Is mainstream academic macroeconomics eclectic?

For economists, and those interested in macroeconomics as a discipline

Eric Lonergan has a short little post that is well worth reading. Not because it is particularly deep or profound, but because it makes an important point in a clear and simple way that cuts through a lot of the nonsense written on macroeconomics nowadays. The big models/schools of thought are not right or wrong, they are just more or less applicable to different situations. You need New Keynesian models in recessions, but Real Business Cycle models may describe some inflation free booms. You need Minsky in a financial crisis, and in order to prevent the next one. As Dani Rodrik says, there are many models, and the key questions are about their applicability.

If we take that as given, the question I want to ask is whether current mainstream academic macroeconomics is also eclectic. (My original title for this post was can DSGE models be eclectic, but that got sidetracked into definitional issues, but from the way I tend to define things it is the same question.) My answer is yes and no.

Let’s take the five ‘schools’ that Eric talks about. We clearly already have three: New Keynesian, Classical, and Rational Expectations. (Rational Expectations is not normally thought of in the same terms, but I understand why Eric wanted to single it out.) There is currently a huge research programme which aims to incorporate the financial sector, and (sometimes) the potential for financial crises, into DSGE analysis, so soon we may have Minsky too. Indeed the variety of models that academic macro currently uses is far wider than this.

Does this mean academic macroeconomics is fragmented into lots of cliques, some big and some small? Not really, in the following important sense. I think that any of this huge range of models could be presented at an academic seminar, and the audience would have some idea of what was going on, and be able raise issues and make criticisms about the model on its own terms. This is because these models (unlike those of 40+ years ago) use a common language. The idea that the academic ranking of economists like Lucas should reflect events like the financial crisis seems misconceived from this point of view.

It means that the range of assumptions that models (DSGE models if you like) can make is huge. There is nothing formally that says every model must contain perfectly competitive labour markets where the simple marginal product theory of distribution holds, or even where there is no involuntary unemployment, as some heterodox economists sometimes assert. Most of the time individuals in these models are optimising, but I know of papers in the top journals that incorporate some non-optimising agents into DSGE models. So there is no reason in principle why behavioural economics could not be incorporated. If too many academic models do appear otherwise, I think this reflects the sociology of macroeconomics and the history of macroeconomic thought more than anything (see below).

It also means that the range of issues that models (DSGE models) can address is also huge. To take just one example: the idea that the financial crisis was caused by growing inequality which led to too much borrowing by less wealthy individuals. This is the theme of a 2013 paper by Michael Kumhof and colleagues. Yet the model they use to address this issue is a standard DSGE model with some twists. There is nothing fundamentally non-mainstream about it.

So why is the popular perception so different? Why do people talk about schools of thought? I think there are two reasons. First, while the above is true in the realm of academic understanding and discourse, it does not carry over into policy. When it comes to policy, we get to learn which models academic think are applicable to particular policy problems, and here divisions can be sharp. Second, there are plenty of people outside academia who have a public voice about economics (and generally a policy orientation), and they often do see themselves as school followers.

In terms of working practice rather than the hot end of macro policy decisions, most academic macroeconomists would regard themselves as eclectic in terms of the kind of work they are prepared to spend an hour or two seeing presented. But this view, and the common language that mainstream academics use, leads me to the No part of the answer to my original question. The common theme of the work I have talked about so far is that it is microfounded. Models are built up from individual behaviour.

You may have noted that I have so far missed out one of Eric’s schools: Marxian theory. What Eric want to point out here is clear in his first sentence. “Although economists are notorious for modelling individuals as self-interested, most macroeconomists ignore the likelihood that groups also act in their self-interest.” Here I think we do have to say that mainstream macro is not eclectic. Microfoundations is all about grounding macro behaviour in the aggregate of individual behaviour.

I have many posts where I argue that this non-eclecticism in terms of excluding non-microfounded work is deeply problematic. Not so much for an inability to handle Marxian theory (I plead agnosticism on that), but in excluding the investigation of other parts of the real macroeconomic world. (Start here, or type microfoundations into this blog’s search box and work backwards in time.) But for me at least this as a methodological point, rather than anything associated with any school of thought. Attempts to link the two, which I think many people including myself have been guilty of, just confuses.

