Financial volatility matters less than we're told

Stock markets have been up and down like Santa in the world's chimneys this Christmas.

After taking a record unfestive pummelling on 24 December, American shares experienced a record oneday gain on Boxing Day. It's a fitting way to end a year that has been characterised by an unusual level of financial volatility.

The MSCI World Index covers most of the developed world's largest listed companies. It raced up in January to a record high. But since then the index has shed around a fifth of that value.

And consider some of the constituents of such indexes. Apple crossed the $1 trillion (£790bn) valuation threshold in August, becoming the first listed company ever to do so. But four months on and the iPhonemaker is worth "just" $740bn. On 26 July Facebook's shares dropped by 20 per cent. That translated into a paper loss of $120bn - the worst day of value destruction suffered by a single company in US corporate history.

The global oil price has bounced around wildly too this year. In October it hit a four-year high of $86 a barrel, prompting concerns about a potential surge of global inflation. But now, within a few months, the black stuff is back down to $54 a barrel.

Sterling peaked at $1.43 in April, up from $1.34 in January. Now the pound languishes at a measly $1.26, beaten down by fears of a no-deal Brexit.

An honorary mention is due to bitcoin. The original cryptocurrency shot up at the start of the year to $17,500. Now one unit trades for only $3,600.

Why does this kind of financial volatility - these surges and slumps in prices - matter? Perhaps it seems obvious. If you own something and it halves in value that's likely to be alarming, not to mention expensive. If you're going abroad on holiday you obviously don't relish discovering that the value of the currency in which you are paid has fallen by a tenth.

Perhaps it might even be ruinous if you were planning on selling a financial asset to realise the cash for something important such as paying off a debt that's falling due. Those who have borrowed in dollars and invested in bitcoin are unlikely to have had an enjoyable year. If you were planning to retire in 2019 and your pension has collapsed in value over the past 12 months you can also see the problem.

But all these examples assume the investor needs to realise the cash imminently. If you're saving for retirement several decades hence, even a 5 per cent daily swing, like the one we saw in US stocks on Boxing Day, is really neither here nor there.

What about the real economy? It's true that financial volatility can damage a normal business, perhaps even ruin it. Think of a goods importer that sees its import costs go up due to a currency slide. Think of a small oil driller that watches the value of the black stuff suddenly plummet. When those companies expire their workers can lose their jobs and livelihoods.

But it's necessary to separate out the micro from the macro. At an economy-wide level, idiosyncratic shocks will tend to balance out in the medium term. Sharply lower energy prices are bad for energy producers but good for energy consumers. A cheaper currency can be bad for importers but can be beneficial to exporters. A currency plunge certainly harms living standards by pushing up inflation. But the impact of a revaluation on prices is temporary if it's a one-off, as we've seen since the Brexit vote.

Some economists, such as Roger Farmer, think stock market crashes lead to domestic recessions. But the causality of that relationship is disputed. And as the Nobel economics laureate Paul Samuelson caustically observed, "The stock market has predicted nine of the past five recessions."

It would be fatuous to argue that financial market volatility doesn't matter at all for ordinary people. Yet it matters rather less than we're sometimes led to believe by the noise of excited speculators and the dramatic media headlines. Sometimes it's better not to pay too much attention to the puffs of smoke emitted by the chimney of markets.

Could 'peak stuff' be in sight this Christmas?

Many parents of small children will be familiar with the depressing Christmas Day rubbish routine.

Presents are unveiled. The paper is eagerly ripped off. And packaging starts to accumulate around your ankles at such a rate that you start to empathise with those flood victims you see on TV wading through their own living rooms.

Disposing of the mountains of trash that are the by-product of the joyful gift unwrapping is as much a part of the festive workload as peeling the potatoes, keeping relatives refreshed and sweeping up the tree's pine needles. It's estimated we collectively throw out around 100 million black bin bags full of packaging at this time of year.

It's not a new observation of course, but nothing illustrates our materialist and ecologically insouciant economy quite like Christmas.

But is change, along with sweet notes of carollers and the whiff of mulled wine, in the air this year? One of the eye-catching business stories last week was the profit warning from the previously unstoppable online fashion chain Asos.

We all know that traditional bricks-and-mortar retailers are, as Mike Ashley put it recently, being "smashed to pieces" by savage trading conditions. But their market share was, we thought, being devoured by the internet players. Yet if the online leviathans like Asos are suffering too could that mean that we're collectively simply buying less than we used to? Will we look back on the Christmas of 2018 as the moment where we reached a "post-consumer moment"? Let's reserve judgement on calling that one until we see the retail sales figures for the end of the year.

"Peak stuff" has been called before only for us to discover that "stuff" was only, in fact, taking a breather.

There's been no dip in the upward growth trajectory in UK retail sales since Ikea's head of sustainability said we'd reached the top of the western physical consumption market in 2016.

