Quotulatiousness

December 25, 2015

Repost – The market failure of Christmas

Filed under: Economics, Government — Tags: , — Nicholas @ 02:00

Not to encourage miserliness and general miserability at Christmastime, but here’s a realistic take on the deadweight loss of Christmas gift-giving:

In strict economic terms, the most efficient gift is cold, hard cash, but exchanging equivalent sums of money lacks festive spirit and so people take their chance on the high street. This is where the market fails. Buyers have sub-optimal information about your wants and less incentive than you to maximise utility. They cannot always be sure that you do not already have the gift they have in mind, nor do they know if someone else is planning to give you the same thing. And since the joy is in the giving, they might be more interested in eliciting a fleeting sense of amusement when the present is opened than in providing lasting satisfaction. This is where Billy Bass comes in.

But note the reason for this inefficient spending. Resources are misallocated because one person has to decide what someone else wants without having the knowledge or incentive to spend as carefully as they would if buying for themselves. The market failure of Christmas is therefore an example of what happens when other people spend money on our behalf. The best person to buy things for you is you. Your friends and family might make a decent stab at it. Distant bureaucrats who have never met us — and who are spending other people’s money — perhaps can’t.

So when you open your presents next week and find yourself with another garish tie or an awful bottle of perfume, consider this: If your loved ones don’t know you well enough to make spending choices for you, what chance does the government have?

December 24, 2015

QotD: Ayn Rand’s view of the commercialization of Christmas

Filed under: Business, Economics, Liberty, Quotations — Tags: , , — Nicholas @ 01:00

Ayn Rand, the poet-theorist of capitalism, had a clever Lucy-like line about the “commercialization of Christmas”: she said it was the best thing about Christmas. “The gift-buying … stimulates an enormous outpouring of ingenuity in the creation of products devoted to a single purpose: to give men pleasure,” she said in 1976. “And the street decorations put up by department stores … provide the city with a spectacular display which only ‘commercial greed’ could afford to give us.”

Rand saw exchange as the ideal model for all human relationships. Sometimes the free-marketeers who have borrowed her style and her ideas are accused of heartlessness for this attitude. Things like holidays and families, they say, should be shielded from the supposedly brutalizing effects of mere trade. What one notices about these arguments is that they smuggle in the notions of exchange and mutual advantage by the back door: everyone benefits selfishly from having havens from selfishness.

What one notices about the people who make these arguments, on the other hand, is that they have an excuse for not being attuned to giving as much as they get in personal relationships or social environments. If you’re exchange- or trade-minded, you will usually be asking yourself whether you’re paying your parents back well for raising you, doing right by your friends, being a good guest when hospitality is extended, observing implied social contracts correctly.

As Rand said, there is a Christmas ideal of “goodwill toward men” that is connected with all these things, and not exclusive to Christianity. The gift-giving part of Christmas, the part where silly mammals rummage in the marketplace trying to please and surprise one another by selecting shiny material objects, has swallowed the part in which we celebrate rescue from hell. It’s a good thing, Charlie Brown. Or a very entertaining sort of racket, at any rate.

Colby Cosh, “Good grief! The commercialism of Christmas isn’t so bad”, Maclean’s, 2014-12-25.

December 22, 2015

Monty’s thumbnail sketch of the economics of scarcity

Filed under: Economics, History — Tags: , , — Nicholas @ 04:00

Okay, it’s perhaps a bit more than just a thumbnail sketch, but it’s still a good introduction:

A basic definition of “economics” is given by Thomas Sowell (PBUH, may he live a thousand years), which I paraphrase here: “Economics is a system of allocating scarce resources which have alternate uses.” The key word I want to focus on here is scarce. It is not abundance but scarcity that lies at the heart of economics. Scarcity of resources is what makes economics a fundamental property of nature. Scarcity is an inherent, inseparable, eternal property of reality. It is not a problem that can be solved — it is bound up in the laws of physics that govern the cosmos.

The necessities of life — water, food, clothing, shelter — are drawn from scarce resources which have alternate uses and thus require a method of allocation. We generally think of systems like “capitalism” or “communism” when we think of economic systems, and there are others (feudalism, for example). But let’s boil down the allocation method to two basic kinds: market-based, where scarce resources are allocated according to supply-and-demand dynamics; and command-based, where a central authority divvies up resources according to some set of (usually arbitrary) rules.

