Winner of the New Statesman SPERI Prize in Political Economy 2016

Friday 29 May 2015

Recognising the success of macroeconomic myths

The Conservative led government of 2010 to 2015 had a terrible macroeconomic record. Partly through their own actions they had presided over the worst recovery from a recession for hundreds of years, and an unprecedented fall in real wages. Employment had increased, but only because productivity had stagnated. Yet the Conservatives were seen by voters as the more competent political party when it came to running the economy, and this probably had a decisive role in winning them the election.

This paradox is easily explained. Voters were sold a lie: that Labour through its profligacy had run up budget deficits that had required painful measures to correct, but that recent growth rates showed that these measures had been a success. And the lie worked.

I think at least two groups have yet to understand the huge significance of this. The first is the Labour party itself. The reaction of some in the party to this situation is to want to ‘admit’ that they borrowed too much, and try and move on. Yet this seems just like the strategic error they made from 2010 in not trying to challenge the Conservative narrative. Back then they seem to have judged that it was pointless to continue to fight the issues that had dominated the 2010 election, and instead they should ‘move on’. What this strategy did was concede the writing of history to their opponents.

Perhaps those that want to fall into the trap of saying that they borrowed too much before the Great Recession think this is no big deal, because if they had known in 2005, say, that a recession was going to come in 2009, they might well have been more fiscally prudent. It should be blindingly obvious that this will not be how any admission is read. Instead the lie that Labour governments are always fiscally profligate will be cemented in stone: their opponents will say that even the party itself now admits it, after years of trying to deny it: how irresponsible is that!

The second group that has yet to comprehend the significance of the success of Conservative myth making are the media. Not of course the large part of the media that helped manufacture and promulgate the lie: they fully understand how successful their propaganda has been. The media I am talking about is the part which, to use the BBC’s mission statement, aims to “enrich people's lives with programmes and services that inform, educate and entertain.” When it came to analysing the myth of Labour profligacy and success of austerity, the ‘educate and inform’ part of that mission seems to have failed miserably.

Of course this media failure was not just during the few weeks of the election. In the years before, political commentators who have the potential to hold politicians to account allowed coalition ministers to repeat their ‘clearing up the mess’ metaphor without serious challenge. Indeed, to the extent that they continued to challenge Labour on their borrowing record, they became part of the deception.

This failure reveals two conceptual flaws in the media’s approach to macroeconomic issues: one with much wider implications, and one specific to fiscal policy. The first is to assume that there are no objective facts, but simply the claims of political parties. So if Labour chose not to challenge the ‘clearing up the mess’ narrative, it was not the media’s job to do so. Conversely, it was not the media’s business to assess the Labour profligacy myth: if the government put the myth forward, it was the media’s job to continue to challenge Labour on it. This is the ‘views differ on whether Earth is flat’ approach.

The second relates to how fiscal policy issues are reported. The government continually drew analogies between government budgets and household budgets: the UK had maxed out its credit card. To the extent that this analogy is used to imply that government deficits have to be reduced immediately come what may, economists know such analogies are false. A media that took its duty to educate and inform seriously would recognise this. What the media appeared to do instead was to accept the line that the deficit had to be reduced as quickly as possible, and obsess about the deficit numbers as if they were as important as data on inflation or unemployment.

Let me give examples that illustrate both of these problems. On the day that the Telegraph published a letter from 100 business leaders, the CFM published a survey of macroeconomists which asked a question about whether the austerity policies of the coalition government have had a positive effect on aggregate economic activity. Initially on BBC TV and radio both were covered - they made an obvious pair, as the majority of economists were saying something rather different from these particular business leaders. However by the time it came to the evening news, only the Telegraph’s letter seemed to feature. I would love to hear a justification for that strange decision. Was it because the Conservatives used the letter throughout the day, but Labour failed to use the survey? By any objective criteria the Telegraph letter was less informative: it was from a self-selected group, while the CFM results came from a survey of leading economists. But if the media sees its job not to inform but to simply report what politicians say, the decision made sense.

