Complacency and the Failure of Mainstream Economics

Stephen Williamson

‘Like the “efficient markets hypothesis,” DSGE has no implications, and therefore can’t be wrong. Indeed DSGE encompasses essentially all of modern macroeconomics. …Granted, some of our models were not so helpful in making sense of the financial crisis. But others were, and some of the models that were not helpful could be (and are being) modified so that they are.’

Quiggan responds

That’s right, Williamson not only defends the EMH on the basis that it’s not even wrong, but follows up by making the same claim about the whole of modern macro…Williamson does have a good line in personal condescension. St Louis is about as close to the geographical centre of the economics profession as you can get, while Brisbane is about as far away as it gets. So it’s time for a bit of provincial-bashing

Christchurch – Rebuilding Plan Revealed

The City of Christchurch, devastated by an Earthquake in February destroying 80 of the 251 listed buildings in the cetre, has revealed its draft masterplan for rebuilding.

Mayor Bob Parker has described a vision of a “safe, sustainable, green, hi-tech, low-rise city in a garden”.

Rather than scattered tall buildings with acres of wasted space, as at present, it proposes a low rise high density solution with more structured open spaces

A memorial to those who died in the earthquake is also proposed.

The draft has been backed unanimously by Councillors and already seems to be well received.

Key proposals are

  • A new Park alomg the river Avon
  • A more compact, walkable and vibrant CBD
  • Light Rail
  • An International Earthquake Preparedness Centre
  • A Sports Hub and Convention Centre
  • Moving all city government functions back to the centre
  • A New Cathedral Square
  • District Heating

Indeed it is an exceptionally well conceived plan, with its proposals for retaining but enlivening the grid, designing in section to reduce the impact of car parking and the concept of a ‘slow core’ centre.  At a time when planning in the UK is sneered at by senior politicians this shows what can be achieved.  Time perhaps to revive for 2012 Olympic Medals for Town Planning.  



Rochford Inspector refuses Stalling Request on Core Strategy – Key ‘duty to cooperate’ Precedent

Likley to be similar responses from LPAs seeking to stall over next few months hoping RSS goes away. We previously covered this EiP here.

So bear in mind that Rochford’s Slogan is ‘95% Greenbelt, our Heritage, Our Future’.

The Government is encouraging local councils to get up-to-date, evidence based plans in place, in order to meet the housing and commercial needs of their area and to provide greater certainty for communities and developers. The Government’s top priority in reforming the planning system is to promote sustainable economic growth and jobs, consequently the Government is encouraging councils to press ahead without delay in preparing up-to-date development plans to drive and support growth. As you acknowledge, the progress of the Core Strategy has been subject to significant delays, not all of which have been within the Council’s control. Nonetheless, to allow a further suspension of the Examination could result in further significant delays, bearing in mind the factors I set out below, and I am therefore unable to agree to your request.

My first concern relates to the uncertainty over the timing of the abolition of regional strategies. The Localism Act, as currently drafted, makes provision for the abolition of Regional Spatial Strategies. The most recent judgement in the Cala Homes case states at paragraph 32: Moreover, even if clause 89 is enacted in its present form, it could not lawfully be assumed that revocation of any individual regional strategy is bound to occur regardless of the outcome of the process of environmental assessment, because to make such an assumption would be contrary to the requirement of the SEA Directive and SEA Regulations: that a decision to revoke may not be made until the process has been completed. If I were to suspend the Examination until December, regardless of whether the Localism Bill has achieved Royal Assent, a further suspension may be necessary pending the completion of the process, including SEA. This would lead to further delay and uncertainty.

Secondly, I have significant concerns relating to the approach adopted by the Council in proposing the reduced housing numbers of 190 dwelling per annum, as set out in Topic Paper 3, and whether this would be consistent with the approach promoted in the Localism Bill as currently drafted, in particular the introduction of a ‘duty to cooperate’. I recognise that the figure is derived from the (abandoned) review of the East of England Plan, but that emerging plan was not subject to independent examination which limits the weight that can be placed on it. The full implications of the duty to cooperate have yet to be realised, but it may be of particular relevance to the circumstances of Rochford District. This is because the rationale set out in Topic Paper 3, relies to a significant extent on redirecting growth to other locations in Thames Gateway South Essex. Therefore the delivery of this strategy would be dependent on the cooperation of neighbouring authorities. Bearing in mind the negative response from Basildon District Council when the proposed changes were published for consultation last year, it is not clear that Rochford District Council would be in a position to demonstrate that any requirements arising from the duty to cooperate had been met by December 2011. This could lead to a further suspension of the Examination.

