Council of despair

Summary

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More or Less: "Council of Despair"

Date: December 17, 2010
Host: Tim Harford (BBC Radio 4)
Guests: Hugh Grover (London Councils), Richard Dickens (University of Sussex), Charles Goodhart (LSE), Matt Parker (Stand-up Mathematician), Charlotte Pritchard (Reporter), Wesley Stevenson

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Episode Overview

This episode explores the complexity and impact of local government funding cuts in England, investigates whether earning £50,000 as a 43-year-old man makes you above average, and revisits common statistical confusions around correlation and causation. Along the way, the show examines how the UK's inflation target is set, and provides a quirky segment involving the team's psychic monkey, Jack.

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Local Government Funding Cuts: Complexity and Consequences

Segment Start: 00:39

Key Points

• Context: The UK government announced significant cuts to English local government funding: 9.9% for 2011–2012 and 7.3% for 2012–2013, but officials emphasize a lower average reduction in "spending power" (4.4% for 2011–2012).
• Why the Numbers Differ:
  • Councils receive income from both central grants and local sources (mainly council tax).
  • “Spending power” includes all their income streams, not just government grant.
  • Only around a quarter of local government income is council tax; 75% comes from central government grants.
    • Hugh Grover: “Council tax accounts for around one pound in every four of local government income... 75% comes through from central government grants.” (01:39)
• Complex Formula:
  • Central grants are distributed according to population, local tax raising capability, and relative need (using Wokingham as the “least needy” reference authority).
  • Small changes in Wokingham’s assessed need can shift tens of millions in funding:
    • “A 1% change in Wokingham's assessed need can cause almost £41 million of undamped grant to move around England. This redistribution really does defy all logic.” – Hugh Grover (03:45)
  • Example: an increase in Wokingham's needs can move funds from Hampshire to the Metropolitan Police Authority, even without any real change in their circumstances.
• Blunt vs. Targeted Cuts:
  • Cutting everyone by the same percentage disproportionately hurts councils more reliant on central government grants.
  • Authorities in deprived areas (up to 75% of income from grants) risk heavier damage than affluent ones (only 20% reliant).
• Smoothing (Damping) Mechanism:
  • To prevent wild funding swings, the government uses “damping”—limits on annual reductions, with extra funds set aside to keep cuts below double digit levels for the hardest-hit councils.
  • “They’re shifting money from lower need authorities to higher need authorities through this system of damping.” – Hugh Grover (05:50)

Notable Quote:

• “In a nutshell, we had a complex formula. When you start cutting, it produces some odd results. And in order to try to make those results less odd, the formulas got even more complex.” – Tim Harford (07:04)
• “Indeed.” – Hugh Grover (07:15)

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Are You Better Than Average?—The Case of David (Listener)

Segment Start: 07:41

Key Points

• Listener David (43, £50,000 salary, two young children, non-working spouse) wonders how his income compares to his peers, especially to Prime Minister David Cameron.
• Earnings Perspective:
  • For all workers, David is in the top 10%.
    • “93% of people earn below that £50,000 level.” – Richard Dickens (08:18)
  • For men of similar age, full-time: About 80th percentile (top 20%).
• Household Income Matters:
  • ASHE only counts employment earnings, not pensions, benefits, investments, or partner income/lack thereof.
  • Household income analysis: Adjusting for taxes and the fact his wife doesn’t work, David’s “take-home” puts him in the 60th percentile overall, and the 48th for 40–50-year-old men with similar households.
• Impact of Family Structure:
  • Having a non-working spouse and two dependents places David near the middle of his peer group.
  • “Your two young toddlers and that your wife stays at home looking after them… has made a massive difference in comparison to you with other 40 to 50 year old males.” – Tim Harford (12:10)
  • David jokes: “So my partner is bringing down the average. I see. I’ll speak to her about that.” (12:30)

Notable Moment:

• David’s reaction:
  • “So by 48th centile that’s actually below average. Well, that’s not quite so good... Slightly below average—I’ll settle for that.” (12:02, 12:30)

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The Great Correlation vs. Causation Media Hoax

