Joining the 'Europe' and Shrinking the Pound: Britain's Single Currency Debate of the Late 1860s.

Though a Royal Commission had rejected Britain joining the Latin Monetary Union, Robert Lowe, the Chancellor of the Exchequer, said he would recommend membership provided three conditions were satisfied. As these included a general adherence to the gold standard, nothing further came of it. But meanwhile there had been a complex public discussion of the subject, and the related topic of shrinking the pound coin so it weighed the same as the 25-france piece. The debate shed much light on the contemporary state of value and monetary theory, and those who supported the changes had much the best of it.single currency, Latin Monetary Union, England, Robert Lowe

The Treasury and the New Cambridge School in the 1970s

With the release of Treasury papers from the 1970s under the 30-year rule we have a much more complete picture of the dispute in the 1970s between the Treasury and the Cambridge Economic Policy Group, especially given the role of three Cambridge economists -- Nicholas Kaldor, Wynne Godley and Francis Cripps – as ministerial advisers at the time. The records show the Treasury and the CEPG eventually meeting near the middle regarding the latter’s proposition of stable private-sector NAFA (Net Acquisition of Private Sector Assets) and its implications for demand management and the balance of payments. By contrast, the initial differences on counter-inflation policy and, above all, on import controls versus free trade were wider at the end of the decade than at the start of it.Treasury, Cambridge, forecasting, inflation, imports

Economic Voting in Britain, 1857-1914

Despite limited government control over the pre-1914 economy, opposition politicians were enthusiastic in blaming bad economic news on the incumbent. In a study of 458 by-elections between 1857 and 1914, we find that voters typically gave new governments a 'honeymoon' but thereafter held them responsible for high unemployment and high prices. Each 1% rise in the price level, on average, brought about a 0.21% swing against the government of the day, while each one-point rise in the percentage unemployed had double this effect. Attributing shorter- or longer-term memories to voters, as they used the past to determine what constituted unacceptable price and unemployment levels, makes little difference to this result. We also look at grievance asymmetry - the idea that voters give governments more blame for bad outcomes than they give credit for good ones - and find some evidence in its favour.voting, inflation unemplyment, Britian, elections

Ideology, Competence and Luck: What determines general election results?

This paper investigates the impact of luck, defined as global economic growth, and competence, defined as the difference between domestic and world growth, on voting in general elections since 1960. The vote of incumbent parties of the right is found to be sensitive to luck, whereas that of incumbent parties of the left is not. This is consistent with the Clientele Hypothesis given electorates which fail to perfectly distinguish luck from competence. Economic competence plays a strong role in determining the vote, especially in high-income democracies. The electoral reward to competence is essentially equal across parties of either ideology, contra to the Saliency Hypothesis. The data are also supportive of the Territory Hypothesis, namely that greater ideological territory increases a party's relative vote share.voting, ideology, luck, competence

Party Activists, Campaign Funding and the Quality of Government

We study the formation of government policy in democracies when turnout depends on party activists and campaign spending ‐ parties’ ‘political capital’. The functional importance of political capital determines equilibrium rent-seeking in government. Often the more potent political capital is the greater the extent of rent-seeking. Limiting the level of political capital is distinct from reducing its potency, and whereas we find a strong case for reducing potency we find that placing limits on campaign spending are rarely optimal, and in particular that weak limits are never optimal. A limit on total campaign spending can increase government quality under certain conditions and if so then strong limits are always better than weak limits. However, finite limits on either national or local campaign spending alone, as often seen in practice, are never optimal.Party activists, campaign funding, rent-seeking, political finance

The Production Function for Votes

The Vote Production Function (VPF) has a party's vote depending on (a) its potential vote and (b) the party organization which actualizes it - 'political capital'. Empirical work suggests that moving to the centre would increase your vote if only you could hold political capital constant. The relative weights of the factors in the VPF will determine whether parties converge or polarize ideologically and politicians' rent-seeking behaviour. In most cases, the more important political capital is, the greater the extent of rent seeking. There is thus a welfare case for sidelining party organizations. Compulsory voting might help.voting, ideological equilibria, rent-seeking

Voting and the macroeconomy: separating trend from cycle

Voters respond differently to trend growth as opposed to economic cycles in GDP. When assessing incumbent competence the rational voter filters out economic cycles when they are the product of external shocks but rewards strong trend growth over the previous term of office. Voters also respond to policy platforms, and parties closest to the median voter have an advantage à la Downs (1957). This advantage is theorized to be heightened in times of recession. Using data from elections in OECD countries and a much more exacting econometric specification than used in previous analyses we find robust evidence of a positive vote response to strong performance in trend growth. We also find evidence to support the hypothesis that centralizing garners additional votes during recession.economic voting, competence, median voter, voter rationality

A new handle on three-point coefficients: OPE asymptotics from genus two modular invariance

We derive an asymptotic formula for operator product expansion coefficients of heavy operators in two dimensional conformal field theory. This follows from modular invariance of the genus two partition function, and generalises the asymptotic formula for the density of states from torus modular invariance. The resulting formula is universal, depending only on the central charge, but involves the asymptotic behaviour of genus two conformal blocks. We use monodromy techniques to compute the asymptotics of the relevant blocks at large central charge to determine the behaviour explicitly.Comment: 32 pages, 2 figures, 1 appendix, 2 moose, a bear and an o

Straightening the Phillips Curve, 1968-76

“This is an Author's Original Manuscript of an article submitted for consideration in the European Journal of the History of Economic Thought [copyright Taylor & Francis]; European Journal of the History of Economic Thought is available online at http://www.tandfonline.com/ 10.1080/09672560903326107."This paper looks at the change in the British Treasury’s macroeconomic thinking and policymaking between Friedman's statement of the natural rate doctrine in 1968 and Prime Minister Callaghan's public abandonment of Keynesian demand management in 1976. Simultaneously rising unemployment and inflation meant that the Treasury was sceptical about the old Phillips curve from the start, but, far from moving smoothly to the expectations-augmented version, it hesitated between (i) assuming the curve had shifted outwards (ii) abandoning any idea of a Phillips curve (iii) adhering to a ‘New Cambridge' curve where unemployment made inflation worse. Eventually money illusion was abandoned by a majority vote at a tense Treasury meeting