Thirdly, I am also mindful that a consultation draft of the NPPF has recently been published. Clearly, the final form of the document is not yet known, but if adopted as currently drafted it may require further changes to the Rochford CS to ensure conformity. For example there may be a need to add a 20% surplus to housing numbers in the first five year period. This is another factor that could lead to further delays in the Examination.

I have also considered your request for a suspension in the light of the Planning Inspectorate’s Procedure Guidance. Paragraph 9.21 of the Guidance notes that: As a general principle suspension goes against the wider policy objective of speeding up the plan process and developing evidence to inform choices made during plan making. The Guidance identifies situations in which suspension may be an appropriate response, but the circumstances outlined in your letter appear to go well beyond what is envisaged in that document. I note your reference to other Core Strategy examinations which have been suspended, but these are not directly comparable. In the case of Luton and Central South Bedfordshire and Surrey Heath, the examinations have been suspended because the submission draft documents were not in general conformity with the relevant regional strategy. The Luton and Central South Beds DPD is now to be withdrawn. The South Wiltshire examination has been suspended, but I understand the ongoing work should enable the Inspector to find the DPD sound prior to the Localism Bill enactment.

Your main concern appears to be that extending the Plan period to provide the 15 years required by PPS3 and PPS12 would require significant amendments to the Core Strategy, leading to further delay. You state that: One option was to amend the Core Strategy such that it unequivocally conforms to the East of England Plan (2008), i.e amend the current policy of providing 190 dwellings per annum to 250. However, the submission Core Strategy seeks to provide 250 dwellings per annum in accordance with the regional strategy, so the changes required would be to roll this forward two years to 2027, to allow for an adoption date of 2012, rather than 2010 as envisaged at the time of submission. I agree that the kind of changes needed to roll the plan forward would require public consultation and SA, but your scenario 2 timetable, published in June, would have allowed for this to happen in August/September 2011. Evidently that timeframe has now been missed.

In all the circumstances, and to avoid any further delay, I am minded to suggest that the Council considers proposing changes to the Plan which would acknowledge the shortfall in the plan period, briefly explaining the circumstances, and making a firm commitment to an early review of the Plan. I am of the view that such changes could be considered minor, and would not require formal consultation or SA. However, the changes could be advertised on the Council’s website and comments invited to coincide with a short consultation on the draft NPPF, which I am asking to Programme Officer to organise. Assuming that no issues of such significance as to warrant the reopening of hearings arise from these consultations, the Council could expect to receive my report for fact check within about one month from the close of the consultation.

This course of action would be a pragmatic way of ensuring that the Council has a Core Strategy in place to guide development whilst it undertakes a revision of the Plan in accordance with the new legislative and policy framework.

As I am unable to agree to a suspension of the Examination, the alternative course of action would be to withdraw the Core Strategy. I would be grateful for an indication of how you wish to proceed as soon as possible, and in any event by 26 August 2011.

Laura Graham


The issues raised are ones we have constantly raised on this blog – which I know has a following by planning inspectors – if LPAs assume displacement of housing elsewhere but cannot demonstrate a duty to cooperate agreement to do so – and of course for that strategy to be Sa/SEAd – they will not have a lawful plan, with or without RSS.

The inspectors conclusion on slippage since submission are pragmatic and could equally be applied to other epic EIP slippages (e.g. South Wiltshire).

A Flight to Safety will Kill You, Swiss Franc/Goldbug Fetishists

With rumours of the Swiss considering a Euro peg as a flood of currency investors seeking safety is killing their exporters the Swiss Franc has taken a plunge on the markets. How predictable. In a global meltdown there is no point of safety.

If the Swiss did beg at the pointy which would mean, in terms of purchasing power parity, it was the most overvalued currency in the world, long term damage to its export industries would mean, through economic fundamentals, that sooner or later currency speculation and bond vigilantes would force the price down. There is never a long term place of safety from the markets.

Similarly for Goldbugs, in the long terms deleveraging and the need to spend (you cant eat Gold) will require sales, which will puncture Gold Bubbles. Those rich and stupid enough to place all there bets on such frothy investments deserve to lose everything.

Lets Stop the Hysteria HS2 will Cause Minimal Damage to the Chilterns AONB #HS2

The impact on the Chilterns AONB has been a key issue for campaign groups, with them concerned at the route through the Chilterns AONB at one of its shortest points. There have been suggestions that it follow an alternative route via High Wycombe (still in the AONB), in a tunnel under most of the AONB north of Hazlmere or even an unlikley route avoiding the AONB itself.

