), Review of Economics and methods and techniques to problems of relevance to mod- Statistics 2.883 (19), Journal of Applied Econometrics ern economics. 1.341 (73) and Journal of Business and Economic Statistics 1.693 (53).

The Editorial Board These figures therefore continue to remain disappointing. The Editorial Office of The Econometrics Journal is In part these returns may arise because of an increase in based in Faculty of Economics at the University of the number of published articles (37) in 2009 due to the Cambridge with Richard J Smith as Managing Editor. Tenth Anniversary Special Issue as opposed to previous years 2006-8 (31, 29, 23). Re-appointments to the Editorial Board of the journal have now been staggered. Richard J Smith (University of Promotion Cambridge) has accepted re-appointment as Managing Table 1 displays the geographical distribution of new sub- Editor until 30.04.2015. Co-Editor re-appointments are missions for 2010-11. This table indicates that propor- Pierre Perron (Boston University) until 30.04.2012, tionately the number of submissions attracted from North Oliver B. Linton (University of Cambridge) until America by The Econometrics Journal has returned to a 30.04.2014 and Jianqing Fan (Princeton) until similar historical level of earlier years. However, in part, 30.04.2015. Robert Taylor continues as Assistant Editor this return is due to a high preponderance of North and Book Review Editor until 30.04.2014 and Marius American authors among the contributors to the Tenth Ooms continues as Software Reviews Editor and Anniversary Special Issue. Consequently, The Econometrics Links Editor until 30.04.2012. Econometrics Journal is still failing to attract the submis- sion numbers from North America if it is to achieve its Han Hong (Stanford) recently resigned as an Associate aim of becoming a top international general journal for Editor owing to his taking up the position as an Editor of econometrics research. As in previous years, Table 2 Journal of Econometrics. The Editorial Board is very emphasises the continuing predominance of acceptances grateful to him for his service to and support of The originating from North America and Europe. Econometrics Journal. The Editorial Board is currently undertaking a thorough The Denis Sargan Econometrics Prize review of its team of Associate Editors. The intention is to The Econometrics Journal on behalf of the Royal reinvigorate the editorial structure of The Econometrics Economic Society has now initiated The Denis Sargan Journal by refreshing and renewing the list of Associate Econometrics Prize. The prize will be awarded for the Editors. Membership of the editorial structure of The best (unsolicited) article published in The Econometrics Econometrics Journal is given in Appendix A. Journal in a given year by anyone who is within five

8 Table 1 : Geographical Distribution of New Submissions

Region 1.7.10 - 30.6.11 1.7.09 - 30.6.10 1.7.08 - 30.6.09

UK 19 (13.77%) 23 ( 14.20%) 16 (10.7%) USA and Canada 41 (29.71%) 31 (19.14%) 43 (28.9%) Total% 43.48 33.34 39.6

Belgium 3 (2.17%) France 1 (0.72%) Germany 6 (4.35%) Italy 2 (1.45%) Netherlands 3 (2.17%) Scandinavia 4 (2.90%) Spain 8 (5.80%) Other 14 (10.14%) Total% 29.71 30.36 34.23

Australia/NZ 4 (2.90%) China/HK 10 (7.25%) India 1 (0.72%) Israel 1 (0.72%) Japan 5 (3.62%) Other 16( 11.59%) Total% 26.81 35.80 26.17 Total% 138 162 149 years of being awarded their doctorate. An honorarium of Problems’ at the RES Annual Conference 2011 held at £1000 will be awarded to the winning author. Royal Holloway University of London. Papers were pre- sented by Rosa Matzkin (UCLA) and Andrew Chesher The winner of The Denis Sargan Prize will be chosen by (UCL). Victor Chernozhukov (MIT) presented the discus- The Econometrics Journal Editorial Board (Managing sion. Submissions have been solicited from the presenters Editor and Co-Editors) and the prize awarded in the year for a Special Issue of The Econometrics Journal. following publication of the winning article. The first award of the prize will be for an article published in The Special Sessions associated with The Econometrics Econometrics Journal during 2011. If an article of sufficient Journal will be arranged at subsequent RES Annual quality is not forthcoming the prize will not be awarded. Conferences. 2 Royal Economic Society Annual Conference EC Special Issue on Recent Developments in Submissions were invited from presenters at The Structural Microeconometrics Econometrics Journal Special Session on Econometrics The Special Issue of The Econometrics Journal on of Inequality at the RES Annual Conference 2010 at the ‘Recent Developments in Structural Microeconometrics’ University of Surrey. The papers are: arising from the 19th EC2 Conference held in Rome on December 19-20, 2008, is now complete and was pub- Donald S G, G F Barrett and Y-C Hsu, ‘Incorporating lished in Vol. 13 Issue No. 3 December 2010. Jean-Marc Covariates in the Measurement of Welfare and Inequality: Robin, a previous Co-Editor of The Econometrics Methods and Applications’. Journal, acted as Editor for this Special Issue. Davidson R, ‘Statistical Inference in the Presence of Contributing authors include: F Fève, J P Florens, P Haan, Heavy Tails’. The discussant was C Schluter. F Iskhakov, I Komunjer, L M Magnusson, V Prowse, A The papers are under consideration and it is expected that Santos and A Vanhems. versions will appear in a Special Issue of The EC2 Special Issue on Identification in Econometrics Journal on ‘Econometrics of Inequality Econometric Theory and Applications scheduled for publication early next year’. Papers from the 21st EC2 Conference held in Toulouse on The Econometrics Journal organized a Special Session on December 17-18, 2010 have been submitted for a Special ‘Nonparametric Identification: Current Issues and Issue of The Econometrics Journal on the theme of

9 ‘Identification in Econometrics Theory and Applications’. of The Econometrics Journal particularly in the US. Elie Tamer, an Associate Editor, and Christian Bontemps Wiley-Blackwell now regularly report the top down- are acting as Editors for the Special Issue. loaded articles and have increased the number of e-mail campaigns. Wiley-Blackwell are also considering how to Book and Software Reviews identify more opportunities for promoting The In 2010-11 books were received from the publishers Econometrics Journal at Econometric Society meetings, Oxford University Press, Springer, McGraw Hill, an absence noted above. University of Chicago Press and MIT Press. The Book Reviews Editor of The Econometrics Journal commis- The maintenance of e-mail lists and planning of market- sioned three reviews. ing campaigns has yet to be addressed. The Econometrics Journal prefers an active rather than reactive rôle in con- Table 2 : Geographical Distribution of Accepted Papers tributing to the preparation of resources for conferences and marketing campaigns. Procedures for publication of 1.7.10-930.6.11 1.7.09-30.6.10 accepted papers, notes and book review on The UK 5 (22.7%) 3 (12%) Econometrics Journal website operate smoothly and effi- USA and Canada 8 (36.4%) 11 (44%) ciently with manuscripts being posted within one week of Total 13 (59.1%) 14 (56%) acceptance of the final version. Europe Belgium Statistics France 3 (12%) Monthly statistics and editorial reports are provided to all Germany 2 (9.1%) 3 (12%) members of the Editorial Board and Associate Editors to Italy keep them in touch with the progress of the journal. Netherlands 3 (13.6%) Scandinavia 2 (8%) Submissions Spain 1 (4%) A total of 138 new submissions were received under Other 1 (4%) Editorial Express®. This total represents a decrease of 24 Total 5 (22.7%) 10 (40%) (14.81%) over that reported for 2010. Additionally there were 41 resubmissions received during this period. It Other should be noted that new submissions and resubmissions Australia/NZ 1 include papers associated with the various Special Issues China/HK 1 of The Econometrics Journal. India Israel Decisions Japan 1 (4%) A total of 183 decisions were made by the Editorial Board. Other 2 (9.1%) Of these 145 concerned new submissions. Of the new sub- Total 4 (18.2%) 1 (4%) missions 87 (60.00 per cent) were screen-rejections which represents a fall from the figure of 64.38 per cent for 2010. 25 (100%) Total 22 (100%) Of the 58 papers not screen rejected, 23 (39.66 per cent) were either return for resubmission or acceptance decisions By João M C Santos Silva on A Review of Micro- (2010: 51.92 per cent), the remaining 35 (60.34 per cent) Econometrics: Methods of Moments and Limited being rejections. Overall, 122 papers or 84.14 per cent Dependent Variables, 2nd Edition, (Springer, 2010) (2010: 83.56 per cent) of decisions were either screen- authored by M-J Lee. The review was published in Vol. rejections or rejections. A total of 22 (2010: 25) papers 14 Issue No. 2 (2011). were accepted by the Editorial Board representing an acceptance rate of 12.02 per cent (2010: 12.25 per cent). By Ralph A Wilke on Econometric Analysis of Cross Section and Panel Data , 2nd Edition, (The MIT Press, The continued high number of screen-rejections reflects 2010) authored by J.M. Wooldridge. This review is due to the determination of the Editorial Board to drive up the be published in 2011. standard of submissions and accepted papers in order to establish The Econometrics Journal as a top international By Denise R Osborn on Review of Modelling Nonlinear general field journal for econometric research. Economic Time Series (Oxford University Press, 2011) authored by T Teräsvirta, D Tjøstheim and C W J Decision durations Granger. This review is due to be published in 2012. The mean estimate for time to decision in days was 60 (27, 14, 103) [2010: 56 (26, 13, 98)] for decisions on all sub- Publishers missions and resubmissions. The figures in parentheses are The Econometrics Journal met with Wiley-Blackwell to the median, first quartile and third quartile estimates. discuss marketing strategy with the aim of targeting the Kaplan-Meier estimates of the stratified survivor functions journal’s resources more effectively. The continuing hope for time to decision are also presented. Excluding screen- is to attract higher quality submissions and build a profile rejections the respective figures are 101 (100, 65, 133).