Yet that doesn't invalidate the concept. Maybe it's just a question of timing. After all, it's manifestly true that the rise of the digital economy makes the possibility of less stuff than before feasible.

There's no need to buy DVDs or CDs anymore in the era of downloads and streaming. We can read a whole library of books on a single tablet. And Independent readers don't need to be told that no one needs to hold slices of dead tree in their hands any more to consume a newspaper.

Presents, even Christmas ones, don't need to be manufactured. We can gift "experiences", whether a ride in a hot air balloon, a visit to the spa or concert tickets. Some surveys have suggested that many young people now value soul-enriching experiences more than physical possessions.

The retail sales data may also be misleading. The Office for National Statistics has looked at the amount of material consumed in the UK and estimates it declined from around 12.5 tonnes per person in 2000 to just 9 tonnes per person in 2016.

Some economists argue that advertising doesn't create demand from nothing, but rather only persuades us to buy a particular brand of a good that our underlying preferences inclined us to desire anyway.

But this feels too simplistic. Before NW Ayers' "A Diamond Is Forever" advertising campaign in the 1940s there was no mass market for diamond engagement rings in the US. And as my colleague Adam Lusher reported last week, Charles Dickens gave a push to the Christmas industry in the 1840s (even if claims the novelist "invented" it are exaggerated).

An interesting question is whether we could go in the other direction? Is it conceivable campaigns could stimulate lower consumption of physical goods, not just at Christmas but generally? In fact we did have something along those lines recently with David Attenborough's Blue Planet BBC series which showed how plastic pollution is throttling the oceans. This gave a significant boost to anti plastic public sentiment and has put a great deal of pressure on manufacturers and politicians to take action.

The conditions of peak stuff are arguably in place this Christmas. But we may require nudges to get over the top.

Japan's justice system is in the dock alongside Carlos Ghosn

On 19 November Carlos Ghosn, the most famous man in the global automotive industry, touched down at Haneda airport in his private jet and was immediately arrested by Japanese prosecutors. That was the last time he was seen in public.

Ghosn has now spent more than 30 days in detention, where he has been subject to questioning by the Tokyo Public Prosecutor's Office. He has not been allowed to have a lawyer present during those interrogations. Access to his family has been tightly limited.

Meanwhile, details of the allegations of what Ghosn is supposed to have done have been released by prosecutors to the media. We have heard nothing from Ghosn himself except a second hand report of a denial of wrongdoing.

It appeared that Ghosn was going to be released on bail last week, but fresh evidence produced by prosecutors at the last minute has kept him detained this weekend. In Japan suspects can be re-arrested on different allegations, which restarts the clock again on their maximum 23-day detention.

Ghosn has not even been formally charged yet. "Detention is essentially an investigative tool used to interrogate suspects and develop evidence," explains Colin Jones, a professor of the Doshisha Law School in Kyoto and an expert on the Japanese legal system.

Leave aside the issue of whether or not Ghosn is guilty of the allegations of under-reporting his Nissan income by tens of millions of dollars over many years, what does this kind of treatment of a suspect say about the state of the Japanese criminal justice system? The prolonged and indefinite detention without charge constitutes a punishment in itself. The majority of indicted detainees confess while in custody, during unrecorded interrogations. Rights groups have long complained of the risk that these confessions are extracted under duress.

According to some legal scholars, trial procedures favour the prosecution. There is a notorious 99 per cent conviction rate. "Most Japanese criminal trials are just about sentencing decisions," says Mr Jones. "A defendant may, of course, challenge the validity of their confession at trial, but the burden of proof is on them - they must prove they are innocent in the face of it."

Some have suggested that in understating his remuneration Ghosn was simply doing what many other executives in Japan do and that this is a case of selective justice, and therefore no justice at all, similar to the way formal corruption prosecutions in authoritarian regimes like China and Russia are about eliminating political rivals rather than tackling graft.

Others have claimed that Ghosn has been a victimised because he is a foreigner. Another view is that one has to understand his downfall in the context of a power struggle between France and Japan over the future of the Renault-Nissan alliance.

There are questions about Japanese corporate governance. Does this show there has been no improvement since the 2011 Olympus scandal that exposed astonishing levels of fraud in a Japanese boardroom? Or is the fact that this alleged scandal has been exposed, supposedly after a whistle-blower came forward, demonstrate the opposite? But we should keep the issues separate. It's possible that Ghosn is guilty of corruption, that the issue was brought to a head by a global corporate power struggle, that Japanese corporate governance is still deficient - and also that the Japanese legal system is in need of reform.

Japan's legal system is based on the imperial German inquisitorial model, where the courts are involved in investigating facts. Yet it also has elements of the US adversarial system, laid over the top after the Second World War. The result is a hybrid system that seems to give an unhealthy amount of latitude to prosecutors but with insufficient checks on their behaviour.

