You have left the new version of The Economist website. Please let us know your thoughts.

Free exchange

Economics

  • Overreactions

    Keep the costs of trade in perspective

    by R.A. | WASHINGTON

    ECONOMISTS are realising that they have got some things about trade wrong in the past. Just because trade can make everyone better off, doesn't mean it will, for instance (at least without some help from politicians). That new research, and this year's political ructions, are generating some reflection on these issues among economists is a good thing. But it is important to maintain one's perspective. Tim Duy has not done that, I think, in this stemwinder of a post on the effects of American trade policy. He quotes Noah Smith, who says:

  • Holiday traditions

    The Federal Reserve at last manages to lift rates in 2016

    by R.A. | WASHINGTON

    ON DECEMBER 14th, finance and economics journalists gathered for a long-awaited Federal Reserve announcement: that the Fed's benchmark interest rate would rise once more, by 25 basis points, to a range between 0.5% and 0.75%. If the scene looked familiar, well, no surprise there. It was December a year ago that the Federal Reserve announced another increase in its benchmark interest rate, of 25 basis points—the first in nearly a decade. It was also December a year ago that Fed projections suggested that rates would soar upward in 2016, to close to 1.5% by year's end.

  • The pain of the past

    Lessons from a fight between economists and historians

    by R.A. | WASHINGTON

    IN A fascinating new piece at the Chronicle of Higher Education, Marc Parry examines an intense, ongoing debate between historians and economists on the role American slavery played in the industrial revolution. A number of recent books by historians (including Edward Baptist's The Half Has Never Been Told, with which The Economist has an unfortunate history) argue that growth in output in American cotton, made possible by America's slave economy (and rising brutality within it), was crucial in fostering the nascent industrial revolution, which had its beginnings in the mechanisation of textile industries.

  • Free Exchange v Free Lunch

    Why Donald Trump can’t create 25m jobs

    by H.C | WASHINGTON, DC

    DONALD TRUMP promises to deliver 25m jobs over the next decade, 18m more than is forecast today. In our print edition, we have consistently argued that this is infeasible, because America is ageing rapidly:

    Arithmetic suggests this pledge is fanciful: even if the labour-force participation of 25- to 54-year-olds returns to its record high, only 4.3m new workers will appear by 2024.

    But at Free Lunch, a blog at the Financial Times, the excellent Martin Sandbu disagrees:

    The US is seriously underperforming relative to its own record on employment.

  • The non-taper taper

    Europe’s central bank extends its quantitative-easing programme

    MARIO DRAGHI has shown a remarkable ability to find a way out of tight spots since he became boss of the European Central Bank (ECB) in 2011. Has he done so again? At its regular monetary-policy meeting, on December 8th, the ECB’s governing council decided to extend its programme of quantitative easing, or QE, by a further nine months to December 2017. It also said it would reduce the monthly pace of bond-buying from €80bn to €60bn from April. But the ECB has given itself the option of stepping up the pace of bond-buying again, should markets become choppy.

  • The dismal science

    Economists cannot stop Trump, but perhaps they can understand him

    by R.A. | WASHINGTON

    ECONOMISTS seem to be warming to the idea that regional inequality is a problem, if only because it leads to political movements that threaten broader prosperity. While that is a useful development, it brings economics to a very difficult question, which is: what can usefully be done about that inequality? In a post generating quite a lot of discussion, Tim Duy says that economists need to get busy thinking about the problem:

    The dry statistics on trade aren’t working to counter Trump. They make for good policy at one level and terrible policy (and politics) at another. The aggregate gains are irrelevant to someone suffering a personal loss.

  • Italy’s referendum

    If Matteo Renzi’s proposals lose, insufficient economic reform could be to blame

    by B.C. | PRAGUE

    ITALIANS take to the polls this weekend to vote on reforming their political system. Reform of many sorts would certainly be welcome; the IMF recently declared that it would take some two decades for Italy to regain the economic footing lost since 2007. Whether the referendum set for December 4th by Matteo Renzi, the prime minister, authorising a constitutional reform to which attempts to loosen up a sclerotic legislative system, is the right medicine remains to be seen. Yet many Italians will be basing their votes not on the content of the referendum question, but on how they feel about Mr Renzi and a course of labour-market reforms adopted last year.

  • Where every city is above average

    Regional inequality is a hard problem to solve

    by R.A. | WASHINGTON

    THE political shock of Brexit and of the election of Donald Trump have led to new interest in the problem posed by regional inequality. Both shocks drew support from places to which recent economic trends have not been especially kind, and both were reactions, at least in part, against the economic success enjoyed by elites concentrated in a relatively small number of rich metropolitan areas. Even economists, whose "nihilism...about what we can do to help struggling places in the U.S. is, quite frankly, strange" (in the words of Adam Ozimek) have taken to reconsidering their priors on the issue. Myself included; as I noted recently:

  • The consent of the governed

    The hole at the heart of economics

    by R.A. | WASHINGTON

    AMERICA has a debt ceiling. It’s a statutory limit on how much debt the federal government can issue. For most of its existence (the ceiling will turn 100 next year) Congress has simply voted to raise the limit when borrowing threatens to hit it. In 2011 and 2013, however, Republicans in Congress chose a different approach. They threatened not to vote to raise the ceiling unless various budget demands were met. It was a dangerous course of action; had the ceiling not been raised the government would have found itself forced to choose between default—potentially triggering a massive financial crisis—or large, sudden cuts to spending of all sorts, triggering a deep recession.

  • Breaking news

    Facebook, and the trouble in being everything to everyone

    by R.A. | WASHINGTON

    OXFORD Dictionaries has just named “post-truth” its word of the year. The timing certainly seems apt. Among the many recriminations unfolding in the wake of the American election are darts aimed at the press which, some argue, did an inadequate job during the campaign sorting truth, from half-truth, from innuendo, from outright fabrication. Interestingly, among those groups in the crosshairs is Facebook, which is now struggling to work out what its journalistic responsibilities are in this strange new digital age.

    Facebook, which has nearly 2bn monthly active users, is a media goliath.

About Free exchange

Our economics correspondents consider the fluctuations in the world economy and the policies intended to produce more booms than busts

Advertisement

KAL draws: Economics A-Z

Advertisement

Products and events


Take our weekly news quiz to stay on top of the headlines


Visit The Economist e-store and you’ll find a range of carefully selected products for business and pleasure, Economist books and diaries, and much more

Advertisement