10 The mean estimate for time to decision in days for all deci- sions on new submissions was 56 (25, 12, 99). The corre- C R Fay sponding figures for non-screen rejections and for a resub- mission decision were 123 (114, 88,142) [2010: 123 (112, 93,150)] and 112 (105, 88, 127) [2010: 125 (110, 93, 154)]. - A Biography For resubmissions the mean estimate for time to decision This first biography of Charles Fay, who served on the was 75 (60, 22, 117) as compared with 62 days for 2010. RES Council for nearly twenty years, has been written These data indicate a slight decrease in but still satisfac- by Hugh Gault and published by Gretton Books, tory overall decision performance which as previously Cambridge. can be primarily attributed to the policy of intensively From Liverpool where his father was a shipping agent, screening submissions. As last year a residual concern is Charles Ryle Fay (1884-1961) was an advocate of co- that for non screen-rejected papers although decision operation, workers’ and women’s rights, and a leading times mainly are not too out of line with the four month British machine gunner in World War I. Professor of desired maximum turn-around period decisions those for Economic History at Toronto University during the a few papers deviated substantially from the target due to 1920s, his legacy in Canada is still remembered — as it some recalcitrant referees which has given rise to the rel- is in India and elsewhere. He was Chairman of the atively long tail in these various distributions. An advan- Horace Plunkett Foundation for ten years, on the tage of Editorial Express® is that The Editorial Office of Council of the Royal Economic Society and taught at The Econometrics Journal is able straightforwardly to Cambridge University for thirty years. His friends monitor the editorial process for all submissions and to included J M Keynes and Sir William Beveridge, and he bring any outlier papers to the attention of the Editor. helped and inspired Sir Austin Robinson to become an economist. He retired to Belfast in the 1950s, but con- MMFRG — recent developments tinued to travel and lecture widely. He was the author of Paul Mizen has agreed to take over from Panicos nearly twenty books, some still in print or recently Demetriades as Treasurer of the Money, Macro, Finance revived, and led a remarkable life. Research Group. Fay sought to counter inequality and foster the common The next annual conference will be in Trinity College good through economic and social reform. Always forth- Dublin. The dates are 6 - 8 September. Currently we right and motivated by values that some saw as socialist, have four agreed invited speakers: he did not accept the status quo. Quirky and unconven- Spencer Dale tional, his practical interventions and intellectual insights Refet Gurkaynak made a difference to understanding the past and people’s Patrick Honohan expectations for the future. More than fifty years on the parallels are obvious and his views remain pertinent today. Stefan Gerlach

....Continued from p.4 Letter from France

Whilst this might not seem remarkable, it provoked around 28 per cent ahead of Nicolas Sarkozy with 24 per immediate reactions from the candidates of the two par- cent. But Marine Le Pen the far right candidate has been ties. Francois Holland of the socialist party said he did not credited with as much as 20 per cent in some polls. There feel bound by the agreement and Eva Joly of the Verts said is a centre right candidate with some 11 per cent and a far that only a complete withdrawal from nuclear power was left candidate with 6 per cent. In this fluid situation the acceptable. current 6 per cent of the Verts are extremely important. The objective of the Socialist candidate is twofold, not to The ruling UMP party took the opportunity to categorise lose the centre voters, who are not strongly anti nuclear, all of this as ‘irresponsible’, but what is behind these but also to hang on to as many ecological votes as possi- manouevres? Firstly, you have to remember that the Verts ble. Hence the ambiguity of Holland’s position. Eva Joly, are a significant force in France and this is particularly however believes she must be faithful to the historical and important given the voting system. If no presidential can- philosophical position of her party and therefore must didate has an absolute majority, only the top 2 go through maintain an anti-nuclear position. Her party however, had and everyone in France remembers the election where an interest in assuring themselves of as many seats as pos- Jean-Marie Le Pen of the Front National beat Lionel sible in parliament if the socialists win, (they have been Jospin of the socialist party into second place. The result promised 25-30) hence their willingness to compromise was an overwhelming victory for Jacques Chirac in the with the socialists. Almost anything can happen and the second round but the left was traumatized by this experi- negotiations over the nuclear issue may have very signif- ence. Currently Francois Holland leads the polls with icant consequences for the outcome. 11 Hyperbolic disasters

In November 2011 the CESifo Prize Fellowship was awarded to Professor Sir Partha Dasgupta, a past- president of the Society at Spatenhaus, Munich. This is an edited version of the address given by Ray Rees to mark the occasion. A mathematical appendix to this article is available from the author on request ([email protected])

Sir Partha Dasgupta has made many important contribu- ticated, so to bring the importance of their result home to tions to the literature of economics, in pure theory as well you I’d like to suggest a simple concrete example. as applied economics and the economics of public policy. Suppose investment A takes the form of buying shares in One of his most interesting recent contributions is the a company that installs ash trays on the handlebars of 2005 AER paper he wrote with Nobel Laureate Eric Harley-Davidson motorbikes. And investment B is to buy Maskin on ‘Uncertainty and Hyperbolic Discounting’, 5-year Greek bonds. Then Dasgupta and Maskin have and it is the idea in this paper that I want to present to you proved that it is perfectly rational to invest in a business tonight. installing ashtrays on motorbikes in preference to buying Greek bonds. I think that makes their result extremely Hyperbolic discounting is a method for expressing how plausible. people value sums of money that will be received at some time in the future, for example the payoff to an invest- However, to illustrate the possible dangers inherent in ment. This method is very different from the standard this kind of rationality I would like to tell you the follow- way we do that in economics, commonly known as ing story. Three friends were on holiday on a cruise ship, ‘exponential discounting’, and to many economists cruising off the coast of China. One was an investment hyperbolic discounting seems to represent irrational banker, one an economic theorist, and the third a moral behaviour. In fact it’s often associated with addictive or philosopher. All had studied at Cambridge under extremely short-sighted Professor Dasgupta and behaviour, a strong pref- indeed the banker, a tall, erence for immediate as The economist suggested the following division of labour: well-built man, was also compared to future satis- he and“ the philosopher would bail out the water that was seeping a Cambridge rowing faction. It also gives rise into the boat, which they had to do with their bare, cupped hands. blue. In the dead of night to ‘time inconsistency’, The banker would row the boat in a direction to be decided — he the cruise liner was for example, as when I was after all too big to bail. attacked by pirates, but in decide in January that ” the darkness the three I’m going to save up to buy my wife a fur coat for were able to escape in a small boat. At daybreak they dis- Christmas but then in July spend the money on a ticket for covered two unfortunate things: first, that there were only the World Cup. 3 litres of water and 3 kilograms of bread in the boat; and second, that there was a small but steady stream of sea- The contribution of the Dasgupta/Maskin paper is to water coming through a leak in the boat just below the show that the behaviour modeled by hyperbolic discount- water line. ing can in fact be rational in some situations. For exam- ple, suppose that you have the choice between an invest- The economist suggested the following division of ment A, which gives a net return of 1000 euros no later labour: he and the philosopher would bail out the water than in 3 months’ time, and an investment B, which that was seeping into the boat, which they had to do with returns 1200 euros no later than in 12 months’ time. their bare, cupped hands. The banker would row the boat Suppose also that there is some probability that the pay- in a direction to be decided — he was after all too big to offs could arise at any time within the next 3 months, so bail. The others readily agreed. there is a chance that the payoff from B could in fact occur sooner than the payoff from A. The paper shows They also agreed to divide the food and water equally that the investor could decide initially that she prefers B, between them right away, at the outset — 1 litre of water because of the chance that it could yield its return sooner and 1 kilo of bread each — but since they were all believ- than A. But if, say, after, two months, that has not yet hap- ers in methodological individualism, they agreed that pened, it is perfectly rational for her to switch preferences each would have complete control over the way in which and say that she now prefers investment A, because the he consumed this, i.e. each was free to choose his own chance that B will materialize in the time remaining is consumption path. now too small. The crucial decision was that concerning the direction in As you might expect, Dasgupta and Maskin’s proof of which to row. There were two possibilities. Possibility A this is both extremely elegant and mathematically sophis- was that they could row in the direction of the Chinese

12 mainland, which they estimated they could reach in 2 days. and water left, we were lucky enough to be sighted by the The problem was that they didn’t know what would await Chinese fishing junk and rescued. them there and how they would be able to find a ship to take them home. Possibility B was that they could row in exact- ‘I have to say however that this terrible experience has ly the opposite direction, out to the main shipping lanes, brought the three of us much closer together and has where they would then be certain to be picked up by a pass- greatly strengthened our bonds of friendship.’ ing ship and their rescue would be complete. But this would Shortly afterwards the Wall St. Journal got hold of this take them four days. They knew that there was a possibility story and published it under a headline that nicely sum- that if they chose A, a wind might spring up and propel them marizes it: more quickly to the shore, while if they chose B, there was a chance that they could be picked up at any time by a ship Chinese Junk Bonds Survivors of that had deviated from the shipping lanes, and so they might Bail-Out Rescue after Banker's Collapse be rescued earlier than expected. They decided unanimous- ly to choose B and to head for the shipping lanes. The RES Lecture I think this fits the setup in the Dasgupta/Maskin paper very well. I should also tell you that the banker was a (quasi- Britain’s Public Finances )hyperbolic discounter, the economist an exponential dis- The RES Annual Lecture was given by Robert Chote, counter, and the moral philosopher did not believe in dis- Chairman of the Office for Budget Responsibility, at counting the future at all. He believed it was, well, immoral. University College London, on 14 December and at Four days later, the boat was found drifting close to the the University of Birmingham on 15 December. coast by a Chinese fishing junk. The banker and the econ- omist were lying unconscious at the bottom of the boat, Why do governments tax, spend, lend and borrow? At a the philosopher was madly bailing water out of the boat, time when fiscal management is under intense scrutiny and all the food and water was gone. around the world (and in these pages) Robert Chote select- ed this as his theme for the RES 2011 Annual Lecture. At this point it occurs to me to ask Professor Dasgupta if He first discussed the key reasons why governments tax he is able to apply his model to explain this empirical out- and spend — to provide ‘public goods’ such as defence come. However given that he has already presented a and criminal justice; to replace ‘missing markets’ in such paper this evening it seems fairer to give the story told by areas as unemployment and incapacity insurance; to the philosopher. I tell it in his own words. influence behaviour, for example, by discouraging social ‘Well, we set off toward the shipping lanes and since it may ‘bads’, such as smoking and encouraging social ‘goods’ have taken 4 days, I resolved to consume one quarter of my such as putting money into pensions; and to redistribute bread and water each day. As we rowed along, I noticed to resources via taxes and benefits. my dismay that my friend the banker had consumed one- Robert then looked at reasons why governments borrow — half of his bread and water on the first day and my friend the because of inevitable errors in revenue and spending fore- economist just over one-third of his, but since I am a believ- casts; to support inter-generational fairness; to stabilise tax er in an individual’s right to decide I said nothing. rates; to implement macroeconomic management; and ‘Toward the end of the second day, though we were making finally, for political expediency as voters typically like good progress, I noticed that the banker had now consumed having money spent on them more than paying taxes. just over one-half of his remaining bread and water, and the The lecture then provided a snapshot of Britain’s public economist just under one-third of his. But even more worry- finances today, explaining the OBR’s latest forecasts of ingly, the boat had turned completely around and was now public sector spending, revenues, borrowing and net debt in heading back towards the coast. When I voiced my concern 2011/12 as presented in the November 2011 Economic and I was told by my economist friend to shut up because I was Fiscal Outlook. It also introduced the ‘Whole of not behaving rationally, whereas our banker friend was, Government Accounts’, a newly available measure of the given his preferences and probability beliefs. I obviously public sector’s financial health, which shows the sector’s hadn’t read the Dasgupta and Maskin paper. balance sheet in a similar way to private sector accounts. ‘Then, on the third day, disaster struck. The banker again This produced the startling revelation that the liabilities of consumed over one-half of his remaining bread and water the UK public sector were roughly twice its assets and that and the economist more than a quarter of his, but a few Britain was therefore technically insolvent by a large mar- hours later the banker suddenly collapsed. He had exhaust- gin. This enabled Robert to explain that the asset side of the ed his reserves of energy and could no longer row the boat. balance sheet failed to take account of the single biggest The economist took over the rowing, but after some hours he asset — the government’s ability to levy future taxes. This too collapsed and couldn’t row any further. The boat was now was a dramatic way of introducing students to the idea that simply drifting, at the mercy of the currents, while I kept on future income streams can be ‘capitalized’ and that the bailing. On the fourth day we barely had the strength to con- principle can be applied to tax revenue. sume the last of our bread and water, but then, with no bread Continued on p.15...