Segment Start: 13:25

Key Points

• The Experiment:
  • Matt Parker sends a press release showing a “phenomenal” correlation: for every mobile phone mast per county, another 17.6 babies are born each year (e.g., Swansea vs. Swindon).
  • Obvious point: both numbers scale with population—not causation, just correlation.
• Media Reaction:
  • Most ignored the story; only BBC Radio Wales inquired (to discuss correlation).
  • “It looks like people realize that there is no actual story here… It even includes a joke in the last line.” – Matt Parker (14:56)
  • Tim Harford: “Maybe science standards of science journalism are rising… maybe people have got the message.” (15:42)
• Still a Widespread Problem:
  • Recent stories falsely claim mobile phone use “causes” bad behavior in schoolchildren (actually correlation).
  • Many links (diet, parenting, education) are confounded by third variables.
• Why Do We Confuse Correlation and Causation?
  • Matt: “I think it’s just our instinct. Our brains have developed to recognize patterns and respond to them… but when you later on realize that they’re both linked to something else, the earth moving around the sun, we can get a much deeper understanding…” (17:15)

Memorable Quote:

• “Just because the movement of the stars corresponds to the changing seasons… you can think of it as one causing the other. But when you later realize they’re both linked to something else… we can get a much deeper understanding.” – Matt Parker (17:38)

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Why Is the UK’s Inflation Target at 2%?

Segment Start: 18:55

Key Points

• History:
  • Follows New Zealand’s lead; began in the UK at 1–4% range (RPI), later switched to 2% target (CPI).
• Why Not Zero Inflation?
  • Zero/negative inflation would require wages to fall—a difficult prospect.
  • Slight inflation “eases” economic adjustment and leaves headroom for monetary policy (interest rates can’t go negative).
  • “A small degree of inflation sort of eases the adjustment mechanism.” – Charles Goodhart (19:46)
• Inflation Target’s Recent Misses:
  • UK has exceeded its target for 11 months in a row—mostly due to tax rises, e.g., higher VAT.
  • The Bank of England’s forecasts have repeatedly underestimated inflation.
  • “The reason why the inflation rate is just over 1% higher than the target is... VAT and direct taxes… bank’s own forecasts... have been underestimating the rate of inflation.” – Charles Goodhart (21:50)
• Should We Judge the Bank on Recent Misses?
  • No—need to look at longer trends due to short-term “blips” like tax and commodity prices.
  • “There are various factors such as energy and food prices that are volatile and don’t necessarily reflect what is going on in the domestic economy…” – Charles Goodhart (23:30)

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Fun Segment: The Psychic Monkey, Jack

Segment Start: 24:34

• Premise: A monkey predicts cricket test match results by choosing bowls of banana porridge representing England or Australia.
• Jack’s Record: Having correctly forecast previous results, Jack now predicts:
  • England will win the current and final Test, Australia the penultimate one—resulting in a 3:1 Ashes win for England.
• Caveat:
  • “We’re talking about the random foragings of a cotton-topped tamarind near Newcastle.” – Tim Harford (26:38)

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Notable Quotes & Segments

• On Formula Complexity:
  • Tim Harford: “In order to try to make those results less odd, the formulas got even more complex.” (07:04)
• On Income Comparisons:
  • David (listener): “So my partner is bringing down the average. I see. I’ll speak to her about that.” (12:30)
• On Pattern Recognition:
  • Matt Parker: “Just because the movement of the stars corresponds to the changing seasons… you can think of it as one causing the other. But when you later realize they’re both linked to something else… we can get a much deeper understanding.” (17:38)
• On Why Positive Inflation is Targeted:
  • Charles Goodhart: “… a small degree of inflation sort of eases the adjustment mechanism.” (19:46)

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Timestamps for Key Segments

• Local Government Funding Cuts Overview: 00:39–07:15
• Listener David’s Wage Comparison: 07:41–12:49
• Correlation vs. Causation Hoax: 13:25–17:55
• UK Inflation Target Explanation: 18:55–24:34
• Psychic Monkey Ashes Predictions: 24:34–26:38

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Tone & Style

Engaging, witty, and explanatory—Tim Harford and guests simplify complex statistical and economic ideas, blend humour and skepticism, and invite the audience to question media narratives around numbers.

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For more episodes, resources, and Matt Parker’s press release, visit BBC.co.uk/moreorless.

Transcript

[Tim Harford]

Thank you for downloading this week's More or Less podcast. Here's Tim Harford.

