Eurozone policy seems driven by market sentiment. This column argues that fear and panic led to excessive, and possibly self-defeating, austerity in the south while failing to induce offsetting stimulus in the north. The resulting deflation bias produced the double-dip recession and perhaps more dire consequences. As it becomes obvious that austerity produces unnecessary suffering, millions may seek liberation from ‘euro shackles’.

Official statistics for US high school graduation rates mask a growing educational divide. This column presents research showing that a record number of Americans are going to university – while an increasing number are dropping out of high school. This poses major social challenges for the United States.

It is still not clear among economic historians why the Industrial Revolution actually took place in 18th century Britain. This column explains that it is the British Empire’s success in international trade that created Britain’s high wage, cheap energy economy, and it was the spring board for the Industrial Revolution.

A recent ECB household-wealth survey was interpreted by the media as evidence that poor Germans shouldn’t have to pay for southern Europe. This column takes a look at the numbers. Whilst it’s true that median German households are poor compared to their southern European counterparts, Germany itself is wealthy. Importantly, this wealth is very unequally distributed, but the issue of unequal distribution doesn’t feature much in the press. The debate in Germany creates an inaccurate perception among less wealthy Germans that transfers are unfair.

Slavery, according to historical accounts, played an important role in Africa’s underdevelopment. It fostered ethnic fractionalisation and undermined effective states. The largest numbers of slaves were taken from areas that were the most underdeveloped politically at the end of the 19th century and are the most ethnically fragmented today. Recent research suggests that without the slave trades, 72% of Africa’s income gap with the rest of the world would not exist today.

Polarised politics in the wake of financial crises echo throughout modern history, but evidence of a causal link between economic downturns and populism is limited. This column shows that financial crisis-induced misery boosted far right-wing voting in interwar Germany. In towns and cities where many firms were exposed to failing banks, Nazi votes surged. In particular, places exposed to the one bank led by a Jewish chairman registered particularly strong increases of support – scapegoating Jews was easier with seemingly damning evidence of their negative influence.  

Societies characterised by a high transmission of socioeconomic status across generations are not only more likely to be perceived as ‘unfair’, they may also be less efficient as they waste the skills of those coming from disadvantaged backgrounds. Existing evidence suggests that the related earnings advantages disappear after several generations. This column challenges this view by comparing tax records for family dynasties (identified by surname) in Florence, Italy in 1427 and 2011. The top earners among the current taxpayers were found to have already been at the top of the socioeconomic ladder six centuries ago. This persistence is identified despite the huge political, demographic, and economic upheavals that occurred between the two dates. 

Do children do better if they start school later? Contrary to the great concerns of many parents, this column says that the age at which kids start school matters little.

Obesity and teenage sex have become social and public health issues in developed countries. This column looks at the effects of being overweight on attitudes to sex among teenage girls in the US. While obesity is associated with less vaginal intercourse, overweight teenage girls are at least 15% more likely to have had anal sex, with a high chance of sexually transmitted disease.

Both economics and geopolitics matter for trade agreements. In particular, defence pacts raise the probability of a trade agreement between a pair of countries by as much as 20 percentage points. This column estimates that were the US to alienate its geopolitical allies, the likelihood and benefits of successful bilateral agreements would diminish significantly. Expected trade creation from an agreement between the US and EU countries would decline by 0.6% of total US exports.

The top 1% of US earners now command a far higher share of the country's income than they did 40 years ago. This column looks at 18 OECD countries and disputes the claim that low taxes on the rich raise productivity and economic growth. It says the optimal top tax rate could be over 80% and no one but the mega rich would lose out.

Dealing with uncertainty about the state of the economy is one of the main challenges facing monetary policymakers. In recent years there has been an extensive debate on the value of some of the deep parameters driving the economy, such as the natural rate of interest and the slope of the Phillips curve, estimates of which are quite uncertain. This column argues that when facing uncertainty on the structural relationship among macroeconomic variables, central banks should adopt a pragmatic and data-dependent approach to adjusting their monetary policy stance. 