A former Japanese civil servant, Kazuo Yawata, has asked whether Ghosn's high-profile treatment might constitute the "suicide of Japan's judicial system". On the evidence we have, hara-kiri would seem to be rather welcome.

Brexit insurance that is worth having

The Irish "backstop", the legal clause that offends the sensibilities of hardline Tory Brexiteers - to the point where they would be prepared not only to immolate their own government but even possibly lose Brexit altogether to be rid of it - is often described as "insurance".

It's insurance, of course, for the people on both sides of the Irish border in that it means - if there's no trade deal between the UK and the EU by 2021 - a hard border on the island will not descend. But it's also insurance for people in the rest of the UK too, given it's not in their interests, either, to jeopardise the Good Friday Agreement. That latter benefit should really be more emphasised in the UK debate.

Yet why do we need insurance in life? The truth is that we often don't. Buying a warranty on a new microwave or vacuum cleaner is a waste of money given the cost of the insurance and the statistical likelihood of the product failing. These are immensely profitable contracts for retailers, which is why they push them so hard at the tills.

And insurance companies are so profitable, in part, because people have a tendency to over-insure against the wrong things. We like the peace of mind that comes from the possibility of relatively small claims, even if we would usually be better off foregoing them.

The better reason to buy insurance is to cover losses we wouldn't be able to cope with. "Insure only those things you cannot afford to lose," is the advice of the economist John Kay. "You need insurance against your house burning down, but not for replacing the bedroom carpet. You need insurance against being hospitalised in the US, but not for an extra night's accommodation because your plane is delayed."

Some Brexiteers don't actually care very much about the Irish border. A clean break with the EU matters more. Some, apparently, privately think the Irish are impudent for using the leverage with the EU to demand a backstop at all and should "know their place".

But let's assume those who have voiced such opinions are outliers rather than representative. Let's assume mainstream Brexiteers genuinely want to avoid a hard border in Ireland but believe that the backstop is unnecessary, that it's overkill.

They place a low probability on it being needed because they are confident we'll conclude a free trade deal by December 2021 and that this will include an unproven technological fix to the problem of Ireland being in the customs union and single market and Northern Ireland being outside both, something that would ordinarily require border checks on goods and agricultural produce passing between the two.

But consider who is calculating those probabilities. And consider their record. When he was Brexit secretary, David Davis predicted that the UK would establish a free trade deal with the EU, and a host of other countries, the "very next day" after we formally depart on 29 March 2019. We know now that's not going to happen.

Liam Fox, still the trade secretary, predicted that a post-Brexit free trade deal with the EU would be the "easiest in human history". It's certainly not looking that way now.

Yet, in fact, this isn't the right way to weight up the value of insurance. For insurance is not to cover eventualities we expect to happen with a high probability, but those that we fear. Even if one put a low probability on a trade deal not being ready in time, that does not imply a backstop would be a mistake.

A good insurance policy protects us against worst case outcomes. That's what the Bank of England was thinking about when it put together its no-deal Brexit scenario modelling. It wanted to test whether the UK banking system could cope in the face of an even an extreme economic and financial shock.

That's why, even if one is sceptical of the assumptions used in climate warming models showing rising temperatures as carbon dioxide levels in the atmosphere rise, one can still be in favour of radical decarbonisation efforts. The risk of a super-heated planet is too great to take (and the cost of shifting away from fossil fuels is eminently bearable).

"Skin in the game," is the solution favoured by Nassim Nicholas Taleb for powerful people who propose to run risks affecting others. He gives the example of monarchs who personally led their armies into battle, and sea captains who go down with their ships. "Skin in the game means consequences when you are wrong as much as when you are right," he says.

Creating a political system with such clear symmetric incentives is difficult. But it's nevertheless a useful way to think about those loudly insisting we don't need the Brexit insurance of an Irish backstop.

Fantastic four? The future of the working week

As a society we can't seem to make up our minds about work. Do we want more of it? Or less? There's a chilling fog of fear over what technological advances will mean for our jobs, with an endless supply of alarming forecasts about how robots and algorithms are set to displace human workers.

But there's also a furnace of angst about low productivity and underinvestment by firms in just the kind of innovations that induce those nightmares of a "jobs apocalypse". Some lament the supposed proliferation of pointless, soul-dismantling, "bullshit jobs". Yet no one gets out the bunting when a struggling company announces redundancies. The UK's official labour market surveys suggest many of us want fewer hours at work, presumably driven by a desire for a healthier "work-life balance". Yet those same surveys also show that many people also want more hours, that the post-financial crisis curse of "underemployment" has not yet been lifted.