Hello and welcome to More or Less your numbers eye view of the news this week. How much should you be earning if you're a 43 year old man called David? Why the UK's inflation target is set at between 1 and 3% and why we keep missing it. And more from our psychic Simeon Jack. We'll also be exposing a cunning media hoax.

[Matt Parker]

So what I did was I took all the data on the number of mobile phone transmitter masts in each county in the United Kingdom and then I showed that has an extremely strong correlation to the number of births in these same regions.

[Tim Harford]

But first, on Monday, the government announced that a key element of English local government funding would be cut by 9.9% in 2011-2012 and by 7.3% in 2012-2013. Speaking in parliament, the Community Secretary, Eric Pickles, was emphasising a different number.

[Hugh Grover]

In fact, Mr. Speaker, the average reduction in spending power for 2012, for 2011, 2012 is 4.4%.

[Tim Harford]

There is a simple explanation for this. Councils have other sources of revenue beyond their grant from local government. So it is logically possible for a 9.9% fall in the government grant to lead to a 4.4% fall in average spending power. But the details of how these central government grants are calculated are fiendishly complicated. I asked Hugh Grover, the director of policy for London Councils and one of the few people who seems to understand how it all works. How it all works?

[Hugh Grover]

Well, unfortunately, Tim, there's no really simple answer to that question, because the world of local government finance is just so complex. But in big picture terms, you could say that there are two main sources of funding for local government, putting aside things like fees and charges and their own interest from investments and so on. And those two main sources are council tax and government grant. Now, council tax accounts for around one pound in every four of local government income. So around 75% comes through from central government grants. Now, there are many grant streams from Central government, some120 of them this year, and that's being simplified dramatically for next year. But one of the biggest of those grant streams is called the formula grant, which in this current financial year amounts to around about 29 billion. Around half of local government funding that comes from central government formula grant is distributed around the country according to a number of factors. One of them, obviously, is per capita, how many people live in the local authority. Another one is the amount that the authority can raise locally through its council tax. And the third, and probably most important, is the relative local need for that authority relative to a threshold authority against which it judges all others. And currently that threshold authority is Wokingham.

[Tim Harford]

Wokingham? Why Wokingham?

[Hugh Grover]

Well, according to the government's analysis, Wokingham is seen by them as the least relatively needy place in Britain. So they adjudge that it has the lowest needs per head for some of the basic services that local authorities deliver, such as education and social services. So, for instance, if you take into account their financial circumstances and all the changes this year, people in Hackney, which is one of the most needy places in England, will be receiving something in excess of £1,000 per head, while residents in Wokingham, as I've said, the least needy will receive only around about £125 a head.

[Tim Harford]

So if everything compares to the least needy place in the country, Wokingham, what happens if Wokingham changes?

[Hugh Grover]

Yeah, well, that's a really interesting question. We did some research and analysis around this Based on the 20089 Local Government Finance Settlement for formula grant. And what we discovered was actually very small changes in Wokingham can have a huge impact in the distribution of money. For instance, a 1% change in Wokingham's assessed need can cause almost 41 million of. And here I have to get slightly technical undamped grant to move around England. And this redistribution really does defy all logic. So for example, the Metropolitan Police Authority in that situation would see their grant increase by 4.8 million, while at the same time Hampshire's would reduce by 2.5. And clearly nothing has changed for those two authorities. The changes only occurred in Wokingham.

[Tim Harford]

Okay, so the government has announced it's going to cut funding. It is cutting funding. And obviously the fair way to do that would be to cut everyone's grant by 10%. Right?

[Hugh Grover]

Well, certainly on the surface that would seem to be the simple solution. And indeed, earlier in the year, how things have changed. Earlier in the year we were expecting, relatively speaking, small cuts of around about 5%. And certainly we in London councils were calling for that kind of methodology. It's simple, it's straightforward, it's easily understood. But that was before we realized quite the scale of the cuts that we were going to see. And now with these huge cuts, obviously we need to be aware that some areas of the country are much more reliant on central government grant than others. And that kind of blanket cut would obviously impact most severely those authorities who are seen to be most needy. So you know, with some areas relying on central government grant for around about 75% of their total budget, while others maybe only 20%, you can see that a blanket cut to those with 75% of their funding coming through from central government, it would disproportionately hit them.

[Tim Harford]

So how can the government stop that kind of unfairness or aggressiveness when it does cut local government funding?