World poverty is falling. This column presents new estimates of the world’s income distribution and suggests that world poverty is disappearing faster than previously thought. From 1970 to 2006, poverty fell by 86% in South Asia, 73% in Latin America, 39% in the Middle East, and 20% in Africa. Barring a catastrophe, there will never be more than a billion people in poverty in the future history of the world.

Labour markets in US cities today are vastly more educated and skill-intensive than they were 50 years ago, but urban non-college workers now perform much less skilled work than they did. This column shows that automation and international trade have eliminated many of the mid-skilled non-college jobs that were disproportionately based in cities. This has contributed to a secular fall in real non-college wages.

Despite leading the world in clean energy investment in recent years, China continues to engage in massive expansion of coal power thanks to policies that effectively subsidise and (over)incentivise coal power investment. This column examines the effects of the 2014 devolution of authority from the central government to local governments on approvals for coal power projects. It finds that the approval rate for coal power projects is about three times higher when the approval authority is decentralised, and provinces with larger coal industries tend to approve more coal power.

Prior to World War I, many authorities believed that countries with substantial agrarian sectors and grain exports, including the Russian Empire, could overcome war hardships more easily than those countries that imported grain. This column asks why the experts got it wrong in the case of Russia, and concludes that the economics and politics of the Russian grain and labour markets provide the answer. It was impossible simultaneously to mobilise 15 million males into the Russian army, procure the grain to feed them as soldiers, and avoid revolution. 

Previous research has shown that changes to the size of the ECB’s balance sheet were followed by meaningful changes in macroeconomic aggregates. This column argues that the econometric technique these studies employed does not provide reliable estimates. Impulse responses to purported balance sheet shocks are statistically indistinguishable from those from nonsensical identification schemes. The effectiveness of the ECB’s balance sheet policies is therefore still unproven.

Policymakers are concerned about effecting real change with monetary policy, particularly in the context of wage rigidity. This column uses extensive Italian data to analyse the extent to which wage rigidity induced by collective bargaining amplifies the effects of monetary policy. The volatility of stock market returns reacts more to monetary policy announcements when the average time left before the renewal of the employees’ collective agreement is large.

The problem of tax compliance is as old as the levying of taxes. Innovations in tax administration that induce high compliance rates at reasonable cost are extremely important to governments. This column demonstrates how the taille, a tax collection mechanism from medieval Paris, raised compliance by turning the social cost of tax evasion into a private one. It offers a tax collection model that is still relevant to governments today.

We may just have started to feel the pain. Asset price drops – including housing – are common markers in all the big banking crises over the past 30 years. GDP declines after such crises were both large (-2% on average) and protracted (2 years to return to trend); in the 5 biggest crises, the numbers were -5% and 3 years. This column, based on the author’s testimony to the Congress, picks through the causes and consequences. It argues that when it comes to ‘cures,’ it would be far better to get the job done right than get the job done quickly.

Developing countries have not participated in the WTO-led negotiations aimed at bringing down barriers to trade in environmental goods. If negotiations conclude, would the win for trade and for the environment be extended to a win for developing countries? This column draws insights from a newly assembled comprehensive dataset on barriers to trade in environmental goods and provides evidence that tariffs and non-tariff barriers are still an impediment to trade while similar regulations stimulate it. A larger list of environmental goods would entice developing-country participation, but this will also require protecting developing countries from challenges at the WTO.

Although the negative impact of conspicuous consumption has been discussed for more than a century, the link between advertising and individual is not well understood. This column uses longitudinal data for 27 countries in Europe linking change in life satisfaction to variation in advertising spend. The results show a large negative correlation that cannot be attributed to the business cycle or individual characteristics.

Alongside liquidity and store of value, is privacy an important attribute of money? Using laboratory experiments, the column shows that privacy matters, and increases the overall appeal of money. The experiments suggest that future competition between alternative currencies will depend on how the three properties are mixed.

The Global Crisis has profoundly changed the financial landscape, including firm financing. This column examines the development of various channels of firm financing before and after the crisis among four groups of EU countries, the US, and Japan. While bank finance and, to some extent, equity finance are under pressure, alternative finance, although small, seems to be on the rise.