Source: by Charles J. Sharp, CC BY-SA 4.0, via Wikimedia Commons

It has been quite a year for reading great books and being inspired by them for me: from An Immense World by Ed Yong last April, to Regenesis by George Monbiot and The Lathe of Heaven by Ursula Le Guin in October, to a great trio of reads in 2023 of The Capital Order by Clara Mattei, When The Lights Went Out by Andy Beckett and The Left Hand of Darkness by Ursula Le Guin. And that is just the books I have blogged about.

However, my stand out book this year is none of these. I have often heard people say they wish they had written some book or other, and I have never understood it until now. This is the book I would hope that a better version of me might have written in a parallel universe. Fortunately for you, Simon Sharpe has written Five Times Faster in this universe, and I am so glad he has.

Five Times Faster is funny, constantly surprising and has reframed my entire attitude to the climate crisis and what can be done about it. Perhaps it had more intensity for me as I read most of it aboard the XR bus from Birmingham down to London last weekend, but it has given me more hope for what Kim Stanley Robinson calls “dodging the mass extinction event” than I have had for some time.

Amongst the many wonders of this book is to reframe the time-worn story of the frog sitting in water which is slowly coming to the boil as a series of conversations with its science adviser, its economics adviser and its diplomatic adviser. To do it full justice you will need to read the book, but the gist of it goes as follows:

First of all, the frog asks its science adviser to investigate whether the water really is getting warmer. The science adviser confirms that it is, and also predicts that, in 5 minutes’ time, it will be a further 2o warmer, plus or minus 1o. The frog says it didn’t want a prediction, it wanted a risk assessment. It takes a while to get the science adviser to understand what this is but then, when asked what’s the worst that could happen, the adviser blurts out “That’s easy. You could boil to death.” In response to the question of how likely that is to happen, the adviser says that it would be very unlikely after 5 minutes, more likely than not after 10 and after 15 a certainty. So the frog now realises it needs to jump out of the pot.

The frog now turns to its economics adviser to ask how it should go about it. The economics advisor does a cost benefit analysis by first calculating the energy cost per cm of moving up the pot away from the water, converting this first into food consumption and then money, and equating this with the frog’s willingness to pay for not being boiled, which is derived from its air conditioning bill. The most efficient solution turns out to be to climb 4.73 cm up the side of the pot. Worried that it would just be replacing the risk of being boiled with one of being steamed to death, the frog ignores its economics adviser and jumps out of the pot.

Finally the general problem of the frogs and the relentlessly boiling water is put to the negotiators for a diplomatic solution. The sides of the pot are too high by now for most of them to jump out. The negotiators tell them they just need to raise their ambition and that this is the only game in town. The consequences of not accepting that analysis and looking at alternative salientian strategies make up the final third of the book.

I cannot recommend it highly enough. If enough people read it and act upon it, perhaps we can avoid this:

Source: Anagoria, CC BY 3.0, via Wikimedia Commons

In Simon Sharpe’s great new book Five Time Faster, he points out that, if we are going to decarbonise everything, “it’s not just the physical plumbing of the global economy that needs to be replaced, but the intellectual plumbing.” In a blog post from January, Three less visible battles to win, Simon mentions three targets in particular for this intellectual plumbing:

  1. Infrastructure that makes sure heads of government know just how bad climate change could get;
  2. Ideas in economics that exert a critical influence over governments’ policy decisions; and
  3. Institutions in diplomacy that will get the job done.

The first one means targeting the Integrated Assessment Models which have informed so much of our hesitancy and inappropriate prioritisations over the last 20 years where climate is concerned. I have written about this several times before, and this is something actuaries can contribute to much more in the future.

The second is at a much earlier stage, but the opening session in the current IFoA Presidential Speaker Series programme of talks indicates a greater confidence amongst actuaries to talk about, and influence, a more pluralist economic future.

And the third one will I believe become much more tractable once the intellectual tide starts to change.

I will be heading down with my banner to London tomorrow for Extinctions Rebellion’s Big One, alongside 90 other organisations united in demonstrating for a survivable future. Hope to see you there!