13 On the Side of the Angels? Economists, Protest and Positional Rents At a time when rewards to top bankers and others are subject to popular protest, David Collard, at the University of Bath, argues that economists should be less keen to defend the status quo by showing more awareness of the role of economic rent in the setting of higher level rewards.

Occupations of Wall Street and the City of London have risk-taking. Soldiers and surgeons take risks: on the whole been mainly about income distribution, the People versus chief executives do not. Bankers. Or ‘who gets hold of the stuff?’ But here’s a paradox. Economists know more than almost anyone else Ricardo famously observed that ‘a tax on rent would about the warts and imperfections of the labour market. affect rent only; it would fall wholly on landlords and So, in spite of being pretty well paid, they should be on could not be shifted to any class of consumers’ the side of the angels. Yet they are widely perceived by (Principles, chapter X). Economic rent fits well with the demonstrators and protesters to be apologists for ‘the sys- classical notion of a ‘surplus’: but it has never sat happi- tem’. I believe this is partly because spokespeople from ly with our default theory, the neo-classical theory of dis- business or finance, many of them with degrees in eco- tribution. The ‘adding-up’ problem was elegantly solved nomics, automatically resort to a simple ‘default’ theory at the end of the nineteenth century (using a theorem due of distribution. They are, as Keynes might have said, to Euler) in a fashion that seemed to preclude a fixed fac- seized of a powerful theory. tor earning rent. The popular classroom device of the Cobb-Douglas production function (or its close relation The powerful theory in question is usually some version the CES) commonly uses two factors, human and physi- of marginal productivity theory. Under competition, cal capital. Again, rent has no place. This rent-less treat- allocative efficiency is satisfied when a worker’s wage ment of both production and distribution provides a rate equals his or her marginal value product. And the framework for most of our macro-models. wage also just compensates the worker as it measures the (money value) of the marginal disutility of effort. Or, if If the view taken here is correct, that is to say positional you prefer, the real wage equals the marginal rate of sub- rents are important, several implications follow. stitution between income and leisure. So the outcome is 1. There is no presumption that positional rent bears doubly satisfactory: it balances value to society against any relation to marginal value product (this is a fortiori subjective cost to the individual. the case if the activity is a zero-sum game). Picking holes in the default theory is not difficult. Any first 2. On the other hand by definition the positional rent year student could do it (externalities, monopoly, zero-sum will be above marginal supply price. activities, etc.) The particular hole I would like to pick here concerns positional rents (analogous to positional goods). 3. To the extent that high pay contains a positional The world to which the default theory is applicable has rent, taxing it cannot have significant output effects. been a shrinking one: the upper echelons of pay in the pub- 4. Policies for public expenditure or income redistrib- lic and corporate sectors have long contained elements of ution, financed by taxing positional rents, cannot be economic rent. Those who set pay have been able, just like finessed by disincentive arguments. aristocratic landlords, to ‘cream off’ a layer of revenue before it gets distributed to the ‘factors of production’. 5. Traditional arguments for economic justice may be These positional rents are not quite the same as Marshallian allowed to carry more weight, since the implied trade- quasi-rents as they do not necessarily get competed away. off between efficiency and equality is not so sharp. The personnel might change but the positions do not. The 6. Recent arguments that more equal societies (for mechanics whereby positional rents are preserved are by example, that those with flatter earnings structures are now fairly well-known. Inter-locking remuneration com- happier ones) also carry more weight. mittees often operate as ‘clubs’ and design attractive pack- ages (or ‘compensation’) for chief executives and the tier In short my plea is for a more explicit role for economic immediately beneath them. Investment funds (supposedly rent, not merely in popular versions of the default theory guarding shareholders’ interests) are not exempt. Public but in our professional work. That might have the effect sector institutions (even universities) then look for com- of making us less up-tight about taxation and more sym- parators (based on indicators such as budgets) for their own pathetic to the half-formed economics-of-the-street. To chief executives. Sometimes an international bench-mark paraphrase Dr Johnson, ‘there are few ways in which a may be found. These rewards seem to be only loosely policy-maker may be more innocently employed than in linked to success or failure and hardly at all to personal stripping the rich of their positional rents’.

14 ppphw+−(1 ) present value =+ + A haircut every year 1(1)(1)++rr23 + r Governments in the European Union suffer under high Taking these remainders as the same we can calculate h from the other values. Our prime conclusion: the haircut on a bul- rates of interest. Components of interest are: (1) the let scheme can be seen as redemption in an annuity scheme. risk free rate like Germany has; (2) the liquidity pre- mium that we can determine from, say, the difference Assume a bond with principal 100 per cent (w = 1). between Germany and Holland or Finland; (3) the Germany would have r = 2 per cent and b = 2 per cent so risk of default that applies to Greece; and (4) stigma that no haircut is feasible and h = 0. Greece has a liquidi- that consists of irrational factors that become ration- ty premium so that r = 2.25 per cent. The value b = 18 per 1 cent for Greece comes from a somewhat curious calcula- al since they are rewarded. Thomas Colignatus tion by the ECB. The ECB uses current market value X of suggests a new rule helps to reduce (4) and to prevent old debt and then calculates the yield or internal rate of it developing into (3). return, using the formula of a bullet loan under the assumption that there will be no haircut. The current value In October 2011, ten year bonds in the EU had widely dif- X, however, comes from markets that use a ‘probability’ of ferent rates of interest. Germany paid 2 per cent while the a haircut. The mismatch in formulas and choice of the risk ECB recorded 18 per cent for Greece. The 2 per cent can free rate is removed by interpreting the 18 per cent as a be regarded as the market risk free rate and the difference term in an annuity scheme that partly contains redemption. of 16 per cent covers liquidity, true default risk and stig- ma. As Delbecque (2011) explains, an important distinc- If Greece indeed pays 18 per cent on a new bullet loan, tion is between existing debt (solvency) and new debt (liq- and doesn’t give a haircut, then there will be excessive uidity). The following mechanism gives a rule for manag- profit taking by investors. The only way that Greece ing new debt when fear for a default starts to feed on itself could conform to market expectations is to have a default and turns into stigma. See Colignatus (2011) for a longer indeed, though governments aren’t supposed to default. discussion and references. The whole situation is a conundrum. The solution lies in comparing a bullet loan with an annu- The current problem is not just risk of default but also that ity. Part of an annuity is redemption. Thus an investor can the Treaty of Maastricht was not built for the market process- feel safe that already part of the loan is paid back during es on stigma. This is probably best resolved by the regime the life of the loan. Putting hairs back is of course differ- ladder. ent from cutting hairs but financially it remains a sound Notes: way to deal with the risk of default. Investors can keep 1. http://www.dataweb.nl/~cool Colignatus is the science portfolios of annuities of different dates and thus build up name of Thomas Cool, an econometrician in Scheveningen, an average level of cash redemption over time as a way to Holland. insure themselves. The problem in the EU arises when bullet bonds are used where annuities are advisable. Bullet References: bonds carry only annual interest while the principal is only Colignatus, Thomas (2011), ‘Conditions for turning the ex redeemed at maturity. A haircut on a bullet seems like a ante risk premium into an ex post redemption for EU govern- breach of contract. This however need not be the case ment debt’, http://mpra.ub.uni-muenchen.de/35120/ financially if we consider the mathematics involved. Delbecque, B. (2011), ‘Capping interest rates to stop conta- The idea is to have a regime ladder too. For Debt/GDP gion in the Eurozone’, http://www.voxeu.org/index.php?q= ≤ 80 per cent bullet bonds can be used. For 80 per cent < node/7106 Debt/GDP ≤ 90 per cent annuity schemes are used and there is insurance support from a common regulator to The RES Lecture ...continued from p.13 suppress stigma and to enforce the common risk free rate. For Debt/GDP > 90 per cent there is no support and full Finally there was a discussion of the impact of the financial defaults may happen. crisis and the recession on Britain’s public finances, the scale of the repair job, the economic backdrop to the current The following formula gives the remaining debt in an debate — ‘Plan A versus Plan B’ — and finally the role of annuity scheme with annual payment p, number of paid the OBR itself as the UK’s independent fiscal watchdog. payments n, principal w and rate of interest r, say for n = 3. The formula can be understood as borrowing a perpe- Professor Rob Elliott Head of Birmingham University’s tuity value p / r and putting a part, p / r-w, into an account Department of Economics commented: ‘There has rarely earning interest. been a time when the state of the UK’s public finances has been under such scrutiny or the subject of such fierce pp⎛⎞ remainder=−+ (1rw )3 ⎜⎟ − debate. The Office of Budget Responsibility has a unique rr⎝⎠ position in analysing the UK’s public finances and as such, Consider a bullet loan that after three years is hit by a their analysis of the latest forecasts for public sector spend- haircut h on the principal w: ing, are hugely influential and demand close attention.’