A key difference between the Labour and Conservative plans was the degree of fiscal consolidation over the next few years. The implications for welfare programmes and other government spending were addressed by the media. But that is not macroeconomics. The macroeconomics is that a large fiscal consolidation when interest rates are very low is risky. I cannot remember seeing that argument appearing at all in the media, which given its potential importance is extraordinary.

As a result of both failures, people believed that the coalition were more competent at running the economy than Labour would be, and remained largely ignorant of the major risk that electing a Conservative government would involve. That is likely to have been one of the critical factors in deciding the election result. On this issue, therefore, the media failed to educate and inform, and this had a significant - perhaps decisive - impact on the outcome of the election. A more serious failure of the media to fulfil its mission is hard to imagine. Yet I suspect those in the relevant media organisations are not even concerned about this, but even if some of them were they would probably be too timid to raise these issues.

So both the Labour party, and the independent media, are failing to address the issues raised by the success of the Conservative’s macroeconomic myths. There is perhaps a third group that also needs to think hard about what this all means. Often when scientists complain about how scientific issues are portrayed (or ignored) in the media and by politicians, we get a lot of stuff about how scientists should be more helpful. But in this election a number of major efforts by academic economists were made to get information out there, in ways that were deliberately designed to be accessible. A number covered macroeconomics, and directly addressed issues about the coalition’s record, competence and future plans (as here or here or here, for example). The information was there, but both the Labour party and the media hardly used it. Economists need to reflect about whether this means what they did was a waste of time. Political scientists need to reflect on what this means for their models of how elections are won and lost.


  1. I think you're missing two things:

    First, the Labour Party had its own myths in government, which were shown to be untrue by the crisis ("no more boom and bust" and "prudence") very clearly. They were very happy to take credit for good economic performance which were probably the result of global conditions (see here: These were much more obviously not true (and shown to be not true) than what you feel about the Conservative record, even if you feel that the Conservative "myth" as you put it is more damaging.

    The second is that economic policy is not just about macro! Labour were planning a number of microeconomic interventions - principally price controls on energy and rented housing - which would *not* recommend themselves to the majority of economists (unless you think differently?).

    1. I do not think I'm missing either points, because they are not relevant to what I'm saying. Of course politicians claim things that are untrue all the time - it matters when they get away with it and it wins them elections. As to micro issues, you seem to be falling for the line that only Labour makes micro interventions that economists might disagree with. Read this for example

    2. It's ironic you should mention "no more boom and bust" because this 'claim' is itself the subject of much distortion, by the Conservatives and the media. (h/t: Benjamin Studebaker)

    3. >> The second is that economic policy is not just about macro! Labour were planning a number of microeconomic interventions - principally price controls on energy and rented housing - which would *not* recommend themselves to the majority of economists (unless you think differently?).

      I think the majority of economists would have more nuanced opinions on the specific interventions. On the housing market, you can say that price controls create a deadweight loss and this is a bad thing, but it's worth bearing in mind the scope of this intervention was minimal and it's hard to conclude that real constraint on supply is that landlords are unable to build because rents are too low. The bigger supply contraints appear to be related to the availability of land and the planning system.

      On energy, there is a question of whether the market is oligopolistic rather than perfectly competitive and that the price restrictions are merely acting to rectify this situation.

      Even if you take the full on negative view of these policies, it's hard to conclude that the losses from them are anything more than mere splashes next to the gigantic torrent of losses we've seen from bad macro policy.

    4. Original Anon here:

      Sorry, I should have been clearer. You state that Labour didn't try to challenge the Conservative macroeconomic narrative from 2010 onwards. It's possible that this was a mistake. But I would suspect that one reason that the Labour leadership didn't try was because the previous Labour economic narrative ("no more boom and bust" etc) had been falsified. This made it much harder for the Labour party to challenge the Conservative narrative.

      On the second, I was just trying to make the point that it's plausible that Labour's micro policy mix was worse than the Conservative equivalent, and this might justify the Conservatives' economic lead over Labour, *even if* we accept your analysis of their respective macro policies.