I am returning to the scene of my crime cartoon, which did not really deal with what the Governor of the Bank of England was saying as it was more a criticism about how he was saying it. However in response to a comment on my piece, I also realised that I was critical of what he was saying too. My criticism centres on the following graph:


As Andrew Bailey’s speech acknowledges:

“As you can see in blue…, long-term sickness has driven much of the persistent rise in inactivity amongst 16 to 64 year olds since the start of the pandemic. That is a striking fact.”

This is backed up by recent research carried out by LCP, whose conclusions included the following:

  • The rise in working age inactivity is not purely amongst those over 50; at the time of the Autumn Statement, nearly half the increase had come from the under 50s, with a big rise in the number of students a major factor;
  • Data on flows into and out of long-term sickness show that persistently high inflows into long-term sickness are a key problem; one growing group is those who flowed into long-term sickness having been previously categorised as ‘short-term sick’; this suggests that failure to address short-term sickness, including through clinical intervention, could have contributed to the increase in long-term sickness;
  • Amongst the entire economically inactive population of working age, very few of those who are retired say they ‘want a job’, whereas over 600,000 of the long-term sick say they would like to work if they could; this suggests that policies designed to help the long-term sick are ‘pushing at an open door’ in terms of supporting people who would actually go back to work given the right opportunities and treatment;

The “striking fact” for me is that the Governor of the Bank of England, faced with very similar data to LCP, instead concluded the following:

…the rise in economic inactivity is a change to the supply of labour, independent of demand, in particular by older workers. If those workers have accumulated enough savings to sustain a desired level of consumption much like the one they had before their early retirement, at least for a while, aggregate demand will not have fallen by as much as aggregate supply. We should expect this to put upward pressure on inflation in a way that would call for a higher level of interest rates to dampen demand.

But this is a comment on a dataset which shows most new inactivity is in the over 50s (which it isn’t) and that there is no large group of people currently economically active who wish to return to work given the right levels of support (there are 600,000 of the long-term sick in this category). What the LCP report concludes plausibly from the data is that policies designed to help the long-term sick who want to go back to work given the right opportunities and treatment and those designed to support the NHS to increase its capacity in primary care and mental health services in particular, would have much more impact on the number of people defined as economically inactive. As the LCP report says:

Clearly, a range of policy initiatives will be required to tackle economic inactivity, and these will include measures to reduce the ‘inflow’ into inactivity (eg people currently in work retiring or going off sick), but in terms of measures designed to increase the ‘outflow’ from inactivity, doing more for the long-term sick is likely to be far more effective than concentrating on those people who have already retired.

Meanwhile, the Governor of the Bank of England has an interest rate hammer for a tool and he therefore needs the problems he is addressing to look as much like a nail as possible (my explanations in non-italics):

So while population ageing is very likely to pull long-run R* down (this is the long-run average real equilibrium interest rate, net of inflation, averaged over the economic cycle), as I discussed earlier, the effects on shorter-run r* (which is the theoretical equilibrium rate of interest at a given point in the economic cycle) from a change in labour force participation are harder to assess. In the shorter run, by reducing the productive capacity of the economy, the rise in inactivity driven by early retirement (which is virtually non-existent as his own graph shows) seems likely to have contributed to a rise in cyclical r*. This is part of the reason why we have had to raise Bank Rate by as much as we have.

But what about a rise in inactivity caused by long-term sickness? Interestingly, Jonathan Haskel, another MPC member who also voted for the latest rate rise, recently presented some fascinating work with Josh Martin on long-term sickness and labour market outcomes. Amongst the implications of the rapid rise in long-term sick amongst the UK’s economically inactive population are:
• Long-term sickness is more than just a reason for economic inactivity – many in-work are long-term sick;
• The out of work long-term sick have high rates of wanting jobs, but less success in getting them, which suggests cultural or structural barriers.

Making their lives more difficult by interest rate rises which increase their living costs and reduce the security of any employment they may already have seems an odd way to solve either of these problems.