15 most of its main arguments appear. In English, the essen- tial ingredients of Garegnani’s contributions are con- Obituaries tained in three key papers: his paper on heterogeneous capital in the Review of Economic Studies for 1970, his notes on consumption, investment and effective demand Pierangelo Garegnani in the Cambridge Journal of Economics for 1978-9 (orig- inally published in Italian in 1964-5), and his essay on the Piero Garegnani, a leading figure of the Cambridge classical economists and Marx in Oxford Economic School, died in Lavagna (near Genoa) on 14 October at Papers for 1984. These papers capture, respectively, his the age of 81. His professional life was centred around critique of neoclassical theory, his approach the theory of the examination of a single theoretical problem: namely, effective demand, and his account of the theoretical core the implications of the dependence of the relative prices of classical economic analysis. of commodities upon the rate of profit. His work explored this problem within both the classical and the Garegnani’s pursuit of the critique of neoclassical eco- neoclassical analysis of value, distribution, output and nomic theory was nothing if not relentless. Each time he employment. It propelled him to the forefront of the discovered an attempt to sidestep the difficulty neoclassi- Cambridge controversies in the theory of capital of the cal theory faced because of the dependence of the value 1960s and early 1970s. It saw him become the advocate of capital upon the real rate of interest, or each time he of a return to classical ways of thinking about the relation encountered a claim to have eliminated that problem alto- between the real wage and the rate of profit. It led him gether, he took up the challenge. There can be little doubt also to suggest an approach to the theory of output and that his greatest personal satisfaction came in 1966 when employment that liberated the Keynesian principle of Paul Samuelson conceded defeat in the reswitching effective demand from the narrow compass of the debate — since it had been during an academic year spent Neoclassical Synthesis. on a Rockefeller Foundation Fellowship at MIT in 1961- 2 that Garegnani had first challenged Samuelson over the Garegnani came up to Trinity College, Cambridge, in the surrogate production function. autumn of 1953. He had earlier completed his laurea as a junior member of Ghislieri College in the ancient In addition to this critical task, Garegnani also engaged in University of Pavia (where he wrote a dissertation on a more constructive project. That project had two dimen- Ricardo’s theory of value). In the early post-war years it sions. On the one hand, he opened-up a route to the study was rare for an Italian student to go on to study abroad, of effective demand that turned upon recognising the ana- let alone to go to Cambridge — perhaps even more so for lytical separability between the theory of output and the someone of Garegnani’s modest social and economic theory of value (something characteristic of Keynes and background. He was awarded scholarships from Trinity the classical economists). On the other hand, he revisited College, Ghislieri College and the British Council to sup- the classical theory of value itself in an attempt to build port this move. At Trinity, officially under the supervi- upon the foundations that Sraffa had laid down in sion of Maurice Dobb, but also with significant encour- Production of Commodities by Means of Commodities. agement and advice from Piero Sraffa, Garegnani embarked upon a research project that culminated in a Sraffa’s influence on Garegnani’s thinking was, of course, doctoral dissertation that must be unique in the annals of profound, and their professional relationship was very Cambridge Economics. close. Sraffa appointed Garegnani as his literary execu- tor; a task to which his considerable analytical skills were When the time came for its submission in December uniquely well suited. Upon Sraffa’s death in 1983, 1958, an unstoppable force in the form of Garegnani’s Garegnani took up the task with a seriousness of purpose need to say everything he wanted to say in exactly the befitting importance of the Sraffa Papers — and he manner he wanted to say it, encountered an immovable applied himself to it in his familiar painstaking, if unhur- object in the form of the Statutes and Ordinances of the ried, manner. His death has meant that those papers University of Cambridge which imposed strict limits to (which reside in the Wren Library at Trinity College, the length of doctoral dissertations. Neither flinched. Cambridge) still await publication. The dissertation, entitled ‘A Problem in the Theory of Distribution from Ricardo to Wicksell’, was duly divided Among those who knew him, Garegnani’s insistence on into two parts — but there were two Part Two’s. One Part analytical precision and attention to detail was legendary. Two was bound into the dissertation itself to accommo- It was a propensity that led him to delay, sometimes for date the Statutes. The other Part Two was inserted many years, the publication of his work. At times, it infu- (unbound) into a flap on the inside back cover to accom- riated some of us. But it also stamped upon his work a modate Garegnani. The examiners (Joan Robinson and meticulous and original flavour that is the hallmark of his Lionel Robbins) were cheekily invited by Garegnani to writing. read both if they so wished. Murray Milgate The dissertation itself was never published in English, but Queens’ College, Cambridge in his Il capitale nella teorie della distribuzione (1960)

16 * university to make a highly successful transition to the more Andrew Skinner rough-and- tumble higher education world of the late 20th Professor Andrew Skinner FBA FRSE, who died on 22 century and beyond. Fittingly, Glasgow conferred on him November 2011, was a major authority in his academic the honorary degree of Doctor of the University in 2001. speciality, the history of economic thought. He was also a key figure in the life of the University of Glasgow. In addition to his formidable teaching and administration, Andrew Skinner was a superb and highly productive schol- Born in Glasgow on 11 January 1935, Andrew Stewart ar. He became a highly respected authority on the influen- Skinner was the second of four children of Andrew tial political economists of the Scottish Enlightenment, Paterson Skinner, a Highland-born sales executive with especially Sir James Steuart and that towering figure (and the National Cash Register Company. The younger Glasgow professor) Adam Smith. He was a major force in Andrew’s mother, Isabella (née Bateman), was born in Glasgow University’s highly successful commemoration Ayrshire. Brought up near Glasgow, he was educated at of the 1976 bicentenary of Smith’s seminal work The Keil School in Dumbarton. He then entered Glasgow Wealth of Nations. That year he published an edition of it University, where he was a member of the Royal Naval (with Roy Campbell and W B Todd) and, with Tom Reserve and graduated MA with honours in Political Wilson, edited The Market and the State: Essays in honour Economy (economics) and Political Science in 1958. of Adam Smith. Andrew also produced an edition of Andrew then held a Glasgow-Cornell Exchange Steuart’s Principles of Political Economy (1966) and, in Fellowship for a year, an experience he wryly referred to 1979, wrote A System of Social Science: Papers relating to it as his BTA (Been to America). Postgraduate research Adam Smith. In 1982 he and Roy Campbell published a gained him a BLitt from Glasgow in 1960. He was tutor biography of Smith and a book of essays on the Scottish and assistant lecturer at Queen’s University Belfast from Enlightenment. Later, Andrew edited (with P Jones) Adam 1959 to 1962 and a Lecturer at Queen’s College Dundee Smith Reviewed (1992) and produced (with K Haakonssen) (at that time part of the University of St Andrews) an Index to Smith’s Works (2001). Also, Andrew published between 1962 and 1964. many articles and, though by instinct no globetrotter, trav- Andrew Skinner then began his meteoric rise in elled the world giving papers at conferences. Glasgow’s Department of Political Economy (later Economics was Andrew Skinner’s bedrock, his core aca- Economics): lecturer from 1964, senior lecturer from demic identity, as he demonstrated when he published in the 1970, reader from 1975, titular professor from 1977, 1990s (with Fred Hay and Christine Oughton) a textbook on Daniel Jack Professor from 1985 and Adam Smith microeconomics. Yet like his great subject Smith Andrew Professor from 1994. He was a dedicated teacher, famed was an economist, and a social scientist, of very broad inter- for coherent lectures in the classical style at all undergrad- ests, encompassing philosophy and history as well as eco- uate levels. Andrew inspired students with his expertise, nomic theory and institutions. Again like Smith, and other notably on the Age and Ideas of Adam Smith, which he key figures of the Scottish Enlightenment, Andrew took an taught even after his official retirement in 1997, and which analytical historical approach which was fundamental to his was particularly popular with overseas students. understanding of theory and its development. In particular, Andrew Skinner was devoted to his department (of which Andrew identified the systematic nature of Smith’s he was Head for some years), but he soon became a major approach to economics (the book title ‘System of Social academic leader beyond its boundaries. From 1980 to Science’ indicating his focus on this aspect of the interpre- 1983, the difficult period of the ‘Thatcher cuts’ in universi- tation of Smith). Andrew Skinner’s work has had a pro- ties, he served as Dean of Glasgow’s Faculty of Social found influence on our understanding of Smith and his con- Sciences, straddling the potential divide between his col- temporaries as well as being pioneering in modern histori- leagues and the university authorities with great skill and ography. This work earned him tremendous respect in the style. For the next thirteen years he exercised highly influ- international history of economic thought community. For ential university-wide leadership, first as Clerk of Senate his highly impressive research achievements Andrew was (chief academic administrator) to 1990, then as vice prin- elected a Fellow of the Royal Society of Edinburgh in 1988 cipal for the arts-based faculties of the institution to 1996. and of the British Academy in 1993. A defender of the University’s traditions, Andrew Skinner This galaxy of accomplishments might suggest a worka- was also a force for constructive change, notably of the holic. Yet Andrew Skinner never allowed his huge labours switch to devolved faculty-level management in the early to overwhelm him. Devoid of pretension, he was quietly 1990s. A problem solver by nature, he was a key if not gregarious, an excellent companion in the staff club, at always a deferential resource for successive Principals. Senate dinners and over cups of coffee in his office. Andrew was a genial colleague for other senior professors Andrew had a lively and irreverent sense of humour, which and an inspirational mentor to the deans who served under he shared with his wife, Mary, who survives him (as does him. He also represented the University ably on a succes- his sister Patricia). Together they were generous hosts to sion of Scottish university bodies. A product of the rela- colleagues and students in their house in a sylvan glen in tively stable Scottish university environment of the 1950s, Cardross, where they shared a passion for dogs and the gar- Andrew played a significant role in enabling his ancient den. Continued on p.19....

