Articles

Public debt and the more subtle ways we risk cheating future generations

Two decades ago, the American economist Laurence Kotlikoff proposed a structure of “intergenerational ac­counting” to enable us to better understand the ways in which our actions today impinge on the welfare of generations to come. Only if we develop and broaden that framework can we start to address the question Roche put to his fellow parliamentarians 350 years ago.

In finance and politics it pays more to be right than to be active

In the face of an event like the attack on Charlie Hebdo, the urge to respond decisively is natural and strong. But the bias to immediacy and action is as pervasive in finance as it is in politics.

Rise in US and UK inequality principally due to financialisation and executive pay

The people who ran big companies were always relatively well paid, but the meaning of “relatively well paid” is now altogether different. Finance employs more people, recruits more able people and pays them a lot more. These effects have not been seen in countries, such as France and Germany, that have proved more resistant to financialisation.

Scottish independence vote will continue to shape British politics

Anyone who thinks that the Smith Commission proposals on further devolution for Scotland will defuse the remaining issues lives in a political bubble distant from the interests of ordinary voters.

Rationality will be at work this Christmas

At Christmas people will spend time with relatives they do not much like, give presents that the recipients value at less than they cost, and eat and drink more than they know is good for them. This is not completely irrational.

To assess value it’s wise to escape the market crowd

The belief that an aggregate of casual opinions provides a better process of value discovery than a flow of informed judgment through close engagement by investors, is an article of faith rather than a matter of empirical evidence.

Home ownership has distributed wealth but raised generational inequality

The ability of young people today to benefit from future house price appreciation depends in large part on their parents’ capacity to pass on the benefits of past house price appreciation to them. But that injustice is different in nature and cause from the inequality that concerns Occupy Wall Street, or the purchasers of Prof Piketty’s book.

Income tax in Scotland can only go up if new powers are exercised

There is only one way in which the Scottish government’s new freedom to vary income tax can be exercised, and that is to raise it. That was not what the supporters of more devolution had in mind when they asked for additional powers.

If “capital is back” it’s in a different sense

The days when economic power was acquired by inheriting the mill are long gone. Mr Buffett began his business career as a mill owner, but closed the mills and went into insurance. That is the reality of capital in modern economics.

London’s airport expansion plans must consider scale and competition

The Independent Airport Commission must choose between the scale advantages of monopoly and the innovative benefits of competition. Airline history favours the former, experience of other industries supports the latter.