Nearly every variant of market-based and command-based economies has been tried over the centuries, and the market-driven economy has emerged as the best solution we have found so far. It turns out that market-based economies work far better than command-based economies for one simple reason: because of what F. A. Hayek called “the knowledge problem”. Hayek’s insight was that allocating scarce resources is a very complex business in anything other than a trivially small economy, and there’s no way that a centrally-managed economy can hope to understand all the decisions and variables that go into making the production of goods and services possible. There is no way for a centralized body to determine how to allocate scarce resources efficiently across the hugely-complex landscape of a functioning economy. Mis-allocation of resources is almost always the near-term result, with the middle-to-long-term result being economic collapse.

Market-based economies use competition and pricing to guide the allocation of scarce resources. Supply and demand fluctuate, and the marketplace uses pricing of goods and services as a signaling device for both buyers and sellers. If supply is high but demand is low, prices drop and the resources that go into the low-demand item are diverted to a good or service where demand (thus price) is higher. If demand is high but supply is low, prices will rise and prompt competitors to enter the market at a lower price or (if the resource is inherently limited, as with beach-front property) drive more intense competition among buyers.

All of this is Economics 101, and it doesn’t matter if you’re a red diaper baby Communist or an Ayn-Randian hyper-capitalist, you have no choice but to work under these constraints. You live in a reality constrained by scarce resources that have alternate uses; there is no magical elixir or scientific discovery that will exempt you from it.

December 18, 2015

“The gift economy of the digital world is a mirage”

Filed under: Economics, Media — Tags: , , , , — Nicholas @ 02:00

Grant McCracken responds to Clay Shirky’s “gift economy” notions:

In point of fact, the internet as a gift economy is an illusion. This domain is not funding itself. It is smuggling in the resources that sustain it, and to the extent that Shirky’s account helps conceal this market economy, he’s a smuggler too. This world cannot sustain itself without subventions. And to this extent it’s a lie.

Shirky insists that generalized reciprocity is the preferred modality. But is it?

    [In the world of fan fic, there] is a “two worlds” view of creative acts. The world of money, where [established author, J.K.] Rowling lives, is the one where creators are paid for their work. Fan fiction authors by definition do not inhabit this world, and more important, they rarely aspire to inhabit it. Instead, they often choose to work in the world of affection, where the goal is to be recognized by others for doing something creative within a particular fictional universe. (p. 92)

Good and all, but, again, not quite of this world. A very bad situation, one that punishes creators and our culture, is held up as somehow exemplary. But of course reputation economies spring up, but we don’t have to choose. We can have both market and reputation economies. But it’s wrong surely, to make the latter a substitute for the former.

Shirky appears to be persuaded that it’s “ok” for creators to create without material reward. But I think it’s probably true that they are making the best of a bad situation. Recently, I was doing an interview with a young respondent. We were talking about her blog, a wonderful combination of imagination and mischief. I asked her if she was paid for this work and she said she was not. “Do you think you should be paid?” I asked.

She looked at me for a second to make sure I was serious about the question, thought for a moment and then, in a low voice and in a measured somewhat insistent way, said, “Yes, I think I should be paid.” There was something about her tone of voice that said, “Payment is what is supposed to happen when you do work as good as mine.”

[…]

Finally, I do not mean to be unpleasant or to indulge ad hominem attack, but I think there is something troubling about a man supported by academic salary, book sales, and speaking engagements telling Millennials how very fine it is that they occupy a gift economy which pays them, usually, nothing at all. I don’t say that Shirky has championed this inequity. But I don’t think it’s wrong to ask him to acknowledge it and to grapple with its implications.

The gift economy of the digital world is a mirage. It looks like a world of plenty. It is said to be a world of generosity. But on finer examination we discover results that are uneven and stunted. Worse, we discover a world where the good work goes without reward. The more gifted producers are denied the resources that would make them still better producers and our culture richer still.

What would people, mostly Millennials, do with small amounts of capital? What enterprises, what innovations would arise? How much culture would be created? I leave for another post the question of how we could install a market economy (or a tipping system) online. And I have to say I find it a little strange we don’t have one already. Surely the next (or the present) Jack Dorsey could invent this system. Surely some brands could treat this as a chance to endear themselves to content creators. Surely, there is an opportunity for Google. If it wants to save itself from the “big business” status now approaching like a freight train, the choice is clear. Create a system that allows us to reward the extraordinary efforts of people now producing some of the best artifacts in contemporary culture.

