We examine the start date of the Great Recession across OECD countries. The Sahm Rule identifies the start of recession in the US to the beginning of 2008 but in most other OECD countries it identifies the start after that identified by two successive falls in quarterly GDP. We establish our own rule for predicting recession using the fear of unemployment series to predict recession. We show a 10-point rise in the series compared to its previous 12 month low predicted the onset of the Great Recession in both the United States and Europe.

The contemporary relevance of Adam Smith is evidenced by continued reference to his name. Computational analysis identifies over 700 mentions of Smith and his two famous works—The Theory of Moral Sentiments and The Wealth of Nations—in post-World War 1 House of Commons debates. We find some parliamentarians appreciate Smith’s complex ideas, but most references are ‘ornamental’. Charting Smith’s use over the decades, this paper builds on Kirk Willis’ idea that studying parliamentary debates are an ideal way to understand how, at best, policy ideas, germinate and disseminate over time, or, at worst, how ‘complex ideas became slogans’.

Modern economic theory gives an important role to expectations as an influence on outcomes. This paper reviews evidence on how well measures of expectations conform to outcomes. It confirms earlier results that measures taken from financial markets perform poorly as predictors of outcomes. Looking at the individual responses to the Confederation of British Industry’s Industrial Trends Survey, it does find, however, that there are significant correlations between expected and realised outcomes of wages, prices, costs orders and employment. It also finds some evidence that actual prices reflect expected future prices, but with a coefficient much lower than economic theory predicts. There is evidence that forecast errors are explained by past forecasts, as well as revisions to the economic outlook, casting doubt on the idea that firms’ forecasts make the best use of the information available at the time. The paper concludes by observing that, while expectations are undoubtedly important, economists need to build on work looking at how they are derived instead of simply assuming they are rational.

Economists understand that a fit for purpose policy regime requires a reliable general equilibrium model of the system in question and a well specified description of the objectives that the policymaker is trying to pursue. The current financial stability regime has neither and without these critical foundations the regime is fundamentally fragile and incomplete. There is no anchor on the conduct of policy, an absence in genuine accountability and, as a result, reputational risks for policy institutions.

In the first half of this decade, the world experienced a period of low short and long-term interest rates. Shortterm rates have risen from these low levels, first in Canada and the United Kingdom, then in the United States and finally in the Euro Area. Long-term rates, by contrast, remained low, suggesting that holders of longterm debt expected the rise in short-term rates to be only temporary. Only in the past few months has the apparently anomalous pricing of long-term debt started to disappear. But with interest rates on long-term debt similar to short-term market rates internationally, the market does not yet show that the traditional upwardsloping yield curve and, on this basis, long rates remain depressed. They are also markedly below the levels of two to three years ago.

Replacement ratios measure the relationship between income out of work and income in work. A ratio of 50 per cent for example would indicate that an employed person would have only half the income if he were unemployed. Interest in these ratios may be a reflection of concern either about living standards or about the incentive to work. For some purposes it is the current level and dispersion of these ratios that matter, for others it is necessary to build up a consistent set of ratios for a run of years in the past. The construction of time series is of particular importance if one is trying to assess the effect of the benefit system on wages or on employment.

The National Institute studied the diffusion of new technologies more than ten years ago: our first report on this subject was published in 1969 followed by a major book. The purpose of the earlier studies was to analyse the introduction and diffusion of major postwar process innovations in several industrial countries, the factors which facilitate or hinder the adoption of the then new techniques, the pattern of diffusion and the influences to which it is subject. The analysis was based on the situation at the end of the 1960s. Since then the processes, which were then relatively new, have matured. In 1982 we started a new project in order to assess and analyse their diffusion in a later phase.

The NIESR price index numbers (given in table 27 of the Statistical Appendix) were introduced in the first issue of the Economic Review. They have now been substantially revised. First, the weights of the individual prices are now based on the average of the years 1960 to 1962. This reduces the influence of chance fluctuations which may affect a single year's figures; the years 1960-62 were free of any major disturbances. The indices are shown with the year 1961 as 100. Secondly, the price indicators have been substantially revised; the least reliable ones have been dropped and some new prices have been included.

This paper summarises research on the labour market done over the past two years at the National Institute. It incorporates research into the determinants of employment—including the role of forward-looking behaviour—wage inflation and real wage models, and comments on some policy issues which have arisen in the past five years or so. The research was not aimed at producing a single approach to labour market behaviour, but touched on several separate topics. In part the present paper reflects this relative heterogeneity, although we will try to emphasise common themes where these are relevant.