Some complain about the raising of the state retirement age and the depressing prospect of being forced to work longer than they planned. But for others the big problem is ageism, the risk of being pressured out of jobs they enjoy prematurely. When it comes to work, we're rather like those two diners in the Catskill mountains: "Boy, the food at this place is really terrible… Yeah, I know; and such small portions."

Yet onto this terrain of confusion and apparent contradiction some stride confidently. To Alex Williams, a Corbynite academic, automation should be embraced by the left as the emancipation of labour, provided the gains are comprehensively redistributed.

The Trades Union Congress seems to have been influenced by this cocktail of technological optimism and socialist assertion. Its general secretary Frances O'Grady recently demanded a four-day week by the end of the century, declaring: "Bosses and shareholders must not be allowed to hoover up all the gains from new tech for themselves."

The Labour Party is keen too. The shadow chancellor John McDonnell has made favourable noises about the four-day week and is reported to be asking the crossbench peer, Robert Skidelsky, to head an inquiry into the subject.

Yet this isn't just a British story. There are tectonic rumblings from abroad too. The IG Metall union in Germany earlier this year won the right to a four-day week for its almost 900,000 members. One technology start-up, founded by former Google employees, has a "Free Friday" policy. Even a think tank close to the authorities in China has called for the most populous nation on the planet to have a four-day working week as soon as 2030.

Any project that can unite German metal bashers, Silicon Valley coders and Chinese Communist apparatchiks clearly has an unusually wide appeal. So is the four-day week a big idea whose time has come? Or is it an unworkable left-wing fantasy? And even if a four-day week is economically feasible, should we really desire it? Or is it a case of being careful what you wish for? 

Productive possibilities

When Marei Wollersberger and her colleagues established an east London-based data design agency, Normally, as a four-day week operation in 2014, the motivation was largely personal. "We wanted to lead happier lives basically - enjoy ourselves more, not just to defer our enjoyment to retirement age," she told me. But there was another goal: "There was also a motivation to be more productive."

The economics of the four-day week revolve around the concept of productivity, the amount we produce per hour worked. The size of the economy - the size of our national income - is derived from the value of all the goods and services produced by businesses and households.

On the face of it, if we all worked one less day a week, our personal output would drop by around fifth.

Multiply that fall across the overall economy and you've got an economy that is considerably smaller, implying lower income and lower living standards for all, one way or another. Yet what if working fewer hours were to stimulate our productivity? What if we produced more per hour working four days than we did per hour working five? In that case there might be no overall drop in total output, and therefore no decrease in living standards. If our productivity rose enough we might even have a higher income than we did before. Wollersberger says the model has worked in stimulating performance at her company. "You're more productive - you achieve exactly the same or more in four days as you would in five," she says. "And I honestly believe it's better work."

A New Zealand financial firm called Perpetual Guardian found similarly gratifying results when it trialled a four-day week recently. "There was broadly no change in company outputs pre and during the trial," said its boss. "No reduction in job performance and the survey data showed a marginal increase across most teams."

Bear in mind that no change in output despite a fifth less time at work implies a stunning increase in productivity. But beware cherry-picking. The results of a Swedish trial involving 70 nurses working a sixhour day were more mixed. While there was some boost to worker productivity, the city of Gothenburg also had to hire more nurses to cover the hours lost.

Intuitively, this seems much more likely to be the result of moving to a four-day week in services sectors that are, currently at least, heavily reliant on face-to-face human interactions such as healthcare or teaching. That's not to imply the shift in working patterns should be ruled out as impractical. There are benefits in terms of lower stress and happiness to set against those financial costs. But it's probably unrealistic to expect the move to always pay for itself, at least in the short-term.

And some experiments have flopped. Treehouse, an online educational firm in Oregon, was one of those companies which got media publicity for its four-day week in 2015. But Treehouse's founder recently lamented that the working practice killed the work ethic in his company and called the experiment a "terrible thing".

The only way is down?

Individual "micro" trials are certainly useful, but they aren't necessarily a reliable guide to "macro" economic impacts. The closest thing that we have to a state-mandated four-day week is France's 35-hour week, introduced in 2000 under the Jacques Chirac-Lionel Jospin cohabitation.

The first thing to bear in mind is that this does not mean all French people work a four-day week. The regulation simply means overtime kicks in after a worker has completed 35 hours and they accrue the right to holiday lieu days. Yet it does establish a social norm of fewer hours and a financial incentive for firms to limit them. Opinions are mixed about its results. France has a high unemployment rate relative to the UK and other developed countries and it's notable that Emmanuel Macron campaigned for president promising to increase the flexibility of the system.

And though the level of French productivity stands comparison with the most productive nations in the world, there's no evidence that its growth rate has risen since it introduced the 35-hour week. This might incline us to scepticism about the value of the the state having any role in limiting working hours. Yet that could be the wrong conclusion. For the historic trend is clear. In the late 1900s, UK workers put in more than 2,500 hours a year on average. That's down to 1,680 hours in 2017. There's been a similar steep fall in other developed countries over the past century and a half.