17 Pro Bono Economics - an update In the 146th issue of the Newsletter, July 2009, we highlighted an initiative by Martin Brookes and Andrew Haldane to launch this service whereby professional economists could make their skills available to charities on a ‘pro bono’ basis. Sue Holloway, Managing Director of Pro Bono Economics has sent us this update.

Pro Bono Economics was launched in September 2009. It lance, retired or working with economics consultancy is a charity whose aim is to broker volunteer economists firms such as Charles Rivers Associates, Europe to work with other charities, mainly helping them to Economics, Frontier Economics, FTI Consulting, Oxera measure their impact and value for money. and NERA. We have volunteers from the Bank of England and Standard Chartered Bank, as well as fifty from the The charities Government Economic Service and twelve from academia. Since then we have received proposals from over 70 chari- The benefits of getting involved with PBE do not accrue ties, mostly asking us to look at their impact, but in some only to the charities. PBE contributes to professional cases to produce a literature review or piece of analysis to development as economists get to apply their toolkit to support their advocacy efforts. Some are already well along areas they previously may not have worked on, and to be the road of evaluating their interventions and collecting data at the forefront of developing methodologies to measure on outcomes, while others are at the start of that journey. A social impact in a more robust and rigorous way. number have not been able to continue the conversation with us because of the pressures of the current funding envi- The challenges facing PBE volunteers ronment, which takes up all the time and energy of a few Data is often a challenge — the charity may not be collect- dedicated members of staff. Others have not had sufficient ing the information needed to inform an economic analy- data to allow a piece of sis, or may not be collecting it on economic analysis, but Bank of England economists looking at Barnardo’s work with young a consistent basis. Many charities our volunteers have people at risk of sexual exploitation were able to use a difference in are working with very small advised them on what treatment age between two local authority areas and econometric groups, and volunteers may need they should be collecting modelling to create a synthetic control group (full details of the method- to look at interactions between in order to be able to do ology can be found here: http://www.probonoeconomics.com/projects). sample size and the magnitude of this in the future. And Their innovative approach showed that outcomes were likely to deteri- the change effected, to under- some have been able to orate without Barnardo’s intervention, and that the costs avoided were stand both significance and share rich datasets which greater than a simple before and after analysis suggested. power, and whether it’s possible have allowed the volun- to draw any statistically signifi- ‘The moral argument for helping girls and boys who are exploited for teers to look at the value sex is plain — now we have tangible, economic evidence of the neces- cant conclusions from the data they are creating across a sity for specialist help too.’ Anne Marie Carrie, Chief Executive, available. While official admin- number of dimensions. Barnardo’s istrative data may be necessary to To date we have complet- track longer term outcomes for ed 10 projects, details of which can be found on our web- the client group, the charity may not be able to get hold of site: www.probonoeconomics.com/projects, with another it easily or at all. 21 in various stages from scoping to near completion, and Some areas of intervention are well researched and there 13 at the early stage of discussing feasibility. is a wealth of academic literature and evaluation material The charities we have worked with are immensely grate- to back up assumptions about the longer term impacts of ful for the help they have received ... interventions. In other areas, there is very little to go on ‘We are proud to have had our work evaluated by econo- and heroic assumptions have to be made. In all cases, mists from a leading consultancy. We hope this is a first transparency about the assumptions made and the step in defining terms and creating measures that others strength of the evidence-base is key, to allow discussion can adopt, ultimately producing transparent reporting and challenge, and continuous improvement. across all organisations in our sector.’ — Baroness Most charities do not have the resources or, in some Stedman-Scott, Chief Executive, Tomorrow's People cases, the mandate to conduct a randomised control trial. ... but there are still many charities grappling with the Often, identifying an appropriate counterfactual can be need to demonstrate their impact, who have yet to under- problematic. Potential ways to overcome this include stand or appreciate the value of economic analysis to their comparisons with an appropriate national average — business and so do not seek it. assuming the charity collects sufficient data to be confi- dent that their client group is representative of the nation- The volunteers al profile — self selection bias is a big issue in some types To date over 160 economists have registered as volunteers. of intervention. Where the charity or the volunteer can The majority come from the private sector — either free- access a large administrative dataset, it may be possible to

18 identify a control group through propensity score match- ue to fill this missing market for many years to come. ing and compare outcomes. The economics profession, unlike lawyer and accountan- There is still considerable debate about what should and cy colleagues, does not have a history of volunteering should not be included in a wider social cost benefit analy- using their professional skills. We hope to continue to sis. If we want to focus narrowly on savings to the provide these opportunities to make a valuable contribu- Exchequer, we need information on the marginal rather than tion to the third sector while at the same time enhancing average cost of savings in public expenditure, unless we are the professional development of the economists who vol- dealing with an intervention that is unteer with us. We want to operating at such a scale that suc- ‘Working with St Basils through PBE has been a great expe- develop guidance on methods cess would lead to the closure of rience. We have had the opportunity to broaden our own pro- and share information on the lat- whole institutions or substantial fessional skills across a complex and fascinating set of est research and published costs, parts of them. Unfortunately most issues. We would encourage other economists to get involved in order to support volunteers of the published cost information with PBE..’ — Patrick Curry and Ben Gill, HM Treasury and ensure they can hit the is based on average costs, which ground running when they leads to inflated estimates of savings. The important thing embark on a project. here is to be careful about how the benefit from reduced To do all this we need three things: public expenditure is described and to make a distinction between what is cashable (reduced benefit payments to • more discussions with charities to build demand and someone who is now in work) and what is not (the average ensure a pipeline of feasible projects — if you are involved cost of preventing re-offending). with a charity who might benefit from PBE’s services, start the conversation and put them in touch with us here Ideally we want to include improvements in individual http://www.probonoeconomics.com/charities-register; well-being brought about by the charity’s intervention. These are particularly difficult to measure and value, but • continuing support from economist volunteers — get in with the collection of national well-being data by the touch here http://www.probonoeconomics.com/econo- ONS, and developments in valuation methodologies mists-register if you are willing and able to spend a cou- using the life satisfaction approach (see a discussion ple of days scoping a project, or half a day peer reviewing paper by HM Treasury and DWP here http://www.hm- a piece of analysis, or if you would like to be part of a team treasury.gov.uk/data_greenbook_news.htm), it may not who can work on producing a piece of analysis over the be long before we can begin to include these important course of many months — the input will vary according to benefits in our economic analysis. the complexity of the analysis and the size of the team; Lessons learnt • continued funding for the central team, including a mod- est expansion — if you would like to donate, see our web- We are grateful to the 80+ economist volunteers who have site http://www.probonoeconomics.com/donate-now or contributed or are contributing to a project in some way. contact us at [email protected] Many are doing so entirely in their spare time, and we have learnt the importance of using teams wherever possi- ble, so that the inevitable peaks and troughs of working Andrew Skinner ....Continued from p.17 life can be smoothed across a number of team members. They refreshed themselves with occasional trips to The small central team (currently two full-time staff) has Portugal and regular sojourns in their caravan in the a key role in managing the charity/volunteer relationship Highlands. and ensuring a high standard of economic analysis. We do the latter through sharing resources and best practice with Academic life depends for its vitality on individuals with the volunteers, commenting on work at appropriate stages keen intellects, wide sympathies, generous temperaments and arranging for an independent economist (i.e. who has and outgoing personalities. Andrew Skinner brought all not been involved in the project) to peer review the final these qualities, as well as huge achievement, to econom- analysis. We also work with the charity on how the results ics, and to Glasgow University, over a period of almost are publicised, helping them to communicate clearly what sixty years. His discipline and his institution have lost the analysis is and isn't saying — avoiding the simplistic one of the great academics of his time, but his influence interpretation and taking the caveats seriously. endures. What next Rick Trainor Principal and Professor of Social History There is still more to do to spread the word that economists King’s College London are willing and able to help charities demonstrate the value Glasgow University 1979-2000 of the outcomes they produce. There are many charities who would like this kind of support, but cannot afford to *This is a revised version of the obituary that appeared in pay for in-house or outsourced economists, and would, in The Herald [Glasgow] on 30 November 2011 and draws on any event, be unlikely to pay for the amount of analysis that inputs from Sheila Dow, Fred Hay, Mary Skinner and its public value would suggest is optimal. PBE can contin- Andrew Stevenson.

19 The National Debt in Perspective The nation is now being persuaded that the problem of the national debt is so bad that we cannot avoid years of misery. A look at the history of the debt suggests a rather different picture. Prof Robert Neild, University of Cambridge, provides a historical perspective.

