Tag Archives: Secular Stagnation

Fish and (micro)chips: Why I’m relatively relaxed about robots

John Lewis.

My earlier post arguing that robotisation wouldn’t destroy jobs, slash wages or drastically shorten the working week prompted many thoughtful responses. Richard Serlin and others countered, arguing that if automation affects all sectors, then displaced workers may have nowhere to go.  Others asked if the sheer scale, speed and scope of robotisation might make it much more disruptive.  Or if wages fall, who will be able to buy the extra output? And Noah Smith raised the prospect that robotisation might eventually differ from earlier waves of innovation by replacing rather than complementing human labour.  This post attempts to respond to those points, expand on the original post and explain why I’m still relatively relaxed about robots.

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Robot Macroeconomics: What can theory and several centuries of economic history teach us?

John Lewis.

Advances in machine learning and mobile robotics mean that robots could do your job better than you.  That’s led to some radical predictions of mass unemployment, much more leisure or a work free future.   But labour saving innovations and the debates around them aren’t really anything new.  Queen Elizabeth I denied a patent for a knitting machine over fears it would create unemployment, Ricardo thought technology would lower wages and Keynes famously predicted a 15 hour working week by 2030.   Understanding why these beliefs proved to be wrong gives us important insights into why similar claims about robotisation might be incorrect.  But automation could nevertheless have sizeable distributional implications and ramifications well beyond the industries in which it’s deployed.

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Less is more: what does mindfulness mean for economics?

Dan Nixon.

Economic theory generally assumes that more consumption means greater happiness. This post puts forward an alternative, “less is more” perspective based around the concept of mindfulness. It argues that we may achieve greater happiness by seeking to simplify our desires, rather than satisfy them. The result – less consumption but greater wellbeing – could be especially important for debates around secular stagnation and ecological sustainability.

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Mean and modal Bank Rate expectations

Will Dison and David Elliott.

Financial market prices provide information about market participants’ Bank Rate expectations. But central expectations can be measured in different ways. Mean expectations, derived from forward interest rates, represent the average of the range of possible outcomes, weighted by their perceived probabilities. On the other hand, modal expectations, which can be estimated from interest rate options, represent the perceived single most likely outcome. Currently, these market-implied mean and modal expectations for the path of Bank Rate over the coming few years differ starkly, with the mode lying well below the mean. In this post we argue that this divergence primarily reflects the proximity of the effective lower bound to nominal interest rates.

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Filed under Financial Markets, Macroeconomics, Monetary Policy

Drivers of long-term global interest rates – can changes in desired savings and investment explain the fall?

Authors: Lukasz Rachel and Thomas Smith.

In this post we show how various secular trends – demographics, inequality and the emerging market savings glut – raised desired savings at the global level and put downward pressure on real rates.  We also show how desired investment could have fallen due to the decline in the relative price of capital goods, lower public investment and a rise in the spread between risk-free rates and the return on capital.  Together we think these secular trends can account for 300bps of the historic decline in the global real rate.  Moreover, we think these secular trends are likely to persist. This suggests the global neutral rate, which acts as an anchor for individual countries’ equilibrium rates in the long-term, will remain low, perhaps around 1%. Continue reading

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Drivers of long-term global interest rates – can weaker growth explain the fall?

Authors: Lukasz Rachel and Thomas Smith.

Long-term real interest rates have fallen substantially over the past thirty years.  The co-movement in real rates across both advanced and emerging economies suggests a common driver is at work – the global neutral rate may have fallen.  In this two-part blog post we attempt to identify which secular trends could have driven such a fall.  In Part 1 we highlight how weaker expectations for global trend growth can account for around 100bps of the 450bps fall in real rates since the 1980s.  But this effect seems to mainly apply to the post-crisis period – suggesting other factors are responsible for the protracted decline before the crisis.
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Back to the future: why we’re optimists in the secular stagnation debate

Saara Tuuli & Sandra Batten

Seven years after the financial crisis, global growth remains anaemic and the policy setting is nowhere near normal.  Some commentators have suggested that this reflects some kind of ‘secular stagnation’ which set in before the crisis.  This would have profound consequences for future growth and development in both wealthy and poorer countries. We are more optimistic, and see a raft of emerging technologies that could transform growth in many sectors.  In this post, we summarise the current debate and offer our views on it.

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Filed under Economic History, International Economics, Macroeconomics