Showing posts from August, 2017

Tariffs, trade and money illusion

In the past few days, I have read three pieces from Economists for Brexit - now renamed "Economists for Free Trade" - extolling the virtues of "hard" (or "clean") Brexit and calling for the UK to drop all external tariffs to zero unilaterally after Brexit. Two are written by professors of finance ( Kent Matthews and Kevin Dowd ). The third is from the veteran economist Patrick Minford . All three of these pieces wax lyrical about the benefits to GDP and welfare from unilaterally reducing external tariffs to zero. But bizarrely, not one gives adequate consideration to the currency effects of trade adjustment and the likely monetary policy response. Minford's brief discussion contains a schoolboy error (of which more shortly). The other two never mention it at all. In today's free-floating currency regime, trade shifts and currency movements are intimately linked. Indeed, for some countries, trade shifts are driven more by capital flows and a

Calculus for journalists

“What do they teach them at these schools?” wondered the Professor in C.S. Lewis's The Lion, the Witch and the Wardrobe.  The Professor, of course, was concerned about logic. But I wonder too - not about logic, but about maths. Especially among journalists writing about life expectancy and other long-term trends. Here is the FT proclaiming "Average life expectancy falls". This is the headline for a chirpy piece about how reduced life expectancy could make things easier for pension funds facing big deficits.  There's only one problem with this. Life expectancy isn't falling. And the report the FT cites does not say that it is. This is how the press release from the Institute and Faculty of Actuaries summarises the findings of their report: Recent population data has highlighted that, since 2011, the rate at which mortality is improving has been slower than in previous years However, mortality is expected to continue to improve and there is signifi