Energy and Environment

Cost of living crisis: causes and solutions

In this video the IEA’s Senior Research Fellow Kristian Niemietz outlines a free-market approach to the cost of living squeeze.

Building on his research in Redefining the Poverty Debate, he argues that the costs of many essential items, such as housing, energy and childcare, are driven structurally higher by government interventions. He therefore proposes a range of policy measures on the supply-side of the economy to make these goods and services more affordable, particularly for poor families.

Head of Political Economy

Dr Kristian Niemietz is the IEA's Editorial Director, and Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).

2 thoughts on “Cost of living crisis: causes and solutions”

  1. Posted 16/09/2014 at 13:45 | Permalink

    Supply side de-regulation is the only game in town when we are dealing with goods and services with an elastic supply. However, it is disastrous when applied to those with an inelastic supply.

    Location where demand to live and work is highest, is essentially inelastic. As with the scrapping of minimum room size standandards, scrapping Greenbelt regulations will have and similarly negative effect, if carried out in isolation.

    It is best that we cure the problem, instead of treating symptoms with dubious medicine.

    The problem is not a lack of supply(we have more dwellings per capita than ever), it is privatised land rent, which is the cause of all the symptoms.

    1) unaffordability. 2) urban sprawl 3) allocational inefficiency 4) slow site turnover 5) NIBMYISM 6) perverse planning incentives 7) small/poor quality new building sizes 8) regional inequality 9) low GDP growth.

    All the above are caused by capitalised land rent. De-capitalise that, we get a level playing field where the market can operate efficiently.

    Although well intentioned perhaps, dogmatic application of “freemarket” reforms to anything and everything is completely at odds with the realities of how the economy actually functions.

  2. Posted 12/10/2014 at 09:00 | Permalink

    Excellent arguments from Kristian Niemietz. I stumbled across this video as I was writing an article where I called to increase the supply of housing to help improve the cost of living crisis. It seems like Mr Niemietz has some similar ideas too.

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