[Hugh Grover]

Okay, so the government for a number of years has had in place a system of damping, a system that prevents major swings in funding from one authority to another. And this year it's put in place a slightly more complex system of damping based around four blocks within which there are now four separate floors. Now, high need authorities in London, for instance, that would be Hackney, are up in block one with maximum protection and lower needs authorities, for instance in London, again, Richmond are down in block four. And effectively what they're doing is shifting money from lower need authorities to the higher need authorities through this system of damping. And then to further minimize the overall cut, they've put in place some additional funding that they've found from the Department for Communities and local government, some 85 million this year and 14 million next year, in order to ensure that the most hit authorities get some protection and stay below a double figure cut to their spending power in order to ensure that no authority sees these enormous shifts that the system can throw up.

[Tim Harford]

So, in a nutshell, we had a complex formula. When you start cutting, it produces some odd results. And in order to try to make those results less odd, the formulas got even more complex.

[Hugh Grover]

Indeed.

[Tim Harford]

That's a good summary, Hugh Grover of London Councils. And if you're wondering exactly where Wokingham is, nobody knows. In the last series of More or Less, we compared what the Prime Minister David Cameron is paid relative to the rest of us. That prompted an interesting email from another David, also 43 years old. We sent our very own Charlotte Pritchard along to meet him in his local cafe.

[David (listener)]

Well, I share the same name, age and gender as the Prime Minister, David Cameron. I don't earn as much as him, but I do earn more than the average salary. So I was just really wondering, for men of my age and gender, whether I'm actually doing better than average, worse than average or average.

[Tim Harford]

So Tim David is on £50,000 a year. He has a wife who stays at home and looks after their two toddlers. In order to work out where his salary fits in compared to other 43 year old males, I contacted Richard Dickens, professor of Economics at the University of Sussex.

[Richard Dickens]

If you compare him to the whole population of people in work, that puts him in about well into the top 10% of earners, kind of around about 93% of people earn below that 50,000 pound level. If you compare him against similar men to him who work full time, he starts to look slightly worse off and he's around about the 80th percentile. And what that means is about 80% of people earn less than him and 20% of people earn more than him.

[Tim Harford]

So, Charlotte, according to ash, the annual survey of hours and earnings, David's doing pretty well. So did you put his mind at rest?

Yes, I did and not surprisingly, he was pretty chuffed.

[David (listener)]

I have to say I'm quite pleased with that from a point of view of doing better than average. My intuition is that there'll be a lot of people who'd be earning at the bottom end of the pay scale would be younger people just leaving school. So my thought was that probably for people at my age that have had 20, 30, well, 25 years in the employment market and probably would have had quite a few career progressions and pay rises and so on, so I was actually expecting to be closer to average for people of my age. Yeah, no, I'm quite surprised, frankly.

[Tim Harford]

But Tim, as much as we like to make our listeners happy, Professor Dickens says the ASCH numbers just don't show the whole picture.

[Richard Dickens]

What the ASH data measures is your earnings from employment. It's only picking out one component of households incomes, which is earnings, and for many people that's going to be the primary component. But for lots of households that isn't true. Their earnings may be primarily made up of pensions or of self employment income or government benefits, investments and so on. And so an alternative way to do this is to look at survey data that collects information on all of those components of incomes at the household level and then see how he's doing compared to the population as a whole or to his kind of reference group of men in their 40s. The survey that's used to do this is called the Family Resources Survey. And this survey underpins much of the government's analysis of household welfare. And it's used widely to kind of measure the income distribution and how that's changing over time.

[Tim Harford]

How is David, our listener on £50,000 doing? If you actually look at his total

[Richard Dickens]

household income, there's two things you have to do. First of all, you have to think about what his total income is. And he's told us that his wife doesn't work and he has Two children. The second thing is to think about is disposable income. What the Family Resources Survey do is think about how much income is left over for David and his family after we've taken off direct taxes. And it's common to take off council tax as well when we do this sort of analysis. So on his 50,000 he would approximately be on about 35, 36,000 take home a year. And that comparing him to the whole population puts him on around about the 60th percentile of the distribution. So 60% of people are on household incomes less than him and 40% are on household incomes more than him.

[Tim Harford]

And then David was very specific that he wanted to be compared to fellow males 43 years old.

