Tag Archives: Economics and demography

A pro-dismal bias in economics?

Posted on by

In a comment to his earlier assessment of the OECD’s new economic outlook, Jasper is raising an interesting, almost philosophical question that I think is worth a discussion in its own right. He claims that -

Economists should study the economy so they can finetune it to suit the needs of the people living inside this economy. They seem to be studying the economy so they can promote policies that finetune the people to suit the needs of the economy.

I would argue that Jasper’s statement correctly captures the sentiment, but not the rationalised opinion, among a growing part of the European population. The disconnect is palpable. So the question seems to be whether our governing institutions (and those trying to capture the essence of reality for them) are not able to accurately understand the people’s true preferences, whether our institutions do not allow an accurate externalisation thereof, or whether this is not simply a matter of lack of understanding.
Continue reading →

New OECD Economic Outlook….

Posted on by

…below the fold.

But first an introduction. I’m guestblogging from Amsterdam and my site can be found here. Very much honored to post at the Fistful (I would be, they’ve got visitors), although in all honesty they might be better served by a Francophone blogger.

As it is, they are grossly misunderestimated by the French part of the blogosphere (le sphère au blog?).
Continue reading →

The “Teuro” Dissected

Posted on by

Did prices really go up when the Euro arrived? The public mind, or at least the dominant media discourse, says they did. The inflation indices say they didn’t, or at least the prices that did go up were outweighed by the ones that went down. This paradox may have been solved. Erich Kirchler, of Vienna University’s Institute for Economic Psychology, tells Der Standard how.

Kirchler formed three representative groups of volunteers, and showed them prices in Schillings, then in euros. One group’s price was exaggerated by 15%, one reduced by 15%, and a control group saw correctly converted prices. All three groups were convinced the prices had risen…yes, including the second group. When he repeated the experiment with wages, rather than prices, the guinea pigs were convinced the opposite was the case.

He theorises that two well-known cognitive biases are at work – irrational perception of risk (the difference between accepting €10 now, or a 90% chance of €90 later) and the salience heuristic (unrepresentative but extreme events are over-perceived).

I was in Austria for the introduction of cash Euros, and I recall not so much that prices went up, as that the standard sums of money one withdraws from ATMs (20, 50, 100 etc) were suddenly considerably more and hence it was easy to spend more. Everyone was convinced that prices went up, though. And the German-speaking press had been hammering the word “Teuro” (roughly: “dearo”) into the meme-pool for months before the switch. (Especially, of course, Bild Zeitung and the execrable Krone..)

Forget It Jacques, It’s Clearstream

Posted on by

It never stops when your blog has to cover an entire continent. Hardly had the Italian left taken AFOE’s advice to get Giorgio Napolitano elected as president than the Clearstream scandal in France was getting out of hand, and nothing at all on the blog! Fortunately, at the moment the news from that quarter is coming so thick and at such a howling rate of speed that it wasn’t going to be hard to catch up. The latest despatches suggest that, firstly, it was De Villepin and Chirac, and secondly, that the victim-Nicolas Sarkozy-probably has something to hide too, as in any good film noir.

And that’s before you get on to the 300 million francs in the president’s secret Japanese bank account. Allegedly.

So what is a Clearstream and why is it a scandal? Clearstream is a bank clearing house in Luxembourg that permits banks to carry out international payments on a net basis, paying just the balance of their transactions in cash every business day. It has a bad reputation in France because of one Denis Robert, who has written three books alleging that it’s responsible for money laundering on a vast scale. But more relevantly, it’s also the supposed cause of a major political crisis.
Continue reading →

Berlusgone

Posted on by

Well, this is a little late, but we ought to put on record that the fun-lovin’ minicaudillo’s fingers were eventually pried from the Italian prime ministership. As predicted, he went out with a considerable degree of low comedy, as the Italian senate struggled to elect a speaker largely because the Berlusconi side insisted on making a fuss about whether ballots cast for the eventual winner read “Franco” or “Francesco” Marini. Eventually, though, it was done.

The Senate speakership had been the last real opportunity to cling on, as the Left has a working majority in the lower house and therefore appointed its man without trouble. The deeper play of the Senate vote, by the way, was an effort to cause trouble in the Unione’s ranks – Romano Prodi chose to put forward a Refounded Communist, Faustino Bertinotti, as speaker of the lower house, thus getting the far Left on side, and therefore needed to balance the ticket by putting someone from the ex-Christian Democrat wing of his coalition in the Senate. This being achieved, Berlusconi had no longer any excuse to hang on.