The confusion goes right back, as I will argue in a forthcoming paper, to the New Classical Counter Revolution of the 1970s and 1980s. That revolution, like most revolutions, was not eclectic! It was primarily a revolution about methodology, about arguing that all models should be microfounded, and in terms of mainstream macro it was completely successful. It also tried to link this to a revolution about policy, about overthrowing Keynesian economics, and this ultimately failed. But perhaps as a result, methodology and policy get confused. Mainstream academic macro is very eclectic in the range of policy questions it can address, and conclusions it can arrive at, but in terms of methodology it is quite the opposite.

Personal debt

A simple point, not very deep or constructive

This earlier post, which has been followed by pieces in the financial press saying similar things, was meant as an antidote to alarmist popular commentary that you can find all over the shop (except the financial press). It was not meant to imply that there are not serious issues to consider in a more thoughtful way around personal debt. (For more discussion on some of these articles, see here.)

There is a view, that some economists hold, that in aggregate we are highly unlikely to ever get a situation where there is too much personal debt, because on average people will not take out more debt than they can afford to pay back. That does not mean that personal debt is always at its optimal desired level, because there are various reasons why people may be unable to borrow as much as they should be able too. [1] But it means aggregate personal debt is either at or below its optimal desired level. There is no reason why an economy can have too much personal debt. (Banks can have too much leverage, but that is different.)

As I said, that is a view that some economists hold. It is not my view, for various reasons, some better than others. First, calculating how much debt you can afford to take out is very very difficult, and as a result there is no reason why on occasion people in aggregate might not be systematically too optimistic. This is obvious to non-economists, but for economists I would say: Friedman’s Billiard player analogy does not hold here because in life we only get to play one game. To put it another way, although I believe rational expectations are the best starting point for analysis, that does not mean we should never look at the possibility of departures from it. Second there may be deep reasons why the young may on average be over optimistic. A third possible reason explored by some is that a widening distribution of income may encourage people to take out too much debt because they aspire to keep up with others. A fourth, which may be a combination of the above, is that debt can be systematically missold, as we discovered in the subprime crisis in the US.

For these reasons I think it is interesting to ask how much personal debt there should be in the economy if people were totally rational and their borrowing was unconstrained, and compare that to how much debt there actually is. Macroeconomic theory tells us this is a tricky calculation to do. Many people will be in debt for what we might call ‘life cycle reasons’: they are students with a loan, or the young(er) household with a mortgage. In other cases people may be borrowing because times are bad (they have become unemployed), but they expect/hope they will get better. So to do the calculation we need a lot of information about the distribution of income over time. (I do not know of any study that tries to do this, so if you do please let me know.)

But at present it is even more complicated than that. This was brought home to me when I saw a chart showing a tight correlation between household debt and car purchases, but I’m afraid I cannot find it again so instead I’ll have to fall back on something more personal. I’m lucky enough to be able to afford to buy a new car when I need it using cash. Yet when I bought my current car, the dealer insisted I took out a zero percent loan with the manufacturer. Although nominal interest rates on the liquid assets I hold are very low they are still not negative, so why turn down an interest free loan?

So I am in debt, because in effect the car manufacturer wanted to lend me money for free. I suspect they saw it as another way of making their car more attractive, and if I was a microeconomist I would probably have fun speculating why they preferred that to just cutting the price. But the point was it made me part of the ‘personal debt time bomb’! I didn’t fall into either of the categories I outlined above, but I was in debt because of the competition strategy of car manufacturers.

This is another reason why aggregate personal debt may be above the level that an economist might think of as reasonable, but the reason for it is utterly benign. It is a danger to no one, as those taking out the debt have the liquid assets to pay off that debt immediately. I’m afraid my conclusion is that any good answer to the question 'is there too much personal debt' is bound to be very complicated.

[1] These credit constraints may change over time, as the financial sector evolves, as I have discussed elsewhere. This means that rising debt income ratios may tell us that credit is getting easier because people are becoming less (unnecessarily) credit constrained, rather than because they are borrowing too much.    

Will Trident be Corbyn’s undoing?

and why Trident is not like austerity

Not being a Labour Party person, I’ve not until now thought much about what Corbyn should do about the Trident issue. (For non-UK readers Trident is the UK’s independent nuclear deterrent.) On a personal level I have never heard a convincing argument for keeping Trident, and a great many bad ones, and it is a very large amount of money. So unless anyone convinces me otherwise I would happily votes against keeping it.