    5. Err, no - I don't think the electorate at large are, off their own backs, astutely assessing the pros and cons of varying micro economic policies. I think the electorate vote on trust and tradition and Cameron and Osborne appeared trustworthy because they've been on message and banging their drum for 5 years plus with little challenge - either from a lone weak opposition party (in previous parliaments, there'd be opposition parties plural) or from robust critical journalism.

      What ever you think of it, that consistency of message builds trust.

    6. Jason - my second point wasn't trying to *explain* why CON had a lead on the economy (as you do). I was just pointing out that it wasn't *necessarily* inconsistent with the facts, even if we accept Simon's extremely dim view of CON macro policy.

    7. So is your point is that the electorate was hoodwinked into voting Tory on spurious grounds regarding macro economics, but it's okay because it might be that Tories are better on micro, though it's not clear that they are...

    8. Did the Labour leadership really say something as stupid as they had aboloshed recessions? How about a citation?

    9. did Labour actually say that recession was a thing of the past? Was that the position of the leadership?

  2. All this reminds me that the BBC still conforms to the template parodied and attacked by Alexander Cockburn back in 1982:
    It is, of course, not just macro policy where myths beat reality. The same might be true of inequality:

  3. Simon, thanks for another great blog.
    You state “Economists need to reflect about whether this means what they did was a waste of time.” Good line.

    If I was writing a rulebook for economists the first rule would be never to try to talk macro with anyone not trained in macro – because it slowly kills you.

  4. Latvia, I understand has done quite well recently in terms of productivity, a reason being that there has been significant outward migration of the unemployed. Among my new neighbours are a large number of Latvians engaged in manual labour and construction of various kinds because they accept lower incomes without employment protection. There are some hidden benefits, recently they saw off a group of Roma travellers, sadly displaying prejudice in the matter. But this does not appear in the figures.

  5. I assume Labour tried out lots of different macro narratives on focus groups. I guess they found that none of the factually and analytically correct narratives went down well. Hence their strategy of talking about other issues, together with a deficit plan that was defensible if challenged. On the face of it, the strategy was rational. With hindsight it didn't work, and I agree their error was allowing the Conservatives to make the weather on the deficit debate.

  6. In my BBC Trust appeal of 24 August 2012 Natalie Rose (Senior Editorial Strategy Adviser, BBC Trust Unit) said this:

    "Finally, the Head of Editorial Standards notes that you complain about the paucity of advocates of the ‘liquidity trap’ theory featuring on the BBC’s coverage, and you contrast this with the airtime offered to its detractors such as Niall Ferguson. In this light, an independent editorial adviser has made a brief check on the extent to which Professor Paul Krugman, the leading advocate of ‘liquidity trap’ analysis, has been given the opportunity to expound his views on the BBC. We understand from this check that in the course of one month alone, starting 30 May 2012, he had appeared on four major BBC platforms, ranging from BBC News, BBC Two’s Newsnight and Radio 4’s Today programme. In each case he was given significant airtime to articulate his analysis of the current economic crisis including his view that a new liquidity trap is the key to the on-going recession in the US and across Europe. For these reasons the Head of Editorial Standards does not believe that your appeal has a reasonable prospect of success and does not propose to proceed with it to the ESC."

    I put this up as I think my Ferguson comment on his Reith lectures was made in passing, yet the BBC Trust really went to town on it, as shown above - I just wanted liquidity trap economics to inform their analysis of the crisis on the main news broadcasts.

    So I was interested in your post on Diane Coyle, BBC Trust member, again comparing Ferguson with Krugman only a few days ago (this blog, Tuesday, 19 May 2015
    'The trouble with macro'). The strange case of Mr Gove's favourite pseudo-historian and his place in BBC economic journalism...

    And of course this also means that the BBC knew about liquidity trap economics in 2012 - they say so in the quote above - and yet the concept disappeared in their coverage despite its model clearly proving the most successful at least two years before the general election.