Britain, a leader in the management of government edly introduced, but they were frustrated by the reduction in finances, has maintained a national debt without default GDP caused partly by those very measures. The ratio of for more than three centuries. The ratio of debt to GDP has debt to GDP went up, not down. Although prices fell sub- often been far higher than it is today. stantially, the money value of the debt was not reduced in any inter-war year significantly below the 1919 level. Debt:GDP GDP Unemplo- Year Gross debt % £’000mn £’000mn yment % The aim of official policy after the 1914-1918 war was to cut expenditure in order to reduce taxation from wartime 1816 260 0.78 0.30 - levels and reverse inflation to the point where the pound 1914 24 0.62 2.55 3 could be returned to gold at pre-war parity. Sharp cuts 1919 127 7.41 5.83 3 briefly reduced the deficit in 1920, but in the depression that 1923 176 7.73 4.39 12 followed debt went up and GDP went down. Consequently 1929 158 7.49 4.73 10 the ratio of debt to GDP rose to 176 per cent in 1923, in 1933 179 7.63 4.26 20 which year recorded unemployment reached 12 per cent, 1939 137 8.15 5.96 11 and the wage rate index had been reduced by 30 per cent since 1920 amidst industrial unrest which culminated in the 1945 225 21.4 9.5 1 General Strike of 1926. By 1929 there was some recovery, 1970 67 33.1 49.4 3 but the Wall Street crash, together with the British govern- 1980 43 95.3 222 7 ment’s deflationary response, caused unemployment to 1990 35 193 551 7 reach 20 per cent in 1933 and the debt to GDP ratio to reach 2000 45 426 943 5 nearly 180 per cent. A reduction in the debt ratio came after 2010 75 [53]* 1,071 [760]* 1,437 8 1933 when GDP rose in response the devaluation of the * Debt net of assets (including bank shares acquired in rescue pound in 1931, the introduction of cheap money and, later, operations) as used in government and OBR statements. the loosening of the budget (substantially disguised by win- Source: 1816 to 1939 from B R Mitchell, British Historical dow-dressing) for the sake of rearmament.1 Statistics, CUP 1988: pp. 600-3, 822, 832-4,124. 1945-2010 from Monthly Statistics of Public Sector Finances, Government Statistical Variations in GDP had a stronger effect on the balance in Services, Methodology Series, No.12, Annexe Table D4, and later the budget in the inter-war years than before. Social bene- figures provided by ONS; unemployment from ONS. fits and progressive taxation had been introduced in 1911- 12, and the level of government expenditure and taxation Some history had settled at roughly 20 per cent of GDP after the war, After the Napoleonic Wars, the debt reached 260 per cent compared with 10 percent before. But budgetary ortho- of estimated GDP. For more than fifty of the previous hun- doxy did not change. It was still held that the budget dred years, Britain had been at war. Our tax system, though should be balanced: that a deficit, by diverting funds from superior to that of most countries, and strengthened when productive to unproductive uses, ‘crowded out’ private Pitt introduced the income tax in 1798, could not produce investment. The Keynesian insight that expenditure cuts nearly enough revenue to match wartime military expendi- and tax increases might reduce output and hence weaken tures, including the subsidies we paid to allies. the budget was not entertained. There followed ninety-eight years in which we were not A radical change came at the beginning of the 1939-1945 engaged in a Continental war. The debt fell to 24 per cent war, brought about by the acute needs of war and the inge- of GDP. That reduction resulted scarcely at all from reduc- nuity of Keynes in devising means of meeting them. In his tion of the debt, almost entirely from a more than eight- General Theory, published in 1936, Keynes, using the fold increase in the money value of GDP. That is an annu- case of a market economy with no taxation or public al rate of growth of just over 2 per cent, compound. Since expenditure, had shown why persistent unemployment the price level was reduced by the influx of cheap food may come about through inadequacy of total demand for from the Americas and Antipodes late in the century, the the potential output of a market economy.2 In three news- burden of the debt was aggravated by deflation. paper articles published in 1939, and re-published in 1940 The financing of the 1914-1918 war was so loose that the in a pamphlet entitled How to Pay for the War, he com- debt went up 12 times, but since the price level doubled the pared the wartime prospects for total demand in the econ- debt ratio rose only to 127 per cent. In the years following omy with potential production, using early national income the war severe measures to tighten the budget were repeat- accounts.3 ‘The huge rise in government expenditure, he

20 argued, would create more demand than the economy could This history suggests two lessons for today. First, today’s meet, unless private spending were to be sufficiently cur- ratio of debt to GDP does not look abnormal, let alone tailed by taxation; if it were not so curtailed, the gap would alarming. Second, the coalition government’s policy of be closed by inflation. In the budget of 1941, this doctrine trying to tighten the budget by sharp cuts in expenditure is was adopted as official orthodoxy.’4 The politicians did not a near repetition of the policies of the inter-war years. It is fully implement the wartime measures proposed by having the same counter-productive effects: by depressing Keynes, which included a scheme to supplement income GDP it is preventing the intended reduction in the budget tax with temporary taxation to be repaid after the war. deficit, and it is causing social distress. It has been justi- Much reliance was placed on direct controls to limit fied partly by invoking again the primitive doctrine of the demand and to hold down prices. But the understanding of balanced budget, partly by the alarmist suggestion that budgetary policy was transformed. It was seen to be a mat- cuts have been urgently needed to prevent a loss of confi- ter of demand management. dence in our national debt comparable to that afflicting Greece and some other fiscally-ungovernable countries. In the period of post-war reconstruction and the period of Cold War rearmament that followed, the task was to con- Alarmism tain excess demand. Then, as normal times returned, the Was this alarmism necessary? Was the government right task was to stimulate or check demand so as to induce full when it suggested that foreigners might take fright at the employment. The balance in the budget no longer guided size of our budget deficit if dramatic action was not taken? policy. Rather, it was assumed, rightly, that if demand was managed so as to employ the economy just to the full and The guarded but unmistakable message of alarm from the foreign trade was kept in balance, the government's bor- Chancellor in his emergency budget speech on 22 June rowing (or repayments of debt) would match the savings 2010 (Hansard col. 166) was this: (or dis-savings) of the private sector: the balance in the This is an emergency Budget, so let me speak plainly about budget was now the tail, not the dog. the emergency that we face. The coalition Government In the twenty-five years from 1945 to 1970 this policy led to have inherited from their predecessors the largest budget the reduction of the ratio of debt to GDP from 225 per cent deficit of any economy in Europe, with the single excep- to 67 per cent: while the national debt increased by just over tion of Ireland. One pound in every four we spend is being 50 per cent, GDP went up more than five times. Inflation, borrowed. What we have not inherited from our predeces- which averaged 4 per cent a year, caused more of the sors is a credible plan to reduce their record deficit - this at increase in money GDP than growth in the volume of output, the very moment when fear about the sustainability of sov- ereign debt is the greatest risk to the recovery of European which averaged 2 per cent a year. Compared with the mis- economies. Questions that were asked about the liquidity eries of the inter-war years, this was an age of great prosper- and solvency of banking systems are now being asked ity. ‘You’ve never had it so good’ and ‘Invest in Success’ about the liquidity and solvency of some of the were Conservative Party slogans of the era. With the welfare Governments who stand behind those banks. I do not want state now established, the level of taxation and public expen- those questions ever to be asked of this country. That is diture were 40 per cent or more, twice as high in relation to why we have set a brisk pace since taking office. GDP as in the inter-war years: the reaction of the balance in the budget to changes in GDP was correspondingly greater. To obtain some evidence by which to judge this alarmism I have put together statistics of the budgetary position of Since 1970 the debt to GDP ratio has not changed greatly. Britain and a selection of European countries in 2010, Having fallen to 67 per cent in 1970, it declined further in together with an index of the level of corruption in each the next two decades and then rose recently to 76 per cent country. The budget and debt figures follow standard in 2010. This is substantially higher than the figure used European definitions and so differ slightly from the British by the government — 53 per cent for 2010 — which is net historical figures above and from those used by the gov- of the assets it holds, including bank shares acquired in ernment and Office of Budget Responsibility. The corrup- recent rescue operations. To achieve historical continuity I tion index has been included to serve, in the absence of have stuck to the gross debt. anything better, as a proxy indicator of the ability of a The small change between 1970 and 2010 in the relation- country to cut government expenditure or raise tax if that ship of debt to GDP has been the consequence of the debt is needed to correct the balance in its national budget. If a increasing 32 times and the GDP 28 times, one almost in country has much corruption it is likely to have weak gov- step with the other. Inflation, which reached an average of ernment with limited ability to enact or enforce budgetary 14 per cent a year in the 1970’s when Heath and Callaghan restraint; and vice versa. The index ranks countries by were faced by surges in the price of oil and by the reaction their perceived levels of corruption, as determined by of the then-powerful trades unions to the consequent expert assessments and opinion surveys. squeeze on real wages, was at first the main cause of the 1. Top are two ‘good’countries: Denmark which is first-equal increase in the money GDP; but in each subsequent decade on the corruption index with New Zealand and Singapore; inflation declined, till from 2000 to 2010 it averaged only and Sweden which comes second-equal with Finland. In 2½ per cent. Real GDP grew at an average rate of two per both, debt in relation to GDP is relatively low at about 40 per cent or more in each decade till 2000 to 2010. cent; the budget is close to balance; taxation is high.

21 Budget Indicators and a Corruption Index for to tighten up again. Only if demand is revived will the meas- Selected European Countries, 2010 ures being taken to encourage business investment and improve the training of labour bear fruit. With inadequate Govt Budget Govt Corruption demand for their products, businessmen will not invest; with debt balance revenue index Country inadequate demand for their labour, trainees will not get jobs. as % of GDP rank order Notes: Denmark 44 -2.6 56 1= Sweden 40 0.2 53 2= 1. See Roger Middleton, Towards the Managed Economy: Keynes, the Treasury and the fiscal policy debate in the 1930s, London, Germany 83 -4.3 44 15= 1985, pp.80-83 and 106-109. UK 80 -10.3 40 20 2. J M Keynes, The General Theory of Employment Interest and France 82 -7.1 50 25 Money, London 1936. Spain 61 -9.3 36 30= 3. John Maynard Keynes, How to pay for the War: a Radical Plan Portugal 93 -9.8 42 32 for the Chancellor of the Exchequer, London, 1940. Italy 118 -4.6 46 67 4. J C R Dow, The Management of the British Economy, 1945-60, Greece 145 -10.6 40 78= Cambridge, 1964, p.7. EU Average 80 - 6.6 44 Sources: Eurostats and Transparency International’s Corruption Finally... Perception Index I have a comment on the contribution by Mark Harrison entitled ‘Surely you’re joking, Mr Keynes’ (Newsletter no.157, October 2. In the second group are Britain, France and Germany. 2011) concerning his critique of the regressions offered by Chick Their scores on the corruption index are very respectable. In and Pettifor (C and P) as part of their Keynesian history of macro- all three government debt as a percent of GDP is close to 80 economics over the past century.1 In order to test how changes in per cent, with Britain’s slightly the lowest of the three. All the budget have influenced the debt/GDP, they chose as their meas- have significant budget deficits. Britain’s deficit is the largest ure of the budgetary stance (the independent variable) the change in at 10.3 per cent; its taxation is lowest at 40 per cent of GDP. government expenditure on goods and services, nothing else. They 3. Next are Spain and Portugal with significantly worse cor- totally omitted changes in government revenue and changes in ruption scores, rather high budget deficits at around 10 per- expenditure on social benefits (and other transfer payments) on the grounds that they are partly the endogenous consequence of changes cent of GDP; debt is 61 percent of GDP in Spain, 93 per cent in GDP. This might have been justifiable if changes in tax rates and in Portugal; both have low tax revenue in relation to GDP. in the rates of benefits had been negligible components of policy 4. Last come two ‘bad’ countries, Italy and Greece. Italy compared with changes in expenditure. But that is not so, except comes sixty-seventh on the corruption index between possibly in wars. Changes in tax and benefit rates have been a major Rwanda and Georgia; Greece comes seventy-eighth. feature of peacetime budgets for the past century, a point that can be Greece’s figures show debt of 145 per cent of GDP, a deficit demonstrated with some precision for those inter-war and post-war of 10.6 per cent and low tax revenue. Linked to its bad cor- years for which cyclically adjusted measures of government revenue 2 ruption score, that looks a toxic mixture, as it has proved to and expenditure are available. While C and P’s descriptive analy- be. Italy’s figures are not so bad: debt at 118 per cent, a deficit sis is valuable, their regression analysis is suspect because of this peculiarity of their independent variable. Apparently unaware of this under 5 per cent and tax revenue at 45 per cent of GDP. problem, Prof Harrison takes C and P’s data and, after specifying a How would one judge the British government’s credit if different equation, finds the association that they found to be absent. one looked at these figures alone? Our deficit — the one From this result (and some rather combative arguments) he con- figure picked out by the Chancellor — is high, but our debt cludes strongly but imprecisely ‘Our country cannot afford to spend to GDP is average and our tax ratio is low. Our good cor- its way out of debt.’ ruption score indicates that we are capable of raising tax or I find this a worrying example of what has happened to econom- cutting expenditure. And, it might be added, our history is ics since it became so heavily focused on the study of mathe- outstandingly good. Few if any other countries have man- matical techniques rather than the careful analysis, in words as aged their national debt for 300 years without default. One well as numbers, of the evolution of the world around us. It is would conclude that some action was needed, but not that surely a mistake to suppose that one has proved anything much there were any grounds for alarm. about causation by finding, or failing to find, an association between two out of the mass of variables, measurable and Conclusion immeasurable, that are in play in a complex problem like this. The application again of the balanced budget policy of the Notes: inter-war years, justified by alarmism, is leading us into an 1. Victoria Chick and Ann Pettifor, The Economic Consequences of unnecessarily deep recession. Mr Osborne: Fiscal consolidation: Lessons from a Century of The remedy lies in judiciously loosening the budget and Macro Economics www.debtonation.com, June 2010. keeping the exchange rate down so as to boost demand. Then 2. Roger Middleton, op.cit., p.135, for the years 1929-39, and T.S Ward the GDP will recover, the budget balance will improve, and R.R. Neild, The Measurement and Reform of Budgetary Policy. unemployment will decline, and it may become appropriate Institute for Fiscal Studies, London, 1978, p.42, for 1964-1979.