[Richard Dickens]

If you do that using the income data from the Family Resources Survey. So what we've taken is men between the ages of 40 and 50 and compared his household income to theirs, it puts him almost in the middle of the distribution. So he comes out around about the 48th percentile point of the distribution.

[Tim Harford]

Poor old David, not quite so good. Did you pass the news on?

I broke it as gently as I could.

[David (listener)]

I think that's very interesting. So by 48th centile that's actually below average. Well, that's not quite so good.

[Tim Harford]

Is does make you more average. But actually what what's happened there is that your two young toddlers and that your wife stays at home looking after them and doesn't contribute to the household income has made a massive difference in comparison to you with other 40 to 50 year old males.

[David (listener)]

So my partner is bringing down the average. I see. I'll speak to her about that. Whilst it would have been nice to be above average, I can comfort myself on some measures. I am, but I'm quite content with how my life's going. So slightly below average. I'll settle for that.

[Tim Harford]

That was David. Charlotte, thank you. You're listening to More or Less with me, Tim Harford. The website is BBC.co.uk More or less the place to send us your comments. Read more, including from our partners at the Open University, or to subscribe to our podcast or you can follow me on Twitter imharford. One of our bugbears on More or Less is the way so many people, including journalists, confuse correlation and causation. And we're not the only ones. This annoys. Matt Parker, better known to loyal More or less listeners as the stand up mathematician, decided to take matters into his own hands.

[Matt Parker]

Yes, I thought I would put together a press release that's completely, factually accurate about Correlation, but has no real causal link and see if any media outlets picked it. So what I did was I took all the data on the number of mobile phone transmitter masts in each county in the United Kingdom and then I showed that has an extremely strong correlation to the number of births in these same regions. In fact, it's so incredibly close that for each additional mobile phone mast in an area, you get on average another 17.6 berths. And my favorite example of this was, I checked and in Swansea, which has 149 masts, they have 2,581 berths. Swindon has 10 more masts and an additional 178 berths. It really is a phenomenal link between the two. Our instinct is to think that one is causing the other. In this case, if you do think about it a little bit, the population size in all these areas controls both those variables. So there's a third factor which controls both of them.

[Tim Harford]

You have a village doesn't have very many people, only has one mobile phone mask, not many babies. You have a big city, lots of mobile phone masks, lots of people, lots of babies. It's that simple. Matt, I have your press release here. It's a work of art, actually. A strict embargo. Thursday 16 December 2010. Increased mobile phone masts match increased numbers of local births so, Matt, you sent out this press release. What happened?

[Matt Parker]

Well, so far, pretty much nothing, which is good. It's not as entertaining as if people had picked it up, but it looks like people realize that there is no actual story here, which is fair enough because I am just some random guy. I sent it out without any university affiliation. I haven't got a publication record. It's just a strange finding that I sent to generic media outlets. It even includes a joke in the last line. We could have made this much more insidious, but it seems that most people spotted it was ridiculous. And in fact the only inquiry we got to check the story was BBC Radio Wales because they wanted to talk about correlation. So I think generally the media have done very well with this. So maybe your constant mentions of correlation not being causality are starting to sink in.

[Tim Harford]

Well, maybe, but we can't be sure that that correlation is actually a causal relationship. Now, Matt, I guess if nobody really bit, maybe science standards of science journalism are rising. Maybe there's nothing to worry about here. Maybe people have got the message.

[Matt Parker]

It still does happen all the time. Earlier this month a story came out that mobile phone use in young children causes them to behave badly at school and there was this causal link when in fact all the experts came out and said that the study had just found a correlation and in fact they had over interpreted their results. There was no obvious causal link and in fact there are other ways you can explain that as just being a correlation without causality and that was covered right across the media. So the error does still occur. There are a quagmire of other links between parenting and these sorts of things. There's a strong link between the diet of kids and their behavior and attainment in school and that's not necessarily because the diet's causing that. It could be as simple as parents who take an interest in their kids education does have an effect on the kids attaining more and the same parents would be more have a closer hand in making sure their kids have a healthy diet. Or there could be other links. It's very difficult to pin an actual causal link.

[Tim Harford]

We've been making this point for a long time and we're not the only ones. Mathematicians, statisticians, popular scientists have for decades been stressing correlation and causation and not the same thing. Why is it so hard for some people to grasp the point?