    1. This comment has been removed by the author.

    2. That was an interesting move on your part. Thanks for trying.

      I think the problem with auntie Beeb on this that it's day to day coverage on the economy has been to treat it as belonging almost entirely to the realm of party politics. So Govt. sends out a press release - you ask a Tory politician to comment (for balance), then you ask a coalition partner politician (for more balance) and then you ask a lone weak opposition politician what they think about the deficit (for balance). Journalism done!

      The existence of a handful of special cases where Newsnight might have done a ditty with variously Krugman or Niall has little impact.

  7. MSM is to news, truth and reportage what painting-by-numbers is to art. The whole political-media-public loop is a nauseating carousel of idiotic orthodoxy, the trite and outright bullshit. That's why 'wrong' is the new 'right'. That's why you can win an election on a false prospectus with a 'mandate' and 'legitimacy' derived from garnering just 25% of those eligible to vote (or 37% of those that did) etc.This can only happen if the narrative is delivered by dictation or subervience. No independent media could ever allow the indefensible to raise its head more times that a fairground gopher or for the fairground to operate as an eternal, self-replicating Kafkaesque charade on dynamism.

    MSM is on a leash and by association so is the public. How can you possibly counteract the narrative, which you refer to, when non-compliant economists or journalists are given just the odd three-minute slot now and again to contradict it? It can't and won't happen. Instead, the fully-paid-up stooges and vested interests will be on hand to tell us that the losing team is actually winning. These craven oafs don't have the inclination, moral courage or intellectual rigour to challenge a system that rewards them so amply. Even the merry-go-round is on a loop.

  8. There is an enormous literature on "framing" and the like in political sociology & political science. Much of it is qualitative, so I'm not sure SWL would grant any of that work the status of "science" or "models" or the like. But such work provides plenty of insights into why people sometimes vote against would would seem to be "truth" or their own interests. (Of course, one could always go back to Gramsci, but maybe that's expecting too much...)

  9. I was very surprised to find a number of people I knew in SE England voted Tory. When I ask them why (some are English are moderately well-off and can afford their own homes, but not all) their answer was usually along the lines that Labour left a mess. They point to uncontrolled immigration, long waits at AandE and doctor's surgeries, large classrooms in schools, a lot of housing development going around them which is still not enough, pot holes in roads, financial scandals etc. The basic feeling was that Labour introduced a free-for-all and simply were not managing things - like someone who is not on top of their paperwork and have a chaotic desk in front of them. The image was poor housekeeping or management that would be considered incompetent if they were managing a business.

    OK, an economy is not a household or a business. But, the message coming from these people is Labour has to demonstrate that it can manage.

    1. Although I think Labour's performance in office was unremarkable to say the least, I think the Tories, for the reasons you identify, have been very damaging for this country. But I do not think 'mediamacro' is that decisive in determining election outcomes. I think the sort of the things I mention above (Anon 7.04) are. People are less influenced by the media than what you might believe, ultimately they vote according to their own observations - and the above are the sorts of reasons why some people who are not natural Tory voters, went Tory.

    2. Agree, particularly on the uncontrolled immigration and lots of housing developments as a result which are still not enough. As 50% of the immigration cannot currently be controlled, and Labour stated they would not have a referendum on changes that would allow it to be controlled, this was, I suspect, the reason why a significant number of people still did not vote Labour.

  10. "Voters were sold a lie: that Labour through its profligacy had run up budget deficits that had required painful measures to correct".

    Lying is a strong word, but at the very least, I think you are presenting the facts with bias unbecoming to an academic, S W-L.

    I just looked this up to answer a similar point made on the Green Party members' website, and found that the Labour government ran cyclically adjusted deficits of about 4% of GDP over the period 2004-7 inclusive - readers may recall Gordon Brown's frequent fiddling of his Golden Rule around that time. Essentially, the Labour government was already running a structural deficit going into the financial crisis, using the pre-crisis boom to finance public expenditure rather than pay down debt.

    1. These cyclically adjusted deficit numbers are pure hindsight, and almost certainly wrong:

      Even if they are right, that means everyone - the OECD, the IMF, the IFS, the Conservative opposition - were all proposing profligate policies at the time! That is a very funny definition of profligacy.