December 16, 2015

To lower healthcare costs, increase the competition

Filed under: Business, Economics, Health, USA — Tags: , , — Nicholas @ 04:00

At Mother Jones, Kevin Drum links to an article that explicitly shows the cost of having monopoly providers in healthcare:

Regular readers of this blog should know that when it comes to the price of hospital care, it’s competition that matters, not insurance companies. In areas with only a single hospital, insurance companies have no leverage and have to accept whatever price the hospital charges. If there are lots of hospitals, they have to compete with each other to earn the insurance company’s business.

But in case you’re still skeptical, a team of researchers has analyzed a huge database of health care claims in the US to check this out. They found enormous regional variation in hospital costs for the same procedure, and one of the biggest drivers of this variation was competition:

Market power and hospital price

    Hospital market structure stands out as one of the most important factors associated with higher prices, even after controlling for costs and clinical quality. We find that hospitals located in monopoly markets have prices that are about 15.3 percent higher than hospitals located in markets with four or more providers. This result is robust across multiple measures of market structure and is consistent in states where the HCCI data contributors (and/or Blue Cross Blue Shield insurers) have high and low coverage rates.

December 15, 2015

Hillary Clinton’s well-intentioned plans will make the prescription medicine market even worse

Filed under: Business, Economics, Government, Health, USA — Tags: , , , , — Nicholas @ 04:00

Another older post from Megan McArdle on the nice-soundbites-but-terrible-economic-notions from the Hillary Clinton campaign to fix the prescription medicine marketplace:

Hillary Clinton thinks drug development should be riskier, and less profitable. Also, your health insurance premiums should be higher. And there should be fewer drugs available.

This is not, of course, how the Clinton campaign would put it. The official line is that Americans are just paying too darn much for drugs, and she has a plan to stop that:

  • Regulate direct-to-consumer advertising more heavily, and strip its tax deductibility
  • Require drug companies to spend a certain percentage of revenue on research and development, or face penalty payments and the loss of their R&D tax credit (I am inferring that this is what she is talking about, since the actual language of the proposal is long on paeans to the importance of federal research funding and short on details)
  • Cap out-of-pocket costs for drugs
  • Reduce the exclusivity period for biologic drugs
  • Prohibit companies from making side payments to generic manufacturers to keep generic competition off the market
  • Allow drug reimportation
  • Require that new treatments be proved to be a substantial improvement over existing treatments — i.e., eliminate the dreaded “me too” drugs
  • Allow Medicare to “negotiate” drug prices

Eliminating the side payments seems eminently sensible. (Yes, yes, you can strip my libertarian card, but market-rigging contracts shouldn’t be enforced.) It also seems reasonable to require some sort of comparative effectiveness research. Other provisions will certainly drive down drug prices, at the risk of also driving down innovation.

Still other provisions, however, are simply bad economics. In what other market do we worry about having a second product available that’s merely just as good as the first? Should we really only have one antidepressant, one statin, one blood pressure medication, and so forth? Might there be variation among patients so that drugs that are statistically about equally effective in large groups are nonetheless individually more or less effective for different people? Might one drug’s side effects be better tolerated by some patients than another’s? Might having two drugs in the category help keep prices down?

Then there is notion that we should force pharmaceutical companies to spend a set percentage of their revenues on R&D. This seems to me to be … what’s the word I am looking for? Ah, I’ve got it: “insane.”

[…]

Economically, large parts of this plan make little sense. Politically, many of these items would be very difficult to pass, not least because the Congressional Budget Office would assess the likely effects and would make it sound much less appealing than it does in a gauzy stump speech. But away from those harsh realities, purely as campaign rhetoric, it probably works very well.

Perhaps the key element of the gender pay gap is … motherhood

Filed under: Business, Economics, USA — Tags: , , , — Nicholas @ 03:00

In Forbes, Tim Worstall pinpoints exactly when many women stop earning as much (or more) than their male co-workers:

Currently, among women under 30 or so (it varies, the age, depending upon the average age of first childbirth and this is itself something that varies quite a bit in the US) women tend to outearn men. And as above those without children have, depending upon how you correct for other factors, a positive wage gap in favour of women of about the same size or no pay gap of any relevant size. But there is a pay gap between men and women who have married and who have children (the two effects are not being separated from each other). So, why?