That reflects the fact that the five-day working week, as opposed to six days with only Sunday off, only become standard practice in the 20th century. It was the industrialist Henry Ford who was the pioneer in the US, giving his factory workers a five-day shift in 1926 while keeping their wages steady. This prefigured legislation and Congress' 1938 Fair Labor Standards Act, which mandated a maximum 40-hour working week (effectively five working days).

We primarily think of John Maynard Keynes as the great promoter of employment for his pioneering theories on the economic benefits of government-funded job creation during the Great Depression.

But it was this secular decline in hours worked, despite the agonising surge in unemployment in the 1930s, that led Keynes to look forward to a 15-hour working week in The Economic Possibilities for our Grandchildren by the year 2000.

The question is whether the recent flattening out is the end of the decline in hours worked, or merely a pause. And is a government nudge necessary to get history moving again? There's also the question of consumption. One of the reasons Henry Ford instituted a five-day working week was revealed in a 1926 interview: "Leisure is an indispensable ingredient in a growing consumer market because working people need to have enough free time to find uses for consumer products, including automobiles."

In other words, it was less a paternalistic concern for his workers' well-being than a recognition that it would create help create more customers for Ford.

There's an echo of this macroeconomic concern today, with government-linked Beijing researchers suggesting a four-day week could boost the domestic tourism and entertainment sectors and help rebalance the overall Chinese economy to consumption and away from excessive investment. But perhaps the major economic question about moving towards a four-day week is whether it could somehow boost our long-term productivity growth rate (perhaps by inducing more investment in automation by firms) or whether a shorter working week could only ever be the fruits of productivity growth with an origin elsewhere.

The truth is that we don't know the answer. Yet it's vital to recognise that countries and societies have autonomy too, even now. The US has a considerably larger GDP per capita than any developed country in Europe. But the bulk of this gap is due not to a vastly higher level of productivity but the fact that Americans, on average, work many more hours than the French, Germans or Swiss or British and so on.

The trade-off between work and leisure is different between our two continents. Both Europeans and Americans, by global and historical comparisons, have very comfortable standards of living. Choosing more leisure over extra working hours is not, whatever some might employers might argue, necessarily a route to penury and decline.

Doing nothing for ever and ever

The Victorian historian and essayist Thomas Carlyle believed in the redemptive power of work. "A man perfects himself by working," he enthused. "Foul jungles are cleared away, fair seed-fields rise instead, and stately cities … Even in the meanest sorts of labour, the whole soul of a man is composed into a kind of real harmony the instant he sets himself to work."

The (possibly apocryphal) epitaph on a Hertfordshire gravestone took a different view of the intrinsic value of hard labour.

"Here lies a poor woman who always was tired For she lived in a place where help wasn't hired Her last words on earth were, 'Dear friends I am going Where washing ain't done nor sweeping nor sewing And everything there is exact to my wishes For there they don't eat and there's no washing of dishes Don't mourn for me now, don't mourn for me never For I'm going to do nothing for ever and ever." One does not need to be a Carlyle-style work zealot to appreciate that there is some intrinsic psychological value to labour. Work is where many of us find not just an income, but friends, stimulation and status. But we can also see where that Hertfordshire washerwoman was coming from.

This dichotomy underlines that not all jobs are the same, or are experienced the same by the worker. For every occupation that that does help to clear away someone's jungles of mental disorder there will be one that is felt as detestable drudgery.

One of the deficiencies of the debate over the four-day week, as with discussions of the appropriate retirement age, is a failure to acknowledge the vast diversity of both jobs and workers. Labour is not homogeneous.

Working until 70 might seem entirely reasonable, even desirable, to the university professor, the politician or the TV presenter. But to the cleaner, the firefighter or shop assistant - especially jobs with a physically arduous component - it may have considerably less appeal. And so views diverge too on the desirability of the four-day week.

One of the most significant developments in the UK and broader Western economy over the past decade is the rise of the gig economy and self-employment. Around a sixth of the British workforce is now selfemployed.

This was brought home to me recently when I met the Romanian father of one of the friends of my young son. The father had been a chauffeur for a wealthy family in Chelsea. But he'd resigned after his son had started school and had signed on with Uber so he could pick his lad up directly from school and shift his driving work to airport shuttle-runs at night instead. "I wanted the flexibility and my previous employer couldn't provide that," he told me, as we watched our boys career around the playground.

His work-life balance was not to be found in limiting the hours he worked (indeed he wanted to keep those the same or even increase them) but in the flexibility of his arrangements. Survey evidence suggests this is a common story. The majority of Uber drivers like the personal control over their working hours made possible by the platform. Drivers who valued flexible working reported higher levels of life satisfaction, as well as lower levels of anxiety.