    2. For what it is worth, I was referring to figures derived from the EU production function based approach ( ), which as far as I know should not be affected by the trend revision effect.

      As for your comment about the number of organisations proposing profligate policies at the time, that was exactly the problem. There was a kind of collective madness (either that, or a cynical reluctance to make themselves unpopular) within economic institutions at that time - recall that the first breach of the BoE's inflation target was in 2007 - with the honourable exception of a few like the BIS. Anyway, since when has scientific analysis been guided by the number holding one opinion or the other?

    3. " were all proposing profligate policies at the time! That is a very funny definition of profligacy."

      Why is that a very funny definition of profligacy?

  11. Simon, I share your frustration. But isn't all this irrelevant and we just have to wait until the economy turns down in the run up to an election to get a change of govt? As for the UK electorate, at best, they will never get beyond comparing the economy to their household budget. Stuff like the liquidity trap/paradox of thrift – forget it.

    1. I think the job of economists is to devise economic systems based on the facts, and forget about politics. (Not that I believe economists actually do this using the scientific method.)

      Bad things happen when mixing economics and politics, like the purist ideology that only monetary policy should be used to moderate the business cycle because "technocrats" at a central bank only have the authority to control monetary policy. The historical evidence strongly suggests the economy works best when all means of stimulating and dampening economic activity are used: monetary, fiscal and regulatory. Devising a political system to implement this, which is possible, is an unrelated matter.

      As for the politics of implementing economic hypotheses, it all boils down to the art of persuasion — or more precisely, consumer psychology.

      Ronald Reagan, for example, was a great salesman for New Classical ideology who ushered in a new economic era (that culminated in economic collapse.) His main talking points were: (democratic) government is the problem; people can spend money better than government; tax cuts will boost the economy and the higher economic growth (and reduced tax avoidance) will increase tax revenues — i.e., "tax cuts create jobs" and "tax cuts pay for themselves."

      It's possible to develop talking points to persuade people on sound economic ideas. Some rough examples: a) It's foolish to use household economics to control an economy because a household is not an economy. b) It's silly to compare personal debt to national debt because a nation doesn't retire. Like corporate debt, national debt is held in bonds and serviced, not repaid. National debt burden is measured in debt as a percentage of the economy. c) Post-war governments didn't pay down most of their debt-burdens by the 1970s with "expansionary austerity" but with expansionary fiscal policies: i.e. increased public spending funded with progressive taxation. c) Yes it's time to stop living beyond our means. We must reverse decades of tax cuts that only benefited the wealthy. It's insane to borrow vast sums of money to pay to rich people.

      Note how the science behind immunization is more difficult to understand, yet the crazies are only a tiny minority. It's best to rely on and work with the significant intelligence of the average person.

    2. Well said. Pity you did not draw up Milliband's speeches!

  12. "Yet the Conservatives were seen by voters as the more competent political party when it came to running the economy, and this probably had a decisive role in winning them the election."

    This political analysis leaves much to be desired . If the 2015 UK election was a referendum on the economy, clearly Cameron's vision was resoundingly rejected by the vast majority of voters: 63%. The only place where 37% of the vote can represent the will of voters is in an insane asylum run by the inmates.

    But what's most interesting about this analysis (a common one after elections in the UK and Canada, the only economically-developed countries with undeveloped political systems) is how upstanding members of society are obligated to uphold a clearly Orwellian interpretation of something. This, I think, demonstrates how easily and how far culture can corrupt a rational analysis, even a very simple one. (This is aptly expressed in the naked-emperor parable.)

    So an important question is: how deep does kind of cultural corruption run in the field of macroeconomics, where extrapolations are made from falsifiable-less hypotheses founded on an ideological belief system (self-regulating self-interest) that just so happens to be self-serving to business people and their wealthy investors?