Labour leader Jeremy Corbyn is firmly against Trident, but current Labour policy and many Labour MPs strongly hold the opposite view. It is a far more fundamental issue for Labour MPs, with deep roots, than any debate about Syria. (Postscript: this LRB article by David Runciman is well worth reading.) This post/article from Steve Richards of The Independent, coupled with the recent Labour reshuffle, suggests it may define Corbyn’s leadership.

I have written in the past that Corbyn’s election by Labour Party members was in good part a response to the inept drift in policy that the other three candidates were associated with. (As Jolyon Maugham says, it may be unfair on the non-Corbyn candidates that they were so clearly associated with this failed strategy, but elections are often unfair in this sense.) I suspect the many Labour MPs and commentators who think that Corbyn got elected because most party members prefer purity to government do this because they do not want to admit how hopeless their own electoral strategy clearly was. I have talked about this before, but Chris Dillow does it better.

The implications are that if in the few years a rival candidate emerges who seriously looked like they could beat the Conservatives while remaining close to the policies of the Blair/Brown government (minus Iraq and City regulation, obviously), I suspect they could easily win against Corbyn if the Corbyn/McDonnell combination looked like it was both incompetent and unable to lead more than a small number of their MPs.

That is why I have also written that Corbyn/McDonnell are likely to play a long game: to adopt for now policies that the majority of Labour MPs can unite behind, and try and gradually change the platform once they had shown that they could competently lead this majority (which means after 2020). As a poll disaster could still ruin this strategy, what they should also do (but I have always doubted that they would do) is focus on improving the Labour party’s spin machine. (Notions that Corbyn would automatically galvanise disenfranchised working class voters seem problematic for various reasons. The fact that almost no one in the media supports the current Labour leadership means that more, not less, energy has to be put into getting their message across.)

You can see why trying to change the Trident policy might go against that strategy of playing a long game. Damian Carrington, who has done more work exposing the government’s flooding débâcle than anyone I know, recently tweeted: “when @UKLabour shd have been holding Cameron to account for huge failings on #flooding, they put on a late Christmas pantomime”. It is pointless to say it is not his fault but that of the Labour MPs and media, because these are facts that Corbyn has to work with.

Please note that I’m not arguing that Trident might be better left as a battle to be fought on another day because most voters want to keep Trident. Voters views on the issue of Trident are not as clear as some Trident supporters like to pretend, and any poll that does not make the opportunity cost clear in any question (how many less teachers, nurses …) is meaningless anyway. The Conservatives are going to argue that Labour threaten national security whatever Labour’s actual policy is as long as Corbyn is leader. I am arguing that anything that breaks the long game strategy is not in Corbyn’s own interest. Remember also that Corbyn’s choice will have no influence on what actually happens to Trident before 2020, because the Conservatives will win any vote in parliament.

Now someone might say I’m being inconsistent here, because I would not apply the same argument to the macroeconomic policy of austerity. Is this because I have a deep professional interest in macroeconomics but not in defence policy? It is a good point, but my response would be this. If Labour under any leader agreed to follow Osborne’s fiscal charter, they would be going down exactly the same road as the parliamentary party seemed to heading before Corbyn was elected - the road to nowhere. Or as John Harris put it, they were “in danger of shrinking into meaninglessness”. Their ambivalence on the austerity issue under Miliband/Balls (having a sensible policy but trying not to talk about it) helped lose them the election for a variety of reasons I have talked about before.¹ Austerity, not Trident, was a key reason that Corbyn was elected. 

The Trident issue may therefore be critical for Corbyn. He would obviously like to campaign in 2020 on a manifesto that clearly pledges to scrap it, and there may even be electoral advantages in clarity. But if in doing so he alienates so many Labour MPs that the only image in voters minds for the next few years is Labour disunity, he may lose his support among the majority of party members, who actually meet those voters on the doorstep. Compared to getting this choice right, fixing his economic policy right must seem easy.

1 My previous posts have focused on Labour’s huge tactical failure: the only area before the election where the the Conservatives had real strength was economic competence, and how this was based on a false narrative that Labour failed to challenge. I have briefly talked about the demise of the European left more generally in terms of ‘political capture’ by the dominant elite’s narrative: some more articulate thoughts are discussed by Henry Farrell here.   

Confidence as a political device

Some technical references but the key point does not need them

This is a contribution to the discussion about models started by Krugman, DeLong and Summers, and in particular to the use of confidence. (Martin Sandbu has an excellent summary, although as you will see I think he is missing something.) The idea that confidence can on occasion be important, and that it can be modelled, is not (in my view) in dispute. For example the very existence of banks depends on confidence (that depositors can withdraw their money when they wish), and when that confidence disappears you get a bank run.