[Matt Parker]

I think it's just our instinct our brains have developed to be able to recognize patterns very quickly and respond to them and it makes more sense to do that imagining it as a causal link and the outcome's the same because we can survive better that way. But just because I guess the movement of the stars corresponds to the changing seasons, you can think of it as one causing the other and your crops will do better.

[Wesley Stevenson]

But.

[Matt Parker]

But when you later on realize that they're both linked to something else, the earth moving around the sun, we can get a much deeper understanding of what's actually happening. And I think we should always try and overcome our instinct to assign causality to get to the bottom of the matter.

[Tim Harford]

Matt Parker, the stand up mathematician. I can't comment on whether there was any causal link between our interest in the subject and Matt's connivances but there was a correlation between the two. Matt's press release is on our website BBC.co.uk more or less. The latest monthly inflation figures came out this week showing we've missed our inflation target band 1 percentage point either side of 2% for the 11th month in a row. This caused or at least I think it was causal, this caused. Loyal listener Roger Whiting to email more or lessbc.co.uk. this week Stephanie Flanders on the World at One referred to the inflation target figure of 2%. Who set it, when and more important, why at that level? Is there any objective reasoning behind the figure or was it just produced in a study by Gordon Brown? A man who knows is Charles Goodhart. He's one of the country's most eminent experts on money and banking, a professor at the London School of Economics and a former member of the bank of England's Monetary Policy Committee. So how did we come up with this target?

[Charles Goodhart]

Well, in a sense it's as low as you can reasonably get and still leave sort of the flexibility of adjustment that having a small amount of information inflation actually gives you. And it really got started when New Zealand started this inflation target game at the end of the 1980s. And when we began, which was way back in 92, 93, the inflation target we set there was actually one to four, with a midpoint at two and a half. And that was for the RPI.

[Tim Harford]

The RPI, sorry, is the Retail Price Index.

[Charles Goodhart]

The price index. That's right. And that effectively stayed until we shifted from the RPI to the cpi, the Consumer Price Index.

[Tim Harford]

Why not a target of zero percent? Why have a target to have some inflation?

[Charles Goodhart]

Because if you try and set it at zero, you've got to have certain prices going down, and if prices are going down, you've got to have wages going down and people don't like their wages going down. And there's generally a belief that a small degree of inflation sort of eases the adjustment mechanism. There's another point which is also very relevant, which is that you can't go below 0 interest rate. And that means that if you want to have interest rates which are very low and which can lead the economy into greater expansion, you want to have inflation being capable of being slightly greater than the level of nominal interest rates that you set. You couldn't do that if the inflation rate was.

[Tim Harford]

Do you think that the idea has been somewhat discredited by the experience of the crisis?

[Charles Goodhart]

No. What happened was that central banks had two objectives. They had a price stability objective, which is effectively the equivalent of having this inflation target, and they had a financial stability objective. And they tended to think before this crisis that if you achieve the price stability objective, that financial stability would be achieved sort of quasi automatically as well. The problem was the stability that we had in the macroeconomic system was such that it led everybody in the financial system to take much greater risks because they thought the risks had been reduced. And effectively what we learned there was that you actually need an additional set of instruments to achieve financial stability. As well as price stability. But the idea that you should get away from trying to manage and achieve an inflation target is just wrong.

[Tim Harford]

Now the bank of England has missed its inflation target for many months in a row. Does this indicate that simply that they're getting their inflation rate policy wrong or is it a bit more subtle than that?

[Charles Goodhart]

The answer to that one is yes and no. And essentially what has been happening is that the reason why the inflation rate is just over 1% higher than the target is very largely the previous government and now this government have been putting up VAT in direct taxes and when that falls out of the system, that the inflation rate will tend to go back down. The problem why I said yes or no is the bank's own forecasts have been underestimating the rate of inflation, not a huge amount, but a little bit more or less, month by month by month. And there are some people who are worried that the bank is putting excessive trust in the belief that there is sufficient competitive pressure in the economy and sufficient slack and spare resources, that when the indirect taxes fall out of the annualized inflation figure, that everything will go back down to 2% fairly quickly or even under. And it's the latter, that perhaps it won't fall back as much as the bankers thought because they've been continuously underestimating over the last year what the inflation rate would be that is causing a little bit of concern.