However, there was also a minority of Uber drivers who would prefer to work fixed hours in a more conventional work setting. And these workers reported lower levels of life satisfaction and higher levels of anxiety.

A question of representation

This brings us back to the apparent paradox of many people in the UK workforce wanting fewer hours but many others wanting more. David Bell, a labour market economist from the University of Stirling whose work, along with Danny Blanchflower of Dartmouth College in the US, has highlighted this divergence, says that the groups who want fewer hours tend to be older, while those who are underemployed seem to be younger.

One of the implications is that younger people in the workforce may need the money from more hours because they are under greater financial pressure, perhaps because they have families, or perhaps because they have suffered a greater real wage squeeze since the financial crisis. This suggests that Corbynite left is correct in stressing that to consider the economic and social case for a four-day in isolation is a mistake.

Incomes plainly matter too, as well as the level of inequality.

One has to consider the role of income redistribution and employment policies. Give people higher incomes and more "outside options" for employment, perhaps through a jobs guarantee or even a universal basic income, and the desire for extra hours in their current job may well melt away. They may begin to make different work-leisure trade-offs than they do now.

Perhaps one of the reasons why we some people languish in ultra-flexible gig economy jobs they don't appreciate - like those disgruntled Uber drivers - is that, despite what most economic analysts say, there is actually hidden slack in our economy - and that if the slack was eradicated they could find the kind of regular job they wanted elsewhere. But that still leaves a circle to be squared, presuming that different people, all else equal, are still likely to put different weights on work and leisure. How do we give those who would prefer a four-day week more freedom to choose it, while protecting the interests of those who don't? The empowerment of ordinary workers is Professor Bell's answer. Let individual employees have substantive input into determining the trade-off, rather than leaving it up to politicians or employers. "One of the things that might help is a strengthening of worker representation, which has declined so dramatically," he says. "Rather than jumping in to impose a four-day week you want to think first about whether workers' interests are being properly represented."

This would be going with the historical grain, given the driving role of new trade unions in the achievement of an eight-hour working day in the 19th century and early 20th century. It's notable not only that IG Metall workers in Germany this year were able to achieve a four-day working week through negotiation with bosses - but that they also had sufficient bargaining power to protect their overall levels of weekly pay.

Satisfying old Adam

A fundamental question that underpins this broad discussion about the future of working hours is a philosophical one: what makes us happy and fulfilled as human beings? Modern psychological studies do partially back up Carlyle's Victorian pompous sermonising: formal work can be as positive for human happiness as leisure, sometimes more so. A job does seem to bring a valuable sense of social usefulness. Involuntary unemployment is clearly harmful for people's mental health.

But how much work do we want or need? Keynes in the 1930s called this desire for work "old Adam" and predicted that three hours a day in the future would be "quite enough to satisfy" this inherited instinct.

Perhaps the right thing to do is not to dictate to people, or engage in speculation on what the future of work will look like, but rather to help them decide for themselves.

Is Emmanuel Macron’s France in the vanguard of a new economic revolution?

As he delivered his televised address to the French public on Monday night, following a month of street protests and intensifying mob violence, Emmanuel Macron sat behind a gilt-framed antique desk, flanked by a pair of golden lampshades. Behind him loomed one of the imposing golden doors of the Elysee Palace's Salon Dore. Yes, "dore" means golden.

President of the rich? Whatever gave people that idea? Yet appearances can deceive. Despite the Marie Antoinette-style furnishings of the Elysee and the complaints of the gilets jaunes protestors, the statistics suggest the French Fifth Republic is actually a more egalitarian nation than its major peer economies.

According to the World Inequality Database, the share of total pre-tax income flowing to the pockets of the top 1 per cent of people in France is around 11 per cent. That compares with 13 per cent in Germany, 14 per cent here in the UK and 20 per cent in the US.

Post-tax income inequality, as measured by the Gini index, is also lower in France (29 per cent) than the UK (35 per cent) and the US (39 per cent) and roughly the same as in Germany.

The wealth share of the top 1 per cent in France is also well below that of the US. Comparisons with the UK and Germany when it comes to the distribution of wealth are more difficult due to a lack of comparable data but they are likely to be broadly similar.

What about economic performance? The French unemployment rate (9 per cent) is higher than the US (4 per cent), the UK (4 per cent) and Germany (3.3 per cent). Yet average real wages seem to have grown much more in France than in the UK and the US since the financial crisis a decade ago. Here in Britain they are still lower than they were in 2008.

The policies Macron announced on Monday - an increase in the minimum wage, a reduction in the overtime tax, an encouragement for employers to pay workers a Christmas bonus, scrapping an increase in the tax on pensioners - were mainly about putting money in ordinary people's pockets.

