Policy lessons on how to have children, and how to bribe them

Afternoon all,

A moderately quiet week politics/economics wise. Which is nice. Unless you’re a renter hoping we’d actually stop the ‘landlord evicting you for fun’ thing, given we’ve got yet another delay to the Renters Reform Bill.

There has been the ‘how much should pensions go up next April’ row, but even that was half hearted because it’s no surprise HMT would like to knock a percentage point off an 8.5 per cent pension increase, and the real news is that both main parties are pseudo-cooperating to give themselves some wriggle room on the Triple Lock’s post-election lifespan (see COTW). I didn’t see that coming so soon.

Reads wise this week we’ve got a bit of a kids focus and a warning: politicians really want to talk to you. Good luck dodging them this weekend…

Torsten

Polling politicians. A common moan is that politicians obsess about opinion polls, rather than getting under the bonnet of what the public really want. Or more recently that their social media obsessions mean they treat what’s on Twitter (or whatever mad Musk has called it now) as gospel – especially if they agree with it. But both critiques are unfair finds new research based on surveying 900 politicos across Belgium, Canada, the Netherlands, Germany, and Switzerland. Consistently across countries politicians said they found direct conversations with punters the most useful guide to public opinion, followed by traditional media or talking to friends/family – social media, polls, talking to journalists were seen as less important. There was some variation (old timers put more weight on journalists, the youth on social media), but broadly the story probably reflects what people say they want from politicians: getting out and talking to ‘real people’. I just have one question. Are we totally sure Jim down the market speaks for the nation?

Patient parenting. We all know child-rearing tends to be a bit more  way too hands-on these days – latch-key kids are out and helicopter parenting is in.  A new study brings a warning for the tiger mums/dads out there. Sure, spending time helping your kids study etc is all good. But your cunning incentive scheme to get them to do their homework (e.g. pocket money bribery)? It may backfire. Yes, it means they do more “human capital investment” and improves cognitive ability in the short term, but long term it has the opposite effect. Why? Because the researchers find it hinders learning the important life lesson (which allegedly arrives during adolescence) that you need to put effort in today for rewards that aren’t immediate. Basically, we need to support kids finding their own motivation to study, rather than directly supplying it ourselves.

Decoding demographics. What caused the baby boom, it turns out, is a great subject for an article. That’s because I, like I suspect most people, thought I knew the answer: people making up for lost time/babies post-war. But (embarrassingly for me) the article notes the boom actually got going pre-war. The article then gives us a good canter through the debate about what actually caused the only major reversal in declining fertility rates for centuries (pre-boom Britain had a fertility rate of 1.79 children per woman ie below the 2.1 required for us all to replace ourselves). The authors’ argument is that a good chunk of it was parenting just getting easier via the three-prongs of rapid housebuilding (so people could settle down), medical advancements (so having a kid didn’t kill you) and the emergence of household appliances (so having children didn’t make you want to kill yourself). Basically, easier children = more children.

Danish drugs. There’s been limitless discussion of the new hot weight loss drugs Ozempic & Wegovy in recent weeks – covering it from health/lifestyle/moral angles. But disgracefully their economic effects haven’t been centre stage. Luckily a new blog has the lowdown, focusing on the impact of Novo Nordisk’s (the Danish pharma firm producing these drugs) success on its home country – which is big. The surge in demand for the drugs (or more accurately the growth in the pharma industry generally) actually prevented Denmark falling into recession. Meanwhile the fact that Yanks just can’t get enough of these drugs (unsurprisingly given 42 per cent of them are obese) has meant the US has now overtaken Germany as the main destination for Danish exports. The scale of the pharma boom is so staggering it’s prompted the Danish stats authorities to ponder publishing GDP data stripping it out (like the Norwegians do for oil/gas). Denmark it turns out isn’t just good at bacon and mid-20^th Century furniture. Who knew.

Chinese cars. Except for a few loony toon ex-climate deniers, everyone gets electric vehicles are the future. But who makes them is obviously up for grabs. After a torrid few years, the UK auto sector has had some better news – like BMW assembling electric Minis in Cowley. But the big EV news this week was from a different German source: Ursula von der Leyen announcing an EU anti-subsidy investigation into global markets being “flooded with cheaper Chinese electric cars”. For a quick briefing on the trade policy angle read Sam Lowe’s latest blog (it starts with chart 6 of this report from the Centre for European Reform, which shows the surge in Chinese EV imports that made this basically inevitable). Sam is on the sceptical end that this will get very far (it’s not like the EU doesn’t subsidise EV production itself), but that partly misses the point: the goal isn’t to stop Chinese imports for good, but to slow a surge in their EVs while Europe gets some battery factories built and EV costs down.

Chart of the Week.

People overestimate how much policy choices matter short-term, and underestimate their long-run impacts. COTW spells this out in the context of debates on the triple lock or (much more important) question of whether Government goes ahead with yet another below-inflation ‘increase’ in working age benefits. People seem to have forgotten this would be the 7th time the Government has done this since 2010. As COTW spells out, each of these might have felt like a small shift at the time but they add up, just like having the triple lock over time is a much bigger deal than the coalition government thought it would be. While the state pension has seen a 14 per cent real-terms increase in its value, basic unemployment support is down 9 per cent. And while we’re on choices, wider welfare cuts like the 2-child limit mean a larger working family has seen their support cut by a third. Policy choices matter. Especially in the long-run.