The obvious answer being that this is what humans do. No, it’s no longer true that this is what humans must do, women taking the majority of the child care duties, men going out to work to support everyone. But it is still what the majority do do, it’s the general expectation about how life is going to be worked out. And this does have its effect:

    The division of labor in the family is less delineated than it once was and a majority of women with children now work in the market. Nonetheless, women on average still assume greater responsibility for child rearing than men, and that responsibility is associated with a lower extent and continuity of market work. In addition, the expectation and assumption of home responsibilities influence choice of occupation and preferences for working conditions that facilitate a dual career, combining work at home and work in the market. A significant literature has investigated the effect of work in the home on women’s lifetime patterns of labor force participation and the effect of labor force discontinuities on wages.15 Women with children devote relatively more of their energy to home responsibilities than women without children and as a result earn lower wages. On the other hand, married men earn higher wages than other men. Although that effect may be partly endogenous—women may shun low earners as husbands—it is a plausible consequence of the division of labor in the home, which leads men to take greater responsibility for providing the family’s money income and consequently to work longer, more continuously and possibly harder.

In a nutshell, the gender pay gap is really the effect upon the overall averages of two effects. Mothers earn less than non-mothers, fathers earn more than non-fathers. And yes, mothers and fathers are a majority and so the effect is large enough to sway that national average. And while the effect is not entirely symmetric it is reasonably so. We talk of the overall gender pay gap as being around 20% or so, and we see that fathers outearn non-fathers by 8%: that’s a significant portion of that gap right there.

Our conclusion thus has to be that the gender pay gap that we’re seeing isn’t a result of societal discrimination against women (nor of such discrimination in favor of fathers, something that no one at all is complaining it is) but instead a result of the choices that people make about how the kids are going to be cared for and who does it.

December 14, 2015

The Monopoly Markup

Filed under: Economics — Tags: , , , , — Nicholas @ 04:00

Published on 18 Mar 2015

Ever wonder why pharmaceuticals are so expensive? In this video, we show how low elasticity of demand results in monopoly markups. This is especially the case with goods that involve the “you can’t take it with you” effect (for example, people with serious medical conditions are relatively insensitive to the price of life-saving drugs) and the “other people’s money” effect (if third parties pay for the medicine, people are less sensitive to price).

QotD: Veblen goods

Filed under: Economics, Quotations — Tags: , , , — Nicholas @ 01:00

… the point about a Veblen Good is not that sales rise when prices do. Rather, it’s that a Veblen Good is desirable because it is expensive. It is a way of showing that you can afford to buy something expensive. That you can afford something expensive is a sign of social status (well, it is in our society, where having lots of money and thus being able to buy something expensive is a sign of social status. It’s possible to imagine other societal forms which don’t include this).

The archetypal example was certain of the Vanderbilt women who would have diamonds implanted into their backs, where they would be visible to people at parties given the low cut backs of dresses at the time. The point of such implantations simply being to show that one had enough money (and perhaps little enough sense in a pre-antibiotic era) to have a diamond implanted over one’s spine. There’s a story that Mick Jagger had a diamond implanted into one of his teeth for the same sort of reason at one point (removed when it promoted caries).

The point being that a Veblen Good does signal something, and as such the greater the price the more desirable the ability to transmit that signal. But it doesn’t go as far as stating that the more the price rises then the higher sales go.

Tim Worstall, “Being Quoted In The New York Times Is Great But…”, Forbes, 2014-11-22.

December 13, 2015

The TPP is pretty far from being a genuine “free trade” deal

Filed under: Bureaucracy, Business, Economics, Environment — Tags: , , , — Nicholas @ 03:00

Last week, Kevin Williamson attempted to explain why the Trans Pacific Partnership isn’t all that similar to an actual “free trade” agreement (and why that’s so):

Prominent among the reasons to look askance at TPP is that its text calls for the incorporation — sight unseen — of whatever global-warming deal is negotiated at the conference currently under way in Paris. It is one thing for a trade deal to incorporate changes to environmental practices — regulatory differences are an inhibitor of truly liberal trade — but there is a world of difference between incorporating specific environmental policies and incorporating environmental policies to be named later.