22 courses also have the potential to introduce undergraduates to a wider range of careers available to them after university. Many departments find student-centred learning and self- and peer-evaluation have enhanced the learning process for undergraduates, not only because it allows students to learn from mistakes and experience, but also because they will Shaping tomorrow's economics graduates develop their skills in critical analysis and problem solving. The Economics Network has also found that many lecturers A note from Ashley Lait offer more feedback throughout modules rather than simply In the context of higher student fees, rising graduate unem- after formal pieces of assessment, a change which in many ployment, the NSS and various ‘good university guides’, cases is a response to student requests. Of course, this raises departments are under greater pressure from both students the question of increased demands on lecturers’ time, but and university management to improve teaching and stu- several departments are making creative use of online and dent employability. group feedback as means of minimising these demands. The Network has spoken to a number of UK departments to Lastly, a number of departments are increasingly hosting find out about changes in teaching practice. These conversa- guest lecturers. This exposes students to different perspec- tions showed that universities are focusing on two key areas: tives and presentation styles, and even future career possi- developing students’ critical skills and employability; and bilities, in addition to allowing undergraduates to see how improving the learning experience and assessment process. what they are learning can relate to developments in the Critical skills and employability subject, or to ‘the real world’ or future jobs. Initiatives focused on widening students’ skill sets and The rise in university tuition fees announced earlier this improving their employability have ranged from specific year and the growing concerns around job prospects for courses to internship schemes, which enable students to graduates may or may not have sparked universities to con- gain useful experience and add to their CVs. sider the service they are offering their students, but regard- less of the cause, it is clear that economics departments, The courses designed to instill key skills in tomorrow’s often with assistance or inspiration from the Economics graduates are compulsory in a number of cases. One mod- Network, are innovating and adapting to provide for the ule currently being run at a UK university is based upon a needs of future graduates. graduate skills paper produced by the Economics Network. This course, and others like it, teaches undergraduates ‘how 2011 Learning and Teaching Awards to explain economic ideas to non-specialists’, a skill that The Economics Network has presented the following will prove vital for many in their careers; as well as offer- awards in recognition of outstanding teaching and innova- ing ICT and report writing support and preparing students tion in economics education in 2011: for job applications and interviews. • Outstanding Teaching award: Steve Cook from Swansea Universities are also emphasising the importance of students University. Commendations were awarded to Caroline Joll recognising the skills required to be successful in both the job from Cardiff University and ‘the EC307 Development application process and in their working lives. In addition, Economics team’ (Oriana Bandiera, Greg Fischer, Michael many economics departments are stressing the value of group Best and Tara Mitchell) from the LSE. work and peer review, as collaboration helps students to recognise abilities and desirable transferable skills in them- • Student Nominated award: David McCausland from the selves and their team members. This has the benefit of creat- University of Aberdeen and Chris Jones from Aston ing a stronger sense of community amongst the students. University. Commendations were awarded to Neil Rickman from the University of Surrey, Steven McIntosh Learning and assessment from the University of Sheffield, Peter Sinclair from the Quality of teaching often remains a more immediate con- University of Birmingham and Michael Walsh from cern. Departments therefore continually try to ensure that Coventry University. their teaching is of a high quality, up to date, interesting and innovative. As a result, they are introducing new elements • eLearning award: John Gathergood from the University into the classroom or lecture theatre, often with the help of of Nottingham. Commendations were awarded to Richard the Economics Network. These include the use of games and Wiseman and Susan Noble from Mimas. experiments to enhance learning through experience, the use of interactive methods and computer packages and a focus Lecturer Survey on contextual learning. Learning theory through everyday We have now published the results of our 2011 lecturer sur- situations was found to improve students’ understanding sig- vey, to which 145 lecturers from 57 UK universities con- nificantly, and courses focused on current economic issues tributed. have been introduced by some departments to aid under- For the full report on the lecturer survey, please see: standing of the wider economic picture and the applications http://www.economicsnetwork.ac.uk/projects/lec_sur- of theory to ‘big questions’ of the twenty-first century. These vey2011.pdf.

23 The Adam Smith Tartan RES The Scottish Economics Society has created a new corporate tartan that honours the great Scottish economist and philosopher, Adam Smith. news items This note was prepared by Robert Wright, a past President of the Society and Keeper of the Tartan. RES 2012 Annual Conference 26 March to 28 March 2012 Adam Smith was born to Margaret Douglas in Kirkcaldy, University of Cambridge Fife in 1723. His father was a lawyer and civil servant. He married Margaret Douglas in 1720, but died shortly Keynote Lectures before their son was born. Adam lived with Margaret Elhanan Helpman, Harvard University (EJ Lecture) Douglas for most of his life and never married. He is best Nancy Stokey, University of Chicago (Hahn Lecture) known for his book, published in 1776, An Inquiry into Ariel Pakes, Harvard University (Sargan Lecture) the Nature and Causes of the Wealth of Nations, regarded by many as a classic of modern economics, particularly Plenary Panel: Lessons from the European Debt Crisis beloved by free market advocates. He became a founding Sponsored by Clare College Cambridge and member of the Royal Society of Edinburgh, and died in Paul Mellon Professorial Fund the city on 17 July 1790. Chair: Giancarlo Corsetti University of Cambridge In honour of his memory and for the principles upon Panel: which the Society was re-founded over 50 years ago, we Ken Rogoff, Harvard University have created a new tartan design. It combines the Ancient Guillermo Calvo, Columbia University Smith tartan (dating from 1886) with the Douglas Lorenzo Bini Smaghi, European Central Bank Hunting tartan (dating from pre-1819), thereby also hon- Organisation ouring Margaret Douglas’s important role in raising Programme Chair: Francesco Caselli (LSE) Adam Smith. Deputy Programme Chair: Chryssi Giannitsarou (Cambridge) The Scottish Economics Society ‘Adam Smith’ Tartan Local Organizers: Pramila Krishnan and Solomos Solomou was officially launched at a conference of the Society, (Cambridge) during a special event hosted by Dewar’s World of More details on the conference website Whisky, Aberfeldy Distillery, Perthshire on Tuesday http://www.resconference.com/ April 5th, 2011. The new tartan was designed by Dr and from David Wishart, Honorary Fellow of the School of [email protected] Management, University of St Andrews. It was registered with the Scottish Register of Tartans on October 6th, 2010 Registration Number 10,290. Membership of the RES Council The tartan was woven and manufactured into ties and A note from the Secretary-General, John Beath scarves for members of the Society by Lochcarron of Members of the Society are reminded of their right as Scotland, Selkirk. If you are a member of the Society, and members to propose names to be considered for election would like to purchase a tie or scarf, post a cheque for to the RES Council. The formal procedure is that the £15 made out to the ‘Scottish Economics Society’ to Nominating Committee, which meets early in February, Professor Robert E Wright, Department of Economics, considers all such names and puts forward to Council a University of Strathclyde, 130 Rottenrow, Glasgow, G4 list for approval. This is then the subject of a ballot of all 0GE. If you are not a member of the Society, membership members of the Society in the autumn. The successful details can be found at the Society’s website: candidates join Council after formal adoption at the fol- www.scotecsoc.org lowing AGM. Editor’s note: Any member of the Society who would like to make a For technical reasons we cannot reproduce a full-colour nomination may contact me at: royaleconsoc@st- picture of the tartan here. However, it can be seen at the andrews.ac.uk Society’s website: In addition to the name(s), there should be either a brief http://www.scotecsoc.org/details/news/1068983/SES_Adam CV or a link to one. As the process needs to get underway _Smith_Tartan_released.html in early February, I would be grateful to receive any nom- inations by 31st January at the latest.