But the leap from the statement that ‘in some circumstances confidence matters’ to ‘we should worry about bond market confidence in an economy with its own central bank in the middle of a depression’ is a huge one, and I think Tony Yates and others are in danger of making that leap without justification. Yes, there are circumstances when it may be optimal for a country with its own central bank to default, and Corsetti and Dedola (in a paper I discussed here) show how that can lead to multiple equilibria.

But just as Krugman wanted to emulate Woody Allen, I want to as well but this time pull Dani Rodrik from behind the sign. In his excellent new book (which I have almost finished reading) Rodrik talks about the fact that in economics there are usually many models, and the key question is their applicability. So you have to ask, for the US and UK in 2009, was there the slightest chance that either government wanted to default? The question is not would they be forced to default, because with their own central bank they would not be, but would they choose to default. And the answer has to be a categorical no. Why would they, with interest rates so low and debt easy to sell.

The argument goes that if the market suddenly gets spooked and stops buying debt, printing money will cause inflation, and in those circumstances the government might choose to default. But we were in the midst of the biggest recession since the 1930s. Any money creation would have had no immediate impact on inflation. Of course their central banks had just begun printing lots of money as part of Quantitative Easing, and even 5 years later where is the inflation! So once again there would be no chance that the government would choose to default: the Corsetti and Dedola paper is not applicable. (Robert makes a similar point about the Blanchard paper. I will not deal with the exchange rate collapse idea because Paul already has. A technical aside: Martin raises a point about UK banks overseas currency activity, which I will try to get back to in a later post.)

Ah, but what if the market remains spooked for so long that eventually inflation rises. The markets stop buying US or UK debt because they think that the government will choose to default, and even after 5 or 10 years and still no default the markets continue to think that, even though they are desperate for safe assets!? In Corsetti and Dedola agents are rational, so we have left that paper way behind. We have entered, I’m afraid, the land of pure make believe.

So there is no applicable model that could justify the confidence effects that might have made us cautious in 2009 about issuing more debt. There are models about an acute shortage of safe assets on the other hand, which seem to be ignored by those arguing against fiscal stimulus. Nor is there the slightest bit of evidence that the markets were ever even thinking about being spooked in this way.

Martin makes the point that just because something has not yet been formally modelled does not mean it does not happen. Of course, and indeed if he means by model a fully microfounded DSGE model I have made this point many times myself. But you can also use the term model in a much more general sense, as a set of mutually consistent arguments. It is in that sense that I mean no applicable model.

Now to the additional point I really wanted to make. When people invoke the idea of confidence, other people (particularly economists) should be automatically suspicious. The reason is that it frequently allows those who represent the group whose confidence is being invoked to further their own self interest. The financial markets are represented by City or Wall Street economists, and you invariably see market confidence being invoked to support a policy position they have some economic or political interest in. Bond market economists never saw a fiscal consolidation they did not like, so the saying goes, so of course market confidence is used to argue against fiscal expansion. Employers drum up the importance of maintaining their confidence whenever taxes on profits (or high incomes) are involved. As I argue in this paper, there is a generic reason why financial market economists play up the importance of market confidence, so they can act as high priests. (Did these same economists go on about the dangers of rising leverage when confidence really mattered, before the global financial crisis?)

The general lesson I would draw is this. If the economics point towards a conclusion, and people argue against it based on ‘confidence’, you should be very, very suspicious. You should ask where is the model (or at least a mutually consistent set of arguments), and where is the evidence that this model or set of arguments is applicable to this case? Policy makers who go with confidence based arguments that fail these tests because it accords with their instincts are, perhaps knowingly, following the political agenda of someone else.     

How Osborne and Cameron turned a crisis into a disaster

Would it be a wild, politically motivated jibe to call these the Osborne/Cameron floods? Of course it is nonsense to suggest that there would have been no floods over the last five years under a different government, but it is equally nonsense to deny that Osborne/Cameron policies have significantly increased the damage and human misery caused by these floods. Consider the following:

1. We have known since at least the Pitt review of 2007 that climate change was going to greatly increase the incidence of record breaking bursts of rainfall in the UK. Government ministers can carry on claiming they are unprecedented, but they are not unexpected.
   