    1. In some ways SWL's analysis is as detached as macro-theory is from reality. SWL thinks that most people were made better off under Labour. But clearly not enough people think so. Forget your output gap and your liquidity trap model and ask why. Labour did what mainstream theory said they should for comparative advantage and efficiency, all 101 stuff - deregulated trade, capital and labour flows. It was ultra-pro-globalisation. History, however, tells us if you do this you are going to leave the economy vulnerable to outside shocks, and vulnerable people within it, particularly vulnerable. Inequality has soared. Zero-hours contracts are the norm. House purchases are out of the question for many - even though regulations have been reduced (which were originally put in for consumer protection and environmental reasons). Crowded and expensive trains, and congested roads, schools and GP surgeries- that is now the norm, especially in the South East. So economists can go on about output gaps etc, but they have to ask, is society better after Labour's long term in office? If people do not see a well-functioning society, or feel their own lives and those around them have got better, they are not going to be convinced that the economy has improved.

    2. Oh yes. It's utterly preposterous to suggest in any way, shape or form that the neoclassical free-market reforms of the past 35 years, whether put in place by (previously self-described) neoliberals and neoconservatives — or cemented in place by the fake centrist liberals that followed — were successful in any way, or evidence-based policy in any way. Yet because of corrupt politicking, and the progressive "capture" of politicians by insatiably-greedy plutocrats, the Anglo-Saxon universe has become an Orwellian theatre of the absurd: the law of gravity is said to cause people to float up into the sky because 'economic scientists' say it does.

      By the mid-1980s, a three-headed neoliberal monster ruled the Anglo-Saxon world and would put the global economy on a roller-coaster ride to inevitable collapse (2008 meltdown.) The three ugly heads that reared themselves: Reagan, Thatcher and Mulroney (Canadian prime minister.) Brian "On the Take" Mulroney, although much further to the right than, say, Nixon, was the least right-wing and ideological of the bunch (although his reckless income tax cuts, coupled with his war against inflation and social spending by the provinces in monetary policy manufactured a much worse 1992 recession — CA: –2.1% GDP; UK: –1.2%; US: –0.1% — and 1993 deficit crisis.)

      In Canada, the "Liberal" party ran against Mulroney's abysmal record. Reduced the "Progressive Conservative" party from a 156-seat majority to 2 seats (although vote-splitting from two right-wing parties under primitive FPTP voting was the culprit, not the "will of the people.") In any case, the Liberal leader, Jean Chretien, campaigned against Mulroney, won the election, then turned the Liberal Party into the Brian Mulroney Party (where it remains today.)

    3. This was the time when the fake-liberal-sellout 'kinder, gentler' three-headed monster came to power: Clinton, Blair and Chretien. Blair's "Third Way" selling point illustrates the absurdity. The new Goldilocks solution was not between the 90% left-wing communism of the Soviet Union and the 90% right-wing New Classical ideology of Milton Friedman. (That would be the centrist Keynesian mixed-market system.) Here the extremes were the unprecedentedly-successful post-war Keynesian system and Friedmanian market fundamentalism. So this 45% right-wing solution made no logical sense. Made less sense in terms of macroeconomics. Furthered the economy's downward spiral. But made for great politics. (The cherry on top: today progressive activists are opposed to the Keynesian system because they believe that it's Blair's Third Way!)

      Clinton, the champion of the left, threw single moms and their kids off of meagre welfare benefits onto the streets. Claimed the era of centrist Keynesian "big government" was over. Dismantled the Glass-Steagall act, (that separated commercial and investment banking ending an era of periodic bank meltdowns in the mid-1930s,) instead of reprimanding Citigroup's violation of it, paving the way for the "financial innovation" fraud meltdown of 2008.

      Given the mass ignorance of these events, you would think they happened in 800 B.C.E, not within the past 80 years. But the people are not to blame for being uninformed. Well-meaning cognitive-dissonant partisan liberals are not to blame for not seeing the "wood for the trees". Even corrupt politicians are not to blame: they are entirely motivated by narcissism; it is the nature of the beast. Blame is not important. The real problem is that civilization is on an accelerating downward spiral that is not going to end well, while the ersatz liberals, free-market zealots, failed economists and pseudo technocrats who designed and implemented this mess don't even acknowledge there is any problem!

