Kyla Scanlon has a book explaining the economy. There are some nice parts, and some things I wasn’t too sure about. (At least one graph seemed really odd as did a couple of comments but, being a popular book, the references were a bit too limited to check properly). Mostly she does a good job of explaining challenging ideas, although there are times the book gets a bit ‘list-like’. It is hard to cover the economy without listing lots of groups and committees involved, but even with the hand-drawn illustrations that isn’t much fun.
Explaining The Economy
I do appreciate that she focused on simplifying the economy. I also liked the fact that she wasn’t afraid to give her thoughts. (At least till the bit at the end that could have done with editing out some of her more strange random thoughts).
She noted the benefits that immigrants bring to economies. If we want another renaissance we need immigrants. And I think we do want another renaissance although some of the outfits probably wouldn’t look good on me.
Scanlon talks about the problem of low pay and how tipping is a way of employers shirking their responsibilities. Expect a lot more of that with new no tax on tips policies infecting US politics.
She suggests easing trade barriers to facilitate worldwide adoption of climate tech. Not sure that seems very likely but we can always hope, I guess.
Scanlon notes peculiarities in the financial markets. People’s emotions and unpredictable reactions matter.
The efficient markets hypothesis bears out only in a perfect world.
Scanlon, 2024, page 142
And we aren’t in a perfect world, see above.
Random Ideas Stick
Her explanation of why inflation targets are 2% was interesting. Low but not zero inflation seems to have a lot of logic. People won’t panic about prices going up, but you still have some flexibility in things like increasing wages. But why 2% and not 1.5% or 2.25%?
.. the 2 percent figure is sort of random. The idea originally came from Arthur Grimes, the Labour Party finance minister of New Zealand in the 1980s. He went on TV and said, “Two percent should be our inflation target,” and now everybody goes after that magic number.
Scanlon, 2024, page 212
There do seem to be a lot of things that we do that have a pretty random starting point. Some arbitrary points often somewhat make some sense even if you can’t explain the choice exactly. An inflation target tells people that the government are serious about inflation and gives something to work towards. That may be more important than the precise number.
For more on the benefits of immigration see A Positive Case For Immigration and Bias And Public Policy Discussions
Read: Kyla Scanlon (2024) In This Economy? How Money & Markets Really Work, Penguin Random House