   
2. The Labour government responded by greatly increasing their spending on flood defences, in the spending review which ended in 2010/11. In contrast Osborne demanded and obtained sharp cuts in 2011/12 and beyond. Only the arrival of floods dragged those numbers up in later years. Ministers can play around with dates as much as they like to try and tell a different story, but the evidence for those cuts is there in the data (see this post). Every news report that allows ministers to claim they did not cut spending on flood defences is complicit in deception.
   
   
3. The number of specific schemes cut or downsized in areas that were subsequently flooded becomes longer with every new event, as it was bound to do: Damian Carrington in the Guardian notes a £58 million scheme in Leeds cut, extra flood defences in recently flooded Kendal repeatedly postponed, schemes cut in the Somerset Levels and Yalding in Kent before the floods of 2013/14, before that Dawlish and the Thames Valley.
   
   
4. And for what purpose. The argument that spending had to be tight is utter nonsense. There is absolutely no evidence that if flood defence spending had been increased rather than cut by 27% in 2011/12 (as it should have been), and that higher spending maintained, the market would have stopped buying UK government debt. The UK recently sold oversubscribed 50 year debt at only 2.5% interest: with a 2% inflation target that is a real cost of only 0.5% a year. By contrast the National Audit Office in 2014 reported that the Environment Agency estimated current schemes had a benefit cost ratio of over 9:1! You have to be slightly mad to cut schemes like that when they would cost you so little to finance.
   
   
5. David (‘greenest government ever’) Cameron in 2013 appointed Owen Paterson, a climate sceptic, to be minister in charge of DEFRA, the ministry responsible for the environment and flood defences. He cut the number of officials working on a climate change adaptation programme from 38 to six. A rather sinister aspect to this whole affair is the influence of widespread climate denial on the right might have had on all these bad and costly decisions.
   
   
6. As it became clear how many farming practices can worsen flooding, the Labour government introduced regulations on land use with the specific aim of reducing flood damage. The coalition government scrapped these regulations.
   
   
7. In November this year, as part of Osborne’s spending review, local authority spending on flood defences was cut by a third. The Environment Agency has to cut staff as fast as the flood risk increases, and then through gritted teeth deny this matters. This report says the Environment Agency had 800 fewer flood risk management staff in March 2014 than in September 2010.
8. The independent, government established Committee on Climate Change has issued repeated warnings to government that spending needed to be increased, not decreased. They have all been ignored.
   
   

As Carrington says, Cameron and Osborne have ignored red flag after red flag. Cuts that make no sense in economic terms have been made with costs that probably now run in the order of a billion and counting, with plenty of human misery attached. Cameron has calculated that an appearance in wellies at each flood sight will be enough to assuage public concern. As Steve Richards notes, after each crisis when no cost is too great, Osborne goes back to playing the responsible one as he cuts regardless.

After the 2013/14 floods I wondered if this would be Cameron’s and Osborne’s Katrina. That was a mistake. For all its faults, and Fox News, the US has a more open media than the UK, particularly when the BBC is cowed by government threats. The Guardian, Independent and Mirror will complain (and the Morning Star will channel my blog!), but the large majority that never read these papers will remain ignorant of what has gone on. A chaotic Labour Party will be unable to coordinate any attack, and fail to effectively voice justifiable rage, and that will give the BBC an excuse to ignore them.

But forget austerity and partisan politics. This is fundamentally about incompetence: about ignoring repeated warnings for no good reason and causing huge costs and heartache as a result. Is no one on the right prepared to call the government to account for its failures on this issue? Will no one at the BBC confront politicians with what they have done? If they do not, I fear all we will get are fine words, one-off emergency cash, and the existing policy of effectively ignoring the threat will continue once again.          

UK flood prevention: the missing billion

2007 saw very bad flooding in the UK. A report was commissioned from Michael Pitt (no longer available on a government website, but available here (pdf), HT @FiDaisyG) which stated:

ES.12 The scale of the problem is, as we know, likely to get worse. We are not sure whether last summer’s events were a direct result of climate change, but we do know that events of this kind are expected to become more frequent. The scientific analysis we have commissioned as part of this Review (published alongside this Report) shows that climate change has the potential to cause even more extreme scenarios than were previously considered possible. The country must adapt to increasing flood risk.

The Labour government responded to this review by substantially increasing central government spending on flood prevention. It reached a peak in 2010/11, the last year of the relevant spending review. Subsequently the coalition government, as part of its austerity policy, cut back on spending, going directly against the spirit of the Pitt review.