    4. Correction: the above-mentioned groups of people have recently concluded that a mysterious "secular stagnation" has befallen the Western economy for reasons that cannot be determined. But they have determined it will remain indefinitely. And that the solution is to simply accept it. Therefore the people must brace for deeper social spending cuts. And, of course, to maintain anemic levels of GDP growth, the doctor prescribes: more free trade and investor-protection treaties; more cuts to "harmful" income, corporate and investment taxes; more cuts to business-killing regulations; more 2% inflation targeting to ensure job-killing real incomes keep falling; and more trickle-down helicopter money dropped into the hands of wealthy investment bankers to … um — well just because they deserve it!

    5. British Democracy is a strange beast; people get ONE vote every five years, and then the party that gains 25% of the electorate runs ALL of the Government.

      Let's be clear, that is, in an average person's lifetime, no more than a dozen Democratic moments; a Government can be as bad as it likes, only having to persuade people in the last year before an election.

      Addressing your specific complaints about overcrowding though, this is more about planning laws not meeting society's needs. Not enough affordable houses near where people work, so they have to commute, clogging up roads and railways in the process. With no democratic imperative to do anything, the status quo prevails.

      Decades of insufficient investment left schools with no sports fields, portakabin classrooms, leaking roofs, and hospitals built in Victorian times. At least Labour addressed those issues; Thatcherism had made them worse, while we won't mention the Somerset Levels and flood defence spending cuts...

  13. What you see in the, here in the US as well, is the laziness of fale equivalence. Sure, Fox News and the WaPost are bad actors, but NPR will just do lazy, ill informed reporting. And there NO excuse. You go to Thoma's blog that gives links to blogs like this (and there are many) and can get the numbers on austerity or the concept of ZLB. I've never seen this phenomenon explained on the front page of NYT, and if the nightly news did my would explode like a pinata. My current model is Bernie Sanders, he will let the brain dead media frame the narrative. The right doesn't fight fair and the media doesn't report objectively. We have to form strategies to deal with that world. Adapt or perish.

  14. Simon: "Employment had increased, but only because productivity had stagnated."

    We could tell the same story with a very different spin: "GDP failed to increase, but only because productivity had stagnated"

    The second spin makes a lot more sense in terms of macro theory. Consider an economy initially at the natural rate. If there were a negative shock to productivity, AD policy should (presumably, approximately) try to keep employment constant, not try to keep GDP constant.

    And on the deficit/hindsight question, that's a bit like saying you didn't buy insurance because you didn't expect to crash your car. Some other countries were running surpluses and reducing debt/NGDP ratios before 2008. Benchmarking against your peers makes sense, even if benchmarking against 20/20 hindsight does not.

  15. Simon you are fighting against the flow here, the country and more importantly the media have accepted that the Tories are masters of the economy. The Labour party were holding the ball when the global economy tanked , aka it's all their fault they are incompetent and it's all their fault.
    When you factor in the totally incompetent job Ed did over the 5 years to counter the arguments and lies of the Tories and the media and his inability to embarrass the government over things like Tory lies , the Post office sell off , the transfer of school premises to free schools for nothing its a wonder he managed any seats.When you add in that the Tories managed to shift all the blame for their failings in the electorates eye's to the Lib Dems ensuring they were wiped out electorally, the public view has been chiseled on the back of Ed's big piece of stone.
    You also forget the biggest factor in most peoples life and one advertisers and political advisers like Crosby imbibed with his mothers milk is that fear moves people , makes them buy things makes them act against their best interests, scares them about Scottish pickpockets , the loss of their BTL portfolio , the loss their government pensioner bonds bribe , the loss of buying their housing association property at a tax payer funded discount.
    Against all this Simon you merely show them the truth, I belong to a couple of Oswald did not kill JFK forums and the twin towers did not fall down because of the plane strikes but the full weight of the fear based media is brought to bear against you and it ends up feeling you are fighting a lost cause. Most of your most powerful arguments rely on your excellent graphs which are not as easy to put across as out of context figures repeated ad nauseam on the main media outlets.
    The US economy shrank last quarter , I think we must wait for our figures with apprehension, the tragedy is the Alex Salmon pickpocket poster has had more effect than would your graph shown in "Mediamacro myth 7: the strong recovery" if Labour had converted that into a poster, to illustrate Tory damage to the economy over the years.