Amongst the arguments we might expect the Chilterns Conservation baord to be carrying out its statutory duty to examine the impact on the landscape of the AONB, advise where this might be particularly harsh and where necessary propose alternatives and mitigation. Rather their response is a disgrace, following the template form of many objection responses of local groups more concerned with local house prices than precious landscapes. Indeed their 17 page response offers just two paragraphs on landscape impacts.

It is not acceptable to cause such damage to an Area of Outstanding Natural Beauty. It undermines the credibility of designating an area as an AONB. The Chilterns was designated as an Area of Outstanding Natural Beauty in 1965. Such a national designation confers on it the highest level of protection. Any development which would cause damage has to be shown to be in the national interest and demonstrate why it cannot be located elsewhere. The HS2 proposal will cause serious and irreversible damage to the Chilterns AONB. The Chilterns Conservation Board is not persuaded that HS2 will provide national benefits to the economy or environment.

The proposal misleadingly suggests that HS2 follows an existing transport corridor through the Chilterns. In fact it follows a single carriageway A class road for 2 kilometres but will otherwise be built across open countryside.

There is an accompanying response to the draft EIA but this does not specifically look at issues of landscape impact, and impact on the natural beauty of the AONB, at all.

In terms of the route its choice would have much less impact on the AONB than the ‘lower speed’ alternative via high Wycombe.

The preferred route would tunnel under the Chalfonts and Amersham Old Town, then run paralell to the dualled A413, then run in the same valley corridor as the A413 and the rail line to Aylesbury, much of this section within cuttings and Tunnels and away from villages and affecting very few woodlands.

Whereas a route alongside the A4010 and through High Wycombe and Beaconsfield would have a considerable negative impact on Bradenham and would either require considerable demolition or expensive tunnelling through High Wycombe and Beaconsfield.

In fact I would go as far as saying the landscape impacts are likely, with the possible exception of three prominent viaducts, although viaducts can be dramatic pieces of architecture in even the most sensitiveness landscapes, to be much worse in sections of the route outside the AONB, in areas such as Edgcote Manor.

‘A giant bet against Germany writing the cheques’

Faisal Islam of C4 News, in conversation with New York Hedge Fund Managers has said that they are taking a giant short of French Banks, betting that if they default then Germany will baulk at writing the cheques. Rumours are a euro-wide short selling ban is immanent.

We have seen nothing like it since Sores giant bet against the UK staying in the EMS.

A fair bet, especially as the costs to Germany of widespread European default, of it being the nation (and bank) of last resort, would spread debt contagion to them.

It is clear that Merkls government party has no taste for it, from opinion polls yesterday, and it may even be unconstitutional with ongoing chakllenges to the current bailout fund in the constitutional court.

Global Deflault – How it Might Work – either Planned or Unplanned

Professor Steve Keen

the level of private debt built up chasing Ponzi schemes in shares and housing was so great in the lead up to 2007-08 that its dynamics are still what is driving the global economy back into recession.

The difference today is that private debt is now falling, and as it falls, it is sucking aggregate demand out of the economy. This in turn is causing governments to run fiscal deficits, as tax receipts fall and welfare payments rise.

That gives us one factor reducing aggregate demand — the private sector — and another boosting it — the government. The end result is a slump, but not so nearly as deep a slump as there would be if the government “balanced its budget”.

Unfortunately, politicians are responding to this as they always do — by seeing the government budget as the problem, and ignoring what the private sector is doing.

They therefore compete at being “hairier-chested than thou” in pledging to return the government to surplus.

But the real cause of the crisis is not the government’s balance sheet, but the private sector’s. Government attempts to fix their own balance sheets while the private sector is also trying to reduce debt results in two forces dragging aggregate demand down, which compounds the problem of deficient aggregate demand. A deeper slump is likely to result.

The only way out of this crisis is to dishonour much of the debt that caused this crisis in the first place: the private credit lent to households that financed the bubbles in housing and shares since the early 1980s… since it was irresponsibly lent in the first place. The private and merchant banks that issued that debt would be sent into receivership, and that would cause substantial economic pain. But it would be a far less long-lasting pain than that of a decade or more of private sector deleveraging.

