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Learning from Trumpism

In the wake of Donald Trump's victory in the US presidential elections, economists are waking up to the idea that regional inequality matters if only because it leads to political movements that threaten broader prosperity, says The Economist's Free Exchange blogger. That's a good development. But it brings economics to a very difficult question: what is to be done about that inequality?

The answer generated so far says that liberalisation should generate gains large enough to make everyone better off, so all we need to do is liberalise and then redistribute some of those gains to the losers. But that misses some important dynamics. The first is that people generally don't just want more wealth, they want jobs; and that economic output depends not just on technology, labour and capital, but on the quality of institutions. These feed on each other when inequality rises, institutions break down. But this sort of economic analysis tells us little about what ought to be done. Ultimately the answer to Trumpism will have to be found in politics, not economics. If economists want to be of use, they should work on providing more compelling stories about how the world works. Dry facts about trade mean nothing to someone who has just lost their job.

Libertarianism on the high seas

Seasteading the idea of fleeing the oppressive grasp of leviathan by taking to the seas and setting up free-market utopias in international waters is an old idea among libertarian utopians. What is not generally recognised is that they already exist, says Tyler Cowen on BloombergView. Cruise liners are owned by private corporations, sail in international waters, compete for business in a relatively unregulated market and make their own laws onboard. However, disappointingly for libertarians, cruise ships don't seem like much of a vehicle for political liberty.

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Customers choose their cruise freely. But once onboard, you get little in the way of democratic participation or autonomy and cruise liners don't hesitate to regulate passenger behaviour. But that doesn't seem to bother the elderly. They get regular contact with other passengers and crew, better weather, regular shopping trips and a doctor (if not a hospital) just minutes away. Some have already taken to the idea and live year-round on assisted-living cruise ships. That may be far from the exciting Wild West dreamed of by libertarian seasteaders but at least the general idea has a future.

Don't write off our schoolchildren

The latest PISA results a global ranking of educational attainment shows, as they do year after year, that Britain is falling behind, says Lucy Crehan on CapX.co. Around one in five 15-year-olds in England are not meeting basic standards in numeracy and literacy. Places that do better in the PISA rankings hold a lesson for Britain.

Finland, Canada, Japan and Shanghai in China, for example, not only have the lowest proportion of low performers, but have among the highest proportion of high performers too. These countries have a different idea about what is possible. Britain needs to replicate the kind of funadamental shift that took place in Finland in the 1970s. Finland realised that, as a small country, it couldn't afford to leave anyone behind. So it scrapped its grammar-school system and introduced comprehensive eduation up to the age of 15. Soon afterwards it got rid of streaming by ability too, retraining teachers to cater for all needs and employing extra teachers to help those at risk of falling behind.

In east Asia, a key advantage is cultural the belief that, wherever someone may start out in the genetic lottery of life, anyone, with the right input and effort, can nevertheless achieve. Britain's fundamental problem is we are willing to accept a situation in which we write off the worst performers who then drag the rest of our pupils down with them. When Poland delayed selection for one year, its PISA results soared impressively. The government's proposal to deal with the problem by reintroducing grammar schools is precisely the wrong approach.