The societal wrecking balls of social media and hot parents 2 February 2024 Torsten Bell Afternoon all, Over-egging your policies is normal pre-election behaviour. And we’re definitely in the, so long it makes you want to end it all, pre-election phase. But this week had a different theme: those policies getting watered down. Jeremy Hunt’s reining in expectations for the scale of tax cuts to come in the March Budget, telling Nick Robinson there’s ‘less scope’ for them. Why? Because he and the Prime Minister let those expectations get out of hand, with a slightly Trussite tone in recent months. The Labour equivalent? Prepping to water down the £28 billion green investment plan, according to this morning’s Guardian. Basically, the politicos have got nervous because everyone’s been watching the Traitors. They’re trying to be less ‘traitory’ well ahead of the final roundtable polling day. In some ways I take this as a vote of confidence – it means they don’t think we’re a bunch of Mollies muppets who’ll believe whatever they say. Have a great weekend. Torsten Chief Executive Resolution Foundation Good looks genetics. Could have done without this one, parental guilt-wise. We know how well off we are affects how our children get on. ‘The intergenerational elasticity of income is above zero’, as economists say, or ‘rich parents mean richer kids’, as the rest of us would put it. But it’s not just our income that affects how our kids get on. New research, using data from both the US and China, shows hotter parents lead to richer kids. One standard deviation increase in parental looks drives an extra $2,300 per year in the next generation’s income. This happens via two mechanisms, both based on the sad reality that better looks translates into higher incomes. First, better looking parents earn more, which tends to generally raise kids’ incomes (the old story). Second, more attractive parents tend to produce more attractive offspring. The authors calculate “if parents’ looks are ten percentage-points above average, their child’s looks will be four percentage-points above average”. Sorry kids. Period power. Biology affects economic outcomes in other ways, argues a new paper examining the impact of the menstrual cycle on bargaining over £. The authors construct an experiment that in some ways simulates negotiations over pay in a new job, and find the cycle does matter – affecting not only how hardball women bargain initially but also how likely they are to compromise and reach an agreement full stop. The headline = women got the biggest payoffs in the bargaining game when ovulating (because they bargain harder if they know the size of the pie being negotiated over, and are more likely to reach an agreement if they don’t). Have a read, even if the research is more convincing in demonstrating the reality of an effect, than on the mechanisms behind it. Devolution dividend. You should read this blog from Alan Harding, Economic Advisor to Greater Manchester Combined Authority (GMCA), if for nothing else than the intro which is designed to annoy everyone – by gently mocking those who think the biggest problem isn’t GM’s economic weakness but the danger that it’ll become too successful and “the London of the North”. The basic point is that the wider North West would benefit from a successful GM. Amen to that. On how to get one, we made our case in recent work. Alan’s after a doubling down on devolution, alongside a good dose of fiscal redistribution between places. Ideologically incompatible. Last week the FT’s John Burn-Murdoch got a lot of debate going with viral tweets about ideological divergence among the under 30s in rich, liberal societies (basically women leading the liberal charge, men being more reticent or actively becoming more conservative – hello Korea). He didn’t get much into why, so Alice Evans’s go is well worth a read. In the west she points to 1) rise of a feminist public sphere 2) resentment (men resenting progress for women when their economic opportunities and status are threatened – especially in a low growth world that feels more zero sum) and 3) social media bubbles (Alice has a specific shout call out for Andrew Tate). Her answer? More mixed gender socialising *offline*, ideally in a garage playing the 1990s version of Mario Kart… I’m all for that. Fudged funding. Success in modern academia isn’t just about being good at research. You need to be ace at grant applications. This isn’t totally new – Galileo had to court the Medicis so he could ponder the universe. These days researchers are bidding to government/foundations for pots to continue their own work – which takes up shed loads of time and means they’re juggling the roles as researcher, managers and fundraisers. A new article calls for scrapping this approach and instead giving big wads of cash to research institutes/labs who can then focus on a specific issue or mission for the long term – involving their team in an ongoing research agenda, rather than everyone competing to stay afloat as individuals. I basically think this is right, unsurprisingly given its how the Resolution Foundation operates. Chart of the week Chart of the week is providing some historical context to the current tax cuts galore debate, looking at the net effect of every fiscal event since 1992. Some Tories seem confused about why they aren’t getting much credit for lopping 2p off National Insurance. Part of answer is that, while it’s fun to be on an actual rollercoaster, it’s less enjoyable for your tax system to be like one. The last few years have been bonkers on the tax policy front. In 2021, Rishi Sunak fronted up the biggest tax rising fiscal event since 1993. Which was then surpassed by the biggest ever in 2022, as Jeremy Hunt told us that “sounds money comes first”. The latter was of course the response to an aborted attempt at the biggest tax cutting event since 1972 (thanks Liz). Since those cuts never actually happened, Autumn Statement 2023 can claim to have had the biggest tax cuts since 1988. This isn’t just silly, it’s unprecedented this century. Bar a big National Insurance rise in Gordon Brown’s 2002 Budget, Labour basically just consistently inched up tax over the course of their term of office, and the coalition government was tax neutral. The shape of our recent rollercoaster – but not its size – does have a precedent. The end of the last Conservative government. Ken Clarke raised taxes in the wake of Black Wednesday before cutting them in the run up to the 1997 election. The punters didn’t buy it, mainly because they knew what would inevitably happen after that election: tax rises. Here we go again.