[Tim Harford]

Do we actually learn anything from analyzing the retail price index figures and the consumer price index figures as they come out month by month and saying, well, the bank missed its CPI target this month, or do we actually have to wait for a longer period of time to actually make any judgments about this?

[Charles Goodhart]

Well, I think one does have to wait a fair period of time because like all economic series, there are various blips that cause things to go up. And apart from the VAT changes, there are various factors such as energy and food prices that are pretty volatile and don't necessarily reflect what is going on in the domestic economy, which is the more important and underlying determinant of inflation. One of the concerns is that because of spare capacity in the major developed economies, the expansionary monetary policy that most of us have in the us, UK and the Eurozone are actually feeding through into generalized inflation in commodities and in energy, so that the commodities in the energy are not just purely, if you like, supply side blips that we can disregard, they themselves can be influenced by the monetary policies of the developed economies.

[Tim Harford]

Professor Charles Goodhart finally, if you were listening last week, you'll Recall Jack, the more or less magic mind reading monkey. Jack correctly predicted the result of the first two Ashes tests, so we have consulted the wise sage once again. Jack is a cotton top tamarind who lives at an aquarium in the northeast of England. Before we find out what he predicted, let me remind you how this works. We put two bowls in his enclosure containing his favorite breakfast, banana porridge. One represents Australia, the other England. And if he doesn't choose either, that signifies a draw or a tie for those pedants who wrote in to point out the distinction. So now we know how it's done. Let's hear what our monkey correspondent, Wesley Stevenson, discovered when he returned to Tynemouth to consult Oracular Jack.

[Wesley Stevenson]

So this is the Blue Reef Aquarium in Tynemouth and we're with Jack, the more or less magic monkey, our psychic, Simeon. So here comes the food.

[Tim Harford]

He's edging down the rope at the minute he's closest to the Australian bull, but he doesn't seem interested in it at all.

[Wesley Stevenson]

He's made the leap over to the plinth.

[Tim Harford]

Now he has to actually eat from this ball to indicate which team he thinks will win.

[Wesley Stevenson]

Oh, there he goes. He's got a bit of banana in his mouth. And that means that England will win the next Test in Perth at the Wacker. And that will mean that England will retain the Ashes.

[Tim Harford]

Well, if you're an England fan, that's pretty splendid. But one thing that's bothering me, Wes, next week it's our more or less Christmas special. So we won't be able to go back and consult Jack again?

[Wesley Stevenson]

No, that's right. But not to worry. I took the liberty of asking Jack to predict all three of the remaining tests.

[Tim Harford]

And, well, England are nailed on.

[Wesley Stevenson]

Not only will they win the current Test in Perth, but they'll also win the final Test. Australia will nick a consolation victory in the penultimate Test, but by then the Ashes will be beyond their grasp. 3:1 to England. A crushing victory down under. It's just amazing.

[Tim Harford]

Well, it is amazing, but remember that thus far we're talking about the random foragings of a cotton topped tamarind near Newcastle. So, just to be clear, Jack has correctly predicted the first two results. He predicts that England will win the current Test in Perth, will lose the penultimate Test and will win the final Test. Let us revisit these predictions in the new year, at which point we may also reveal to our very patient listeners what we're up to. Before then, though, you have the more or less Christmas special to look forward to. At half past one on Christmas Eve. Please tune in because we hope it's going to be a lot of fun. Our website, BBC.co.uk more or less is the place to go for podcasts, archives and Matt Parker's phony press release. And of course, you can always contact us at more or lessbc.co.uk. we look forward to hearing from you. Until then, goodbye.

More or Less was presented by Tim Harford, the FT's undercover economist. The producer was Richard Knight and the editor was Richard Varden. It was made in association with the Open University.

[David (listener)]

Well, I think that's very interesting. So by 48th centile, that's actually below average. Well, that's not quite so good.

[Tim Harford]

Is does make you more average. But actually what's happened there is that your two young toddlers and that your wife stays at home looking after them and doesn't contribute to the household income has made a massive difference in comparison to you with other 40 to 50 year old males.

[David (listener)]

So. So my partner is bringing down the average. I see. I'll speak to her about that.

[Tim Harford]

Right, I'm gonna leave.

Thank you, Charlotte.

[Charles Goodhart]

It.