According to France's public accounts minister, this package will cost around €10bn (£9bn), or around half of one per cent of GDP. That's not negligible, especially considering the government was hoping to see its budget deficit decline from 2.8 per cent of GDP next year to 2.2 per cent in 2020 and the eurozone's rules define a 3 per cent deficit ceiling.

While Macron's package has been interpreted in some quarters as a "turn to the left", his refusal to reinstate the wealth tax on those with total assets of more than €1.3m, which he scrapped last year, shows there are limits to how far he is prepared to redistribute. He may, ultimately, need to capitulate on that too, just as he has on the new diesel tax, which sparked the recent protests.

The president suggested the unrest has stemmed from "40 years of malaise". That could be interpreted as an attempt to spread the blame after 19 months in office characterised by unforced errors, but there is something in this diagnosis.

While there are those like Marine Le Pen who ascribe the sense of dissatisfaction in France primarily to immigration, a glance at the demands of the (admittedly diverse) gilets jaunes suggests a dominant economic element.

In the wake of the destruction left by the Second World War, France basked in the "trente glorieuses" - thirty years of rapid economic growth and rising living standards for most.

Since the 1980s the rate of both overall GDP per capita growth and productivity growth in France has slowed. It seems to have shifted down again in the wake of the financial crisis a decade ago.

What's ominous for Macron is that this seems to be part of a global trend of slowing economic growth, suggesting it will not easily be turned around by policies in one country.

Defeatism is usually poor counsel and so it remains today. There surely remains potential not just for France, but for all nations, to increase national productivity growth through investments in infrastructure, research and skills. Living standards can be improved not just through redistribution but through a new generation of low-carbon technologies, through institutions that foster a greater sense of economic security, and through governance innovations that enable people and communities to take more control of their lives.

Yet the transition out of malaise is unlikely to be smooth. And if the economic pie is not growing as fast as it was, arguments and tensions about its division are likely to become more intense. Perhaps in this respect, as it was in 1789, France is in the revolutionary vanguard of nations once again.

The unreliable Oxbridge signal

Oxbridge seems to recruit extraordinarily heavily from a small group of southern private schools (presumed to include Eton and Westminster) according to a new analysis by the estimable Sutton Trust.

So what? Why do we care? The answers probably seem obvious. An Oxbridge education appears to unlock the upper echelons of the British establishment.

As work by the Sutton Trust has previously shown, a startlingly high proportion of judges, senior civil servants, business executives, cabinet members and journalists (disclosure: I went to Oxford) were educated at those two quadrangle-festooned institutions of higher education.

If Oxbridge is drawing disproportionately from fee-paying private schools, these are likely to be children from relatively wealthy (if not super wealthy) families. Those children of the rich thus appear get a sizeable additional advantage in their adult life (at least if one considers entering parliament, law, the civil service or the higher reaches of the media to be a desirable destination).

This is poisonous for British social mobility, a monstrous affront to any reasonable conception of fairness.

That's why we should care. But let's take a step back. Imagine we were designing a system for selecting capable and ambitious graduates for advancement in those kinds of professions.

What would that system look like? Once you ask this question, the central importance of Oxbridge as a recruiting pool starts to looks absurd, no matter who goes there. The numbers studying at Oxbridge have risen since higher education steadily opened up to the masses after the Second World War. But the growth in new places has not kept pace with the explosion of total student numbers over the past half century.

Perhaps they should double the number of Oxbridge colleges and build on the green belt around the two picturesque cities to accommodate the secular rise in demand. But, in the real world, the annual Oxbridge undergraduate intake is destined to remain tightly limited by geographical constraints.

The two universities currently accept around 7,000 new undergraduates each year. That's now less than 1.5 per cent of national total undergraduate acceptances in 2017 (533,890). Since Oxbridge receive around six applications for every acceptance, admission is a zero sum game: one person's place is a place not won by five others.

Why are Oxbridge students so dominant in the upper reaches of certain professions? Many will say it's because so many smart children tend to go there. And that may well be true to a certain extent. But it's not the whole story. And it misses a vital economic mechanism: signalling.

Oxbridge transmits a "signal" to employers and gatekeepers of a capacity on the part of a candidate for exceptional perseverance and capability. (For some it will be signal of social class too but let's park that for the purposes of this argument.) Many employers faced with a hiring choice between two equally strong candidates for fast-track training or some other opportunity will opt for the Oxbridge one because of that signal.

Yet the signal may not be accurate. Indeed, it may be becoming less accurate over time given the rise in the numbers attending higher education. To put it another way, what reason is there to believe that those five ambitious children who didn't get in to Oxbridge have less potential to be a top lawyer, accountant, journalist, business executive or an MP than the one who did? But note the incentives the signal creates. It gives smart and ambitious children an added reason to apply to Oxbridge because they correctly discern that their chances of future advancement are higher there. This battle for places among bright kids reinforces the signal of quality, creating a vicious circle.