It would be preferable if we could simply enact a series of bilateral “Goldberg treaties,” so called in honor of my colleague Jonah Goldberg, who argued that an ideal free-trade pact would consist of one sentence: “There shall be free trade between …” But the unhappy reality is that the snouts of the nations’ sundry regulatory apparatuses are so far up the backsides of various industries and economic sectors that sorting them out requires thousands of pages of text. Consider, for example, the problem of defense-acquisition practices. Some countries have rules mandating that defense procurement be restricted to domestic firms, and some countries don’t. Coming up with a harmonized, one-size-fits-all approach is difficult; we Americans, accustomed as we are to operating in an economy that produces the best of almost everything in the world, sometimes forget that there are countries with no domestic aerospace industry or sophisticated manufacturers of military materiel. Of course Kuwait goes abroad for military gear; if memory serves, at one point their air force uniforms were made by Armani.

[…]

All of which is to say, we should expect trade deals, especially multi-lateral trade deals, to be complex, and we should expect environmental and labor standards, along with government procurement procedures and the like, to be part of the accord. There’s no getting around it. And, again, there is nothing wrong in principle with using trade accords, which have real economic bite, as a critical instrument for enforcing environmental rules and other regulatory reforms that are incorporated into trade relationships. But using TPP to commit the United States to whatever is cooked up in Paris, without an additional vote in Congress, is a poor tradeoff. It’s not often that I will turn up my nose at a trade deal — even far-from-perfect trade pacts are generally desirable — but here we should draw the line. TPP was negotiated, Congress and the public have had a chance to review the text, and Congress should reject it. That’s the system working, not the system failing to work. It’s why we have votes.

December 12, 2015

QotD: The economic non-issue of a “federal minimum wage”

Filed under: Cancon, Economics, Government, Quotations — Tags: , , , — Nicholas @ 01:00

… the other new strategic wrinkle was much worse in that regard: the announcement of a policy for a restored “federal minimum wage.”

Provinces set minimum wages for most employees under the Constitution, but Ottawa has an unused right to set a national minimum in private industries regulated under Part III of the Canada Labour Code. The major categories are banking, interprovincial and international transport, and broadcasting. You may be wondering how many people in these technically complicated lines of business are actually making the minimum wage. In the most recent survey of the federal labour jurisdiction (taken in 2008), the answer arrived at by Statistics Canada was: 416 people. In the entire country.

The New Democrats were pretty clearly counting on the press to foul up the story, and it obliged. Some Postmedia newspapers, for example, wrote headlines implying that the new wage floor was for “federal workers.” Economists, who mostly dislike minimum wages anyway, will probably tear into the NDP for a misleading measure that, to a close approximation, helps nobody. And it probably won’t matter much, as New Democrats go on repeating the words “federal minimum wage” for a year.

Colby Cosh, “How to ignore the NDP’s new talking points”, Maclean’s, 2014-09-18.

December 3, 2015

Even the IPCC agrees that corn ethanol is a waste of effort and resources

In Forbes, James Conca wraps up the latest IPCC Working Group reports’ comments on the viability of biofuel production from corn:

OK, can we please stop pretending biofuel made from corn is helping the planet and the environment? The United Nations Intergovernmental Panel on Climate Change released two of its Working Group reports at the end of last month (WGI and WGIII), and their short discussion of biofuels has ignited a fierce debate as to whether they’re of any environmental benefit at all.

The IPCC was quite diplomatic in its discussion, saying “Biofuels have direct, fuel‐cycle GHG emissions that are typically 30-90% lower than those for gasoline or diesel fuels. However, since for some biofuels indirect emissions — including from land use change — can lead to greater total emissions than when using petroleum products, policy support needs to be considered on a case by case basis” (IPCC 2014 Chapter 8).

The summary in the new report also states, “Increasing bioenergy crop cultivation poses risks to ecosystems and biodiversity” (WGIII).

The report lists many potential negative risks of development, such as direct conflicts between land for fuels and land for food, other land-use changes, water scarcity, loss of biodiversity and nitrogen pollution through the excessive use of fertilizers (Scientific American).

The International Institute for Sustainable Development was not so diplomatic, and estimates that the CO2 and climate benefits from replacing petroleum fuels with biofuels like ethanol are basically zero (IISD). They claim that it would be almost 100 times more effective, and much less costly, to significantly reduce vehicle emissions through more stringent standards, and to increase CAFE standards on all cars and light trucks to over 40 miles per gallon as was done in Japan just a few years ago.