Either we do this in a planned way or it will happen anyway in a chaotic way

The current scenario:

  • Risks of sovereign default
  • Banks holding sovereign debt hit
  • Interbank lending and collateral default obligations spread contagion
  • Government’s intervene in secondary bond markets and underwrite weaker economies further worsening the creditor nations debt/gdp
  • Bond rate spreads worsen for all affected nations
  • Risk of default worsens
  • Downgraded credit rating
  • Bond rate spreads worsen for all affected nations
  • etc. etc.
  • Either a county or major bank defaults
  • Either causes bank contagion
  • Major creditor nations, Germany and China baulk at cost (including politically) of intervention – current currency unions/pegs break down
  • Bank runs
  • Governments cannot afford to bale out large depositors of multiple banks
  • Countries may default if they see creditor banks falling and being locked out of global credit markets – they have nothing to lose
  • Within a chaotic few weeks most of the world’s global financial institutions collapse as do most banks as there is a flight to money like assets and gold
  • Those with remaining bank deposits are wiped out
  • With a massive increase in liquidity preference there is deflation and a global depression of a severity not so far seen.

But there are points of intervention that could prevent this

  • Planned and orderly sovereign debt cancellation – and cancellation of all emerging markets debt
  • Governments announce a global debt jubilee – 10 year moratorium on all mortgage and credit card payments of private debtors owing (say) less than a certain amount
  • Governments recapitalise small deposits of affected banks preventing bank contagion – but only guaranteeing small depositors – paid for by halting sovereign debt repayments
  • Governments jointly and globally introduce a wealth/land tax of 2% on all fixed assets used to provide a basic income to all residents sufficient to prevent global hunger
  • This income is available at a higher rate to those that work on a massive public work programme, providing work on measures to improve infrastructure, improve the environment and reduce energy consumption.
  • Reduce to zero or corporate profit taxes on investments and research which will reduce consumption of high price non-renewable resources

This would be a global reboot to a sustainable post-carbon economy, without the inegalitarian distribution of resources which created the problem.

Cameron Blames Planners Over Riots ‘We will weed out unecessary planning regulations’ over roller shutters #londonriots

The Prime Minister in the Commons said that

A specific point was raised with me in Wolverhampton yesterday, that planning regulations make it difficult for shops to put up protective shutters.

We will weed out unnecessary planning regulations to ensure that businesses can get back on their feet and feel secure as quickly as possible.

How low can the Prime Minister go, not only seeing planners as ‘enemies of enterprise’ and a cause of the recession, but now even of the riots.

If full solid and impermeable rollers shutters gained permitted development rights it could have a devastatingly negative impact on crime and community safety in our town centres, as they became bleak and forbidding places. Dead frontages deter eyes on the street and can increase street crime.

As circular 5/94 stated

solid roller shutters can give an area a ‘dead’ appearance and are vulnerable to graffiti. This in turn can deter the public from using such
locations, so losing the benefit of passive surveillance.
Where security shutters are required, the Circular recommends those with an open grille design.

Whilst current official government advice in Safer Places: The Planning System and Crime Prevention says:

Roller-shutter blinds provide a high level of security, but can have a negative effect on the street scene, are susceptible to graffiti and do not reflect light in the way that windows do. Alternatives such as open grilled designs or internal shutters should be considered. Where external roller shutters are necessary, they can have translucent panels or be coloured to make a positive contribution to the street scene


Campaign for Kensal Crossrail Station Gathers Pace

The Campaign for a Crossrail Station serving North Kensington, Kensal Green and Kensal Town is gathering pace.

Kensington and CHelsea COuncil hs offered to pay the £33 million costs and Octavia Housing, Kensington and Chelsea Tenant Management Organisation, Catalyst Housing Group, Affinity Sutton, the Sheppard Trust and Viridian Housing have backed it.

The development can help bring forward the Kensal canalside opportunity area – which can accommodate 2,500 new homes including a major site owned by Ballymore.

Mayor Boris Johnson stated that a station could be added only if it did not increase Crossrail’s overall cost.

TfL is conducting a feasibility study on the station and the project is backed by National Grid and retailers Sainsbury’s.

Crossrail requires a “turnback” site in west London to accommodate trains that will make shorter journeys across central London, as far west as Paddington, so a station might be possible at the same location.

A 2008 pre-feasibility study concluded that an additional 7,200 single trips per weekday would be needed to offset the estimated lost revenue of providing a new station. The feasibility study will need to consider this.

It seems to me that with 15Ha of development opportunity land a considerable number of that demand could be provided through increasing the proposed density from the current very low 167/ha. If its a choice between having a station and having 15 storey buildings next to the canal and cemetery – even if conservation areas, to me its a no brainer.