  16. I doubt that the venerable conservative myths were an instant hit in focus groups - or would have been had such short-termist idiocies then existed. What has given these myths their force has been their unremitting repetition. Only unremitting repetition of the truth will overcome them and continued surrender to them is not a practical option.

  17. "This paradox is easily explained. Voters were sold a lie: that Labour through its profligacy had run up budget deficits that had required painful measures to correct, but that recent growth rates showed that these measures had been a success. And the lie worked."

    This claim is ridiculous.

    This is because it hopelessly overestimates the attention and knowledge of almost all voters to macroeconomic issues.

    The numbers with any knowledge of what the deficit is, or what growth rates mean, is very small indeed.

    Instead, what most voters do (understandably) is associate times where the economy is doing badly or well with the government in power at that time.

    So, Labour was in power during the crash and its aftermath. And got the blame, however unfair that may be.

    The Tories were in power during the early 18 months of 'austerity' from 2010 on, and got the blame for that initial period of slowdown. But, as recovery got underway, they got the credit.

    If you don't want to spend any effort trying to understand macroeconomic issues (and hardly anybody does) how else are you going to form a view?

    This lack of any attention to what the actual impact of the various governments macroeconomic policies are is, no doubt, frustrating for those whose academic careers are focused on these matters, but that is the way it is.

    The idea that this failure of understanding is down to the failures of such rightwing media stooges as Duncan Weldon, Paul Mason, Evan Davis or Chris Giles is just a joke. The numbers paying *any* attention to these issues is very small, a few hundred thousand at most. Of those, the number of floating voters persuaded to vote one way or another is vanishingly tiny. A few hundred tops.

    I know it must be very frustrating that nobody seems to be paying much attention, but what do you expect?

    For people to be deceived they need to have listened to what was being said. Hardly anybody is. You have been misled by your webhits into thinking that what you are saying is part of a debate of any significance in democratic terms. it just isn't.

  18. I think the problem you have is that not only do most people not understand these issues they are not particularly interested in them, despite the fact, as you say, that they make important political judgments on them.

    The fact is that macroeconomic policies are, to most people counter intuitive, and you won't change this.

    Also the MSM are hopelessly biased against Labour so, whatever arguments one can come up with, they would be deaf to them. However, I do agree that Labour made a very poor job of pushing back against the MSM and the Conservatives.

    However, I wouldn't get too despondent; there's very likely to be a recession in the next four years and this will blow the PSBR sky high, even without another dose of austerity, and the myth ( as indeed it is) of Conservative competence is going to look very threadbare.

  19. As an economist, you can take a detailed analytical look at the economy. This is way beyond most of the electorate. Most of the electorate "experiences" the economic conditions, they do not analyze them. If the experience is one of easier to find a job, wages are increasing, friends and family have jobs and are not sleeping on a sofa, then the economy will be viewed favorably. The response to the Great Recession was neither swift enough nor strong enough. Voters often vote to throw the bums out when conditions are bad whether the "bums in power" are at fault or no. The case needs to be made that the recovery is not good enough and the bums in power are responsible for holding back progress.
    -jonny bakho

  20. Won't they allow economists on Question Time?

  21. What do you make of this Simon?!

  22. "The first is the Labour party itself. The reaction of some in the party to this situation is to want to ‘admit’ that they borrowed too much, and try and move on. Yet this seems just like the strategic error they made from 2010 in not trying to challenge the Conservative narrative. "
    Why don't Labour go the whole hog and embrace MMT? Just spend and tax by printing and imprinting money? No debt.
    'Fiscal irresponsibility ' = good ;)


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