December 2, 2015

Maximizing Profit under Monopoly

Filed under: Economics, Health — Tags: , , , , , — Nicholas @ 05:00

Published on 18 Mar 2015

AIDS has killed more than 36 million people worldwide. There are drugs available to treat AIDS, but the price of one pill is incredibly high in the U.S. — coming in at 25 times higher than its cost. Why is that? In this video, we show how patent rights have created a monopoly in the U.S. market for AIDS medication, causing pills to be very expensive. In other countries, however, such as India, which does not recognize patents on AIDS medication, prices remain low. Using this example, we go over how monopolies use market power to increase prices.

November 30, 2015

The Pennsylvania Steagles

Filed under: Economics, Football, History, USA — Tags: , , , , , — Nicholas @ 05:00

Megan McArdle talks about the plight of Pennsylvania’s two NFL teams during World War Two … oh, and some boring stuff about financial regulation:

Fun fact: During the 1943 professional football season, the World War II draft had so depleted the ranks of football players that the Pittsburgh Steelers and the Philadelphia Eagles were forced to unite their teams into a joint production that became colloquially known as “the Steagles.” In a heartwarming turn, this plucky band of men went on to one of the winningest seasons in the history of Pennsylvania football. That was, alas, their only season; the next year each city fielded its own team, and the proud name of the Steagles retreated into history.

I’m beginning to think that we should revive it, however, not for football players, but for those intrepid souls who continue to fiercely agitate for the return of the Glass-Steagall financial regulations. Like the Steagles, these people are not daunted by the many obstacles in their path. Like the Steagles, they are passionate in their determination. Probably also like the Steagles, they mostly don’t know much about Glass-Steagall.

And we desperately need a name for Team Steagles, because they seem to have become a powerful force in the Democratic Party. Last night’s Democratic debate, like the first one, featured lengthy paeans to the joys, and urgency, of a modern Glass-Steagall act. Somehow, an obscure Depression-era banking regulation has turned into a banal political talking point. Or worse — a distraction.

You, like the Steagles, may not know much about Glass-Steagall. That’s all right. There is no particular reason that most of us should know about Glass-Steagall, and many people manage to live perfectly happy and fulfilling lives anyway.

November 28, 2015

More on inequality and stagnant wages

Filed under: Business, Economics — Tags: — Nicholas @ 02:00

A few months back, Tim Worstall explained why we can soon stop worrying about the rise in income inequality, because the disturbance which caused it in the first place is finally settling out:

We’re constantly told that rising inequality is the greatest threat to the peace and prosperity of the nation. And further, that the stagnant wages of the ordinary working guy and gal are an abomination: as is the increasing amount of the nation’s income going to the already well off. Therefore something must be done. And there’s interesting news for us all. Which is that we don’t have to do anything at all to reverse this trend, the world economy is going to do that for us. We don’t need to change domestic tax rates, start to place tariffs on imports, shout at China for being a currency manipulator, none of the things currently being touted. Because the reason for that income stagnation and rising inequality is itself reversing.

OK, this does rather depend upon agreeing what the original cause of them both was but I think it’s reasonably clear that it is the process of globalisation that has done it. As Branko Milanovic tells us, here’s the winners and losers from globalisation:

Changes in global income from 1988 to 2008

That 75% to 95% of the global income distribution, the people who haven’t done well out of it, is essentially some of the people in the communist transition countries and most of those on below median wages in the rich countries. That latter group being exactly who everyone is worrying about in terms of stagnant incomes. The poor of the world have made out like bandits from globalisation which is why I support it. And, yes, the already rich have done well too.

And the point is, this is exactly what we would expect from having added a couple of billion low wage and low skill workers to the global economy. The low skill and low wage workers already in that global economy aren’t going to do very well, as Charles Goodhart explains via Ambrose Evans Pritchard:

    Prof Goodhart and Manoj Pradhan argue in a paper for Morgan Stanley that this was made even sweeter by the collapse of the Soviet Union and China’s spectacular entry into the global trading system. The working age cohort was 685m in the developed world in 1990. China and eastern Europe added a further 820m, more than doubling the work pool of the globalised market in the blink of an eye. “It was the biggest ‘positive labour shock’ the world has ever seen. It is what led to 25 years of wage stagnation,” said Prof Goodhart, speaking at a forum held by Lombard Street Research.

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