Butterfly economics An article in today’s Guardian refers to RICS figures which show that house sales have dropped to their lowest level since 1959. In the absence of land value taxation, house prices are sticky downwards, but due to the interaction of the banking system and the land market, they always overshoot when the trend is rising. This drives the boom-bust cycle. When the country’s...

David Blanchflower of the Bank of England’s Monetary Policy Committee has repeatedly argued for a cut of interest rates to fend off mass unemployment. But the underlying assumptions are wrong because they are based on defective economic theory. It is not possible to get an economy to function properly just by adjusting interest rates. A low interest rate will cause a fall in the value of the...

Stock markets bounced back on Friday with record rises following the US “rescue plan”, which involves the government taking on the mass of bad debt, backed by “assets” – in reality, land, that is worth substantially less that the money advanced in loans. We said then that the Paulson scheme did not sound convincing and predicted that the enthusiasm was likely to be...

Having been out of the UK for several months, I have had an opportunity to get a sense of what the politics of the country is, viewed from the outside. It does not look good. The economy of the UK is undoubtedly in a bad way, but neither politicians nor economics commentators seem to have much idea about what is going on. William Keegan and Will Hutton, who write for the Observer, are ureconstructed...