The next problem will be to elect a President. In Italy, the presidency is a nonexecutive position more like that of Germany than that of France, but the president does choose who is asked to form a government, so without a prez there can be no prime minister. Now, the simplest option would just have been to re-elect Ciampi, but he says he’s too old. This is where it gets complicated, because a super-majority is needed to elect a president.

Recalling that the Refounded Communists got the speakership of the lower house, and the ex-democristiani the speakership of the upper house (and in all probability the prime ministership). Which major faction on the left is empty-handed? That’s right, the non-refounded communists, who in fact really did refound themselves to become the Democratic Left, unlike their former comrades in the Refoundation who didn’t refound themselves and remained communist. Their leader, former PM Massimo D’Alema, was therefore put forward as a candidate for the presidency even though the chance of Berlusconi’s side supporting him was exactly nil.

In fact, the Right is threatening a campaign of mass demonstrations in the event of his election, and suggesting that Marini be the President. This, your keen and agile minds will soon perceive, is a transparent device to reopen the speakership issue and thus destabilise the Left. Alternatively, the Right proposes, the secretary of the Presidency, Gianni Letta, might be a candidate.
Continue reading →

French Shop As Germans Save

Posted on by

This just about sums it up:

French shoppers, scarcely distracted by riots in March, increased spending significantly in the first quarter of this year, with purchases of household durable goods soaring, official data showed on Friday. The robust spending growth is almost certain to have helped eurozone economic growth rebound in the first quarter of 2006.

Meanwhile:

the outlook for German consumer spending remains poor – highlighting the underlying weakness of the eurozone economy…..German households have been hit by falling real wages and house prices. Germans have also continued to save at a furious pace because of their fears about the future of the welfare state.

Hollowing Out In Moldova?

Posted on by

The Moldovan population has fallen from more than 4.3 million people in 1989, to just 3.4 million in 2004 excluding the separatist Transnistria area in the east, rising to a bit under 3.8 million if one includes Transnistria’s resident population. Randy McDonald asks:

Moldova’s example demonstrates that, when economic conditions become sufficiently bad and/or when the benefits accuring to emigrants become sufficiently great, regional and national populations can contract at speeds more reminiscent of wartime depopulation than anything else. Where Moldova goes now, perhaps any number of relatively small and relatively impoverished states (Serbia, Paraguay, Cuba, Laos, Lesotho) in the future, perhaps–who knows?–even much larger countries.

Don’t miss this important post.

Too Old To Work For Ericsson?

Posted on by

Well if you’re over 35 you may be. That’s the implication of today’s decision to offer redundancy to workers in the 35 – 50 age group:

Ericsson, the telecoms equipment maker, on Monday offered a voluntary redundancy package to up to 1,000 of its Sweden-based employees between the ages of 35 and 50. The unprecedented move is designed to make way for younger workers.

This fits in with the findings of ongoing research by Italian economist Francesco Daveri. See especially working paper 309: “Age, technology and labour costs”, which examines the case of Finland and especially Nokia (available on this page, abstract pasted at the bottom of this post).

Details below the fold:
Continue reading →

Gazprom, Iran and EU Energy

Posted on by

Well just in case the Iranian situation wasn’t difficult enough in and of itself (or here), there are always some around who will seek to take short-term benefit from the temporary embarassment of others. So this week, as June delivery oil prices spiked up around the 74 dollar a barrel mark, it became just a little bit clearer who might be doing what.
Continue reading →

The Plural of “Anecdote” Is Not “Data”, It’s “Blog”

Posted on by

Overheard in the bar, Paris-Toulouse TGV near Bordeaux…

A French saloon bar bore, who has apparently just returned from a spell abroad, is in the process of berating “national decline” to the barman. Apparently these students are deluded, irresponsible fools, France is in the Middle Ages, and two of the escalators weren’t working at Montparnasse this morning! (Jesus, what would he have made of Oxford Circus tube?) Only la rupture can save us, etc, etc.

But which society had he been experiencing that made him consider France to be stuck in the Middle Ages and to be desperately in need of, ahem, “modernisation” and “reform”? Why, Sweden, of course. A few minutes later, I saw a huge full-page ad in my newspaper taken out by Alcatel to boast of how the takeover of Lucent would give them the world’s biggest laboratories and that they would be spending twice Alcatel’s €2.6bn annual R&D budget in the future.

I can’t imagine a British CEO getting away with that.

Returning to Britain, I see that Peugeot has decided to transfer production of 206s from the Ryton plant in Coventry to somewhere with less job security and lower wages…after all, that’s what we all need, no? Whoops. They are zapping 2,300 workers at Ryton to transfer the work to Mulhouse..