24 Annual General Meeting details of the arrangements for the programme. Notice is hereby given that the AGM of the Society will be Please contact the Secretary-General on held in the West Road Theatre at the University of [email protected] or by post to: Cambridge, on Monday 26th March 2012 at 3pm. The The Royal Economic Society, Secretary General’s Agenda and Minutes of the last AGM will be circulated by Office, School of Economics and Finance, University of post to all current and life Society Members prior to the St. Andrews, St. Andrews, Fife, KY16 9AL meeting. Events Special Project Grant Funding RES PhD Presentation Meeting & Job Market Last year, The Society introduced a further funding The Sixth PhD Presentation Meeting will be held on stream for financial assistance on a one-off basis for the Saturday 21st and Sunday 22nd January 2012 at Queen support of activities that further the understanding and Mary University London. The aim of the event is to pro- use of economics. Examples might include seminars, vide a service both for UK and European university eco- workshops and mini-conferences, events to disseminate nomics departments who wish to recruit lecturers, and research and policy findings, and activities that support for PhD students seeking academic jobs in the UK or teaching and learning in the subject. elsewhere in Europe. This annual meeting has grown to The Society will not normally consider requests that be an extremely successful event, well supported by both exceed £5K and would in any case expect to see evidence students and potential employers. The event consists of of significant co-funding. Successful applicants would be two days of students’ presentations and poster sessions. required to submit a report on and a set of accounts cov- Participating institutions attend these presentations and ering the event within two months of its date. are also allocated a table at the conference site in order to arrange individual appointments with participating Applications will be considered three times a year by students during the course of the conference. January 20, May 20 and September 20 with decisions to be made within 28 days where possible. Applications For further information please contact Elizabeth Price at should be made to: [email protected] or the RES Administrator (royale- [email protected]). The Administrator, Royal Economic Society, School of Economics and Finance, University of St. Andrews, RES Training Schools St. Andrews, Fife, KY16 9AL, UK or by email to The Royal Economic Society has granted funds to the [email protected]. University of Birmingham to provide an Easter School for twenty years. Further RES financial support com- Visiting Lecturer Scheme bined with success in obtaining funding from the ESRC's The Society would like to encourage University depart- Researcher Development Initiative has now enabled the ments to consider the reinstated RES Visiting Lecturer University of Birmingham to run an Autumn School for scheme when they are planning lectures. The conditions the last two years and again in 2012. One school is to be of the scheme are as follows: Economics departments in devoted to some aspect(s) of macroeconomics, and the any UK university may suggest the name of a distin- other to subjects of a microeconomic character. guished economist for a visit to their department. Such The twenty-second Easter School organised by the Royal visitors may be from within the UK or from overseas. The Economic Society, with financial support from the Society will make up to five awards in each financial Economic and Social Research Council, will be held at The year, though the visit need not necessarily take place in University of Birmingham from Sunday 15th April to the financial year in which the award is made. Thursday 19th April, 2012. The subject of the school will The visitor is expected to give a series of lectures, seminars be The Economics and Econometrics of Forecasting. The or workshops and to be available for consultation by staff lecturers will be Sir David Hendry (University of Oxford) and students. At least one of the lectures etc. should be open and Professor James Stock (Harvard University). to those outside the host University and should be publi- The Schools are intended primarily for advanced post- cised, for example in the RES Newsletter. It is the responsi- graduate students doing doctoral research but are also bility of the host department to cover the costs of travel and open to members of the teaching and research staff. The hospitality. The Society will pay a fee of £2000 to the lec- purpose is to enable participants to become acquainted turer. At the conclusion of the visit both the visitor and host with the latest developments in the selected fields of eco- department should submit a report to the Secretary-General. nomics, to have the opportunity for study and discussion Payment of the fee will be conditional on these reports. with an internationally renowned expert in the topics Applications should be made in writing to the Secretary- covered, and to meet other young researchers. General and will be considered by the Executive Applications close on 6 January 2012. For further Committee by January 20 and September 20. The appli- details please see the RES website or contact easter- cation should give the dates of the proposed visit and [email protected].

25 post graduate RES members presenting at the Conference. Conference Further information at: www.resconference.org.uk/ See also announcement on p.24

Diary april

2012 April 1-May 30 Budapest, Hungary The Subprime Crisis and Its Impact on The Financial january and Managerial Environments: An Unequal Repercussion At the European Level at Central January 15- 18 La Thuile, Italy European University Business School, Budapest in con- junction with ESCEM Tours-Poitiers, France. Alp-Pop 2012 Population Conference for scholars who are interested in population issues across several disci- Further information at: [email protected] plines, including (but not limited to) demography, eco- nomics and sociology. JEL classification(s): H, I, J, O Further information at: www.dondena.unibocconi.it/ April 12 Munster, Germany Financial Markets and Financial Regulation: Sources January 26- 27 Santiago de Compostela, Spain of Instability or Growth? We are interested in analyses XIX Meeting of Public Economy: ‘Public Policies for that deal with the period before World War II. The work- Out of the Crisis’. JEL classification(s): D, E, F, H, I, R, Z shop is intended as a pre-conference meeting ahead of the 9-13 July 2012 Conference of the International Economic Further information at: History Association, Stellenbosch, South Africa. www.usc.es/congresos/xix-eep/en/Presentacion.htm Further information at: www.wiwi.uni-muenster.de/me/workshops/index.html. January 28 Philadelphia, USA 5th Annual Conference on the Political Economy of April 27-28 Budapest, Hungary International Organizations, Villanova University, Philadelphia, USA. The conference brings together econo- CALL FOR PAPERS mists and political scientists to address political-economy RES Supported Workshop on ‘The Social Dimension of issues related to international organizations such as the Organizations’ organised by University of Southampton World Trade Organization, the United Nations, the and Central University Budapest and supported by a Royal International Monetary Fund, the World Bank, and the Economic Society Special Project Grant. The workshop European Union, and also other international organizations will comprise invited and contributed papers to include that have received less attention in the academic literature. both theoretical contributions as well as empirical papers Further information at: www.peio.me/ using experimental or field data. The goal is to disseminate recent findings and foster interaction among economists of diverse interests (theory and empirics). Submissions are march also welcomed with an interdisciplinary approach that draw insights from related disciplines such as psychology March 8 London and management. Deadline for papers: 1 March 2012. Further information at: sites.google.com/site/mirco- SUERF/ICFR Conference: Future Risks and tonin/workshop Fragilities for Financial Stability. The core themes of the conference will include: incentives and market disci- pline; regulation, competition and shadow banking; and may size and structure of business models. Further information at: www.suerf.org/icfrlondon May 10-11 Nantes, France

CALL FOR PAPERS March 26-28 Cambridge T2M 2012: Theories and Methods in Macroeconomics Royal Economic Society Annual Conference will take The conference is partly aimed at young researchers who place at the University of Cambridge. Reduced rates for will present their papers in parallel sessions. It also hosts RES members and further financial assistance available for more experienced researchers in parallel, semi-plenary or

26 plenary sessions. Keynote speaker — Wouter den Haan, June 29 - July 3 San Francisco, CA, USA LSE and Economic Journal Managing Editor. Deadlines: (papers) January 31 2012 (registration) March 31 2012. The 87th Annual Western Economic Association International (WEAI) Conference. You can present a Further information at: http://sites.google.com/site/ paper, organize a session, discuss a paper, chair a session or t2mnetwork/the-annual-t2m-conferences/t2m-2012 just attend. There will be over 1,000 economists from all around the world. Also, take advantage of the opportunity May 23-25 Izmir, Turkey to publish your conference paper in one of our journals, Contemporary Economic Policy or Economic Inquiry. Annual Conference on International Political Economy at Gediz University, Florida International Further information at: http://weai.org/AnnualConf University and Leeds Metropolitan University invite paper and panel proposals for a joint multidisciplinary conference on International Political Economy entitled july ‘Challenges to the Welfare State’. It seeks to provide a forum for scholars of political economy, politics and inter- July 2-4 Rio de Janeiro, Brazil national relations. JEL classification(s): B, E, F, G, H, I, O III World Finance Conference. Keynote Speaker Further information at: Professor Franklin Allen, University of Pennsylvania. statehttp://ipeconference.gediz.edu.tr/ Further information: www.world-finance-conference.com june July 16-18 Budapest, Hungary June 7-8 Ljubljana, Slovenia SING8 - 8th Spain, Italy, Netherlands Meeting on Game Theory organised jointly by the Institute of Reforming Finance: Balancing Domestic and Economics, Hungarian Academy of Sciences and International Agendas. Topics to be considered for the Corvinus University Budapest. SING8 is the 8th confer- workshop include but are not limited to: international ence in the Spain-Italy-Netherlands series of meetings on cooperation versus coordination in monetary and/or fiscal Game Theory and the first organised in Hungary. While policies; regulatory frameworks for banking and financial many of the participants come from the founding coun- markets: Is more the merrier? the behaviour of financial tries or other European countries, the conference is open markets before, during, and following financial crises; to all and covers all areas and aspects of game theory. assessments of monetary and fiscal responses since the Further information at: http://sing8.iehas.hu/ beginning of the crisis; We especially welcome empirical papers, but we will also consider theoretical work. One session will be devoted to presentations by PhD students. august More information at: www.ssrn.com/update/fen/fenann/ann11369.html August 16- 18 Ontario, Canada

CALL FOR PAPERS June 7-8 Coruna, Spain RCEF 2012 Conference: Cities, Open Economies and CALL FOR PAPERS Public Policy. This year’s theme will draw researchers XV Applied Economics Conference. Deadline for from urban economics, with a micro focus on long run Papers: March 1 2012. Contact: [email protected] development, trade, and increasingly the environment and from international macroeconomics with a focus on busi- Further details: http://www.revecap.com/encuentros/eng- ness cycles, financial markets, and monetary policy. lish/default.html Papers and proposals for submissions are welcomed through the conference website www.rcef.ca. Paper sub- June 20 - 22 Hong Kong, China mission deadline: March 21, 2012 Other enquiries to: [email protected]. CALL FOR PAPERS The 2012 APJAE Symposium on Advances in the September 5-6 Zürich, Switzerland Studies of the Chinese Economy, Growth, FDI, Trade and Intellectual Property Rights. Deadline for papers 30th SUERF Colloquium - States, Banks, and the March 18, 2012. JEL classification(s): F, O, R, Z Financing of the Economy. Deadline for papers 15 February 2012 Further details at: www.suerf.org/

27 Membership of the Royal Economic Society

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