Good Deals 13 preview: Five economic gripes from the undercover economist

 

There are some serious long-term issues. One concern is inequality: it's rising within Anglophone economies and inequality is also correlated with low social mobility - the opposite of what many people expect from what we are told are dynamic, open societies. I'm concerned that there's a pernicious dynamic at work there.

 

 

A second concern, perhaps even more serious, is climate change. There's no doubt that we're emitting too many greenhouse gases with consequences that are uncertain, probably negative and possibly catastrophic. This is a problem that does have a well-understood economic response: raise the price of carbon through taxes or tradable permits. Although we understand the necessary policy, implementing it is difficult. You only have to look at the current storm about energy prices to see how far we are from taking that sort of policy seriously.

 

 

More generic worries about "growth" and "consumerism" are in my view too abstract to deliver practical results.

 

 

Let's not dismiss short-term needs too quickly: there are plenty of people who aren't employed, or aren't employed in anything like the job they want. And economic growth has been seriously lacking in recent years.

 

 

Both bankers and teachers have been paid in ways that don't necessarily encourage them to do their jobs well. I am mildly annoyed that some bankers have managed to extract so much money that (it seems to me) should really be going to the shareholders of banks. I am far more annoyed that some bankers have been rewarded for taking decisions that, with hindsight, turned out to be disastrous - for instance, writing derivatives contracts that blew up some time after the bonus had been paid. 

 

Performance pay is all very well - but let's make sure that the expected performance actually materialises.

 

We need to be careful about performance pay for teachers, too: if you can't measure performance, don't try to reward some vague proxy for performance (such as exam results) and hope that things turn out well. But I suspect we could measure teacher performance better than we do, and reward it, and try to learn from the best teachers - and possibly get rid of the worst ones.