It was obvious following 2007 that substantially more money needed to be spent on flood prevention as a result of climate change, and the Labour government acted on that knowledge. The Coalition government ignored it. Suppose that instead of cutting, the coalition government had allowed spending to increase each year by 2% from that 2010/11 level: a very modest rise given the nature of the risk. That would have meant that by 2015/16 around £500 million more in 15/16 prices would have been spent in total, which is about three quarters of the total amount spent this year. As 2014/15 is acknowledged as a one-off positive blip, by 2020/21 under Conservative plans we will probably be looking at missing expenditure near £1 billion. And that is despite all the flooding that has occurred since 2011, some of the damage from which must be the result of this missing spending. That is a huge spending gap created by the Conservatives.

Spending on Flood Protection, 15/16 prices: actual (source DEFRA) and hypothetical 2% growth path

I still find it remarkable that no one has held the government to account for this huge failure. Flooding is currently costing at least £1 billion a year. Even if filling that spending gap had prevented only a small proportion of these current and future costs, it would have produced a handsome return, as well as avoiding a great deal of individual heartbreak. Yet the government continues to get away with talking about unprecedented rainfall, as if no one had thought this might happen. John Deben, Chairman of the Statutory Committee on Climate Change, tweets

"Surprising no broadcaster seems to have sought to discuss advice on flooding and adaptation to climate change given to Government"

The Labour Party too appears to have made no attempt to coordinate a media attack on the government, in an area where their own record was exemplary. DEFRA secretary of state at the time that Labour increased flood defences was Hilary Benn, who is MP for Leeds (one of the areas affected by flooding) and Ed Miliband was the minister in charge of energy and climate change. The current DEFRA shadow minister is Kerry McCarthy, and all I could find from her on flooding was this and this.

Speaking about the latest flooding, David Cameron said “We will do everything we can to help people in this, their hour of need.” It is a shame that no one seems capable of asking him why he added to these needs, by ignoring the growing evidence (including the Pitt review) that more money needed to be spent on flood defences.   

The unique blindness of some commentators on the right

Janan Ganesh of the FT talks about the unique moral arrogance of the left. They have too often “impugned the motives of Conservatives”. He says that “the reality of politics in a rich, modern country is that parties are squabbling over marginalia”. He is wrong, and should get out more.

For example, take the issue of benefit sanctions. No doubt he might say that sanctions existed, and indeed the regime was tightened, during the Labour government. But the reality is that something very horrible, and morally shameful, is currently going on. The number of sanctions per claimant remained below 4% from 2000 to 2010. In 2013 it peaked at above 7%, and in 2014 was between 5% and 6%. Behind these statistics are a wealth of examples of where sanctions have been applied for minor infringements, and have ignored excellent reasons like the death of a spouse, or the long que at the jobcentre. Frances Coppola gives these and more examples here.

She points out that Department of Work and Pension (DWP) guidance states “It would be usual for a normal healthy adult to suffer some deterioration in their health if they were without essential items, such as food, clothing, heating and accommodation or sufficient money to buy essential items for a period of two weeks…” Sanctions often operate for 4 weeks or even longer. It is causing people to become homeless, and children to go hungry. This is not “marginalia”.

The current sanctions regime is one of the main causes of the increased use of food banks in the UK. Yet Ganesh instead likes to focus on inaccurate use of foodbank data. The DWP says that the sanctions regime is important in providing incentives to get people back to work. But is there any evidence that it does this? You would think that the department would have produced some evidence by now, although one of the comments on Frances’s post (and yes, we cannot know it is genuine) suggests why we have not. Yet this did not deter the department. They put out on their website (now unsurprisingly withdrawn) quotes and a picture from ‘Sarah’ who had been sanctioned and as a result had been encouraged to produce a CV. The only problem was that Sarah was completely fictitious.

There is widespread talk of jobcentre staff being put under pressure to sanction. The relevant select committee of MPs has asked for an inquiry, but this has been refused. Benefit sanctions are just one of a range of policy mistakes by this department that is causing real harm to the disadvantaged, and will continue to do so. All these problems were quite clear before the election, but the Prime Minister has kept Iain Duncan Smith in post. George Osborne has been happy to feed off the stigmatisation of benefit claimants stoked by the tabloids.

So please, Mr. Ganesh, no more lectures about moral arrogance on the left. Not, at least, until you have recognised what is actually happening to many of those who are unfortunate enough to be claiming benefits administered under this government, and the government’s apparent indifference to that.