None of this is to argue that efforts to reform Oxbridge admissions are irrelevant or unimportant. They certainly aren't. But perhaps the bigger challenge is to, somehow, erode the prestige of these two institutions in employers' eyes, to interfere with the signal.

We need to encourage a culture where employers and gatekeepers, whether in the public or private sector, do not look at these two midsized universities as some kind of gold standard. We need recruiters to wake up (more fully - many, in fairness, have) to the reality that there are also vast numbers of extremely able and talented people elsewhere too.

In other words, do not simply concentrate on making access to the elite recruitment pool fairer but try to make that pool much bigger too. Bear in mind too that, in such a transformed environment, bright students would not have such an overwhelming incentive to apply to Oxbridge and to engage in that zero-sum competition for places. The vicious circle could become a virtuous one.

The problem with "elitism" is not so much that it privileges ability (leaving aside concerns about the social implications of a true meritocracy) but that it is so arbitrarily exclusive.

It's a sad irony that the intense media focus on Oxbridge admissions may serve to emphasise the institutions' signalling power. If everyone thinks it's terribly important how these universities select students, doesn't that underline that they are also terribly important institutions, that "the best" are to be found there? University-blind admission processes, like the one introduced by Deloitte a few years ago, are welcome experiments and we should hope for more of them. If we paid less attention to where others went to university the world would be a less tedious place. It could also be more just.

A lifetime gift tax could be the solution to increasing homeownership inequality

In the 1960s the sociologist Robert Merton identified something he described as the "Matthew effect".

Merton was drawing on the observation by Jesus in the Gospel of Matthew that, "for whosoever hath, to him shall be given, and he shall have more abundance". In other words, there's a natural tendency for the rich to get richer.

Anyone looking for evidence of this Matthew effect in our own economy will find it in residential property ownership.

The Resolution Foundation think tank has produced new research showing that those whose parents are homeowners are considerably more likely by the age of 30 to be homeowners themselves.

That's probably not surprising to many readers. The existence of the "Bank of Mum and Dad", where wealthier parents give their children money to enable them to get on the housing ladder, is no secret, and we've had estimates from financial firms about just how big these annual financial transfers are.

But the Resolution Foundation's latest work, nonetheless, adds value because it has managed to quantify, through a smart use of longitudinal survey evidence, just how closely an individual's chances of owning by the end of their third decade is associated with his or her parents' homeownership status.

Homeownership rates for those with parental property wealth are 25 per cent - almost three times the rate of those without parental property wealth.

And the link seems to have become more pronounced over the past two decades. In the mid-1990s and early 2000s the homeownership rate of those with property-owning parents was only twice as high as that of others.

The Resolution Foundation work also suggests that as a predictor of homeownership rates by age 30, parental homeownership is more important than education, region of residence, whether someone is in a couple, and is now even catching up with young people's salaries.

"If current trends continue, it is likely that whether or not someone is able to own their own home will be increasingly decided by who their parents are," the think tank says.

Another fact that the report brings out is that the property-ownership advantage often comes well before formal inheritance, or when the older homeowners may leave their own property assets to their children in their will. Parents' property wealth, their illiquid assets, seems to get monetised for gifts or soft loans to children so they can accumulate bricks and mortar assets of their own.

This has policy implications for those who want to slow down the Matthew effect in our economy, for those politicians who think that intergenerational cascades of wealth and economic advantage are socially toxic.

The Resolution study makes it clear that the current inheritance tax system (even if the threshold were lowered to a sensible level and all the many loopholes were ended) would be inadequate for tackling the core kind of intergenerational asset transfers we're increasingly seeing.

The Institute for Fiscal Studies has long championed the replacement of the inheritance tax with a "lifetime gifts tax". The Resolution Foundation itself, more recently, has backed such a reform.

The advantage of such a levy is that, unlike the current inheritance tax, it would capture the financial helping hand given to children to buy homes.

But how would a gift tax work? Would every £ 10 gift voucher from grandma be taxable? How would loans be treated? Carl Emmerson of the IFS points out that there is nothing insurmountable about the challenge of designing a new system. Recipients would inform HMRC of gifts received from a single donor above a certain value each year.

Emmerson suggests a minimum lifetime allowance for each individual, and anything gifted to them above that threshold becomes taxable at a progressive rate. The terms of soft loans could be compared to commercial lending rates and the tax levied on the difference (with the full tax being payable if the loan is written off).

It would be up to the government to decide the allowances and rates, something that they would hopefully do guided by expert advice.

But the principle is sound. And we can also be reasonably confident about its overall impact: it would throw sand in the gears of one of the biggest motors of intergenerational wealth inequality.

It would help keep Matthew shackled.