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Supporting the DEE 09 conference

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Is tax policy a train or a power station?

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This final post on the DEE09 conference follows on from looking at how Sherlock Holmes can be used in economics education and how to combine technology, research and the financial crisis into economics teaching to consider the conference keynotes.

John Sloman of the Economics Network in conversation with Robert Chote of the Institute for Fiscal Studies

John Sloman of the Economics Network in conversation with Robert Chote of the Institute for Fiscal Studies

Robert Chote is Director of the Institute for Fiscal Studies and despite his self effacing introduction that he is a journalist who has seen the economic light, he delivered an analysis of Fiscal Policy and the Crisis that any economist would have been proud of.

Chote began by suggesting that the crisis we are currently in would have been regarded as a bizarre happening from a parallel universe that might have been a theoretical sidebar in textbook a few years ago.

Robert Chote of the IFS at the DEE conference

Robert Chote of the IFS at the DEE conference

He went on to outline the role counterfactuals are going to play in the analysis of the crisis – what would have happened without various policy interventions – we won’t know for sure, but he suggested that the temporary VAT cut may produce 20 years of PhDs!

Turning to the specifics of the crisis, he characterised the British stimulus package as short and small by international standards, showed that there will be more borrowing and more structural debt, with long term debt not returning to pre-crisis levels until 2030.

With the economy set to be 5% less productive, falls in share and house prices locked in, plus a less productive financial sector the IFS view seems to be that we are in for two terms of pain, seemingly regardless of who wins the next election.

The return to balance is focussed around spending cuts with 80% of the burden falling there and just 20% coming through tax rises.

The various tinkerings with tax rates makes the schedule for 2011-2012 look like the side of a train or Battersea power station ie not something you would find in any economic model.

Do income tax rates look more like a train or Battersea power station?

Do income tax rates look more like a train or Battersea power station?

He reflected on his experience as an employer of economics graduates and noted a wide variation in their writing skills / ability to explain economics to a wider audience. He exhorted academics to do more to get students engaged with areas of economics where there is no consensus.

Rachel Lomax at the DEE conference

Rachel Lomax at the DEE conference

The other keynotes featured Rachel Lomax former Deputy Governor of the Bank of England who told delegates that looking at price stability and individual institutions will not be enough to prevent another crisis – but that with no unanimity about new tools to combat future crises, economics needs creative thinkers now more than ever.

Vicky Pryce of the Government Economic Service emphasised the importance of not separating micro and macroeconomics completely – policy interventions may depend on the spending decisions of individual consumers – so the economics graduates of tomorrow need to make swift judgements from incomplete information if they are to make an impact on policy.

All three keynote speakers noted the rise in interest in economics the crisis has sparked. Applications to universities are up 20% and the IFS have gone electronic to cope with the number of applications they receive.

It seems as though academia may see an upside to the crisis after all.

Written by Paul Ayres

September 16, 2009 at 11:36 am

Posted in Other sessions

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