Morning all,

No need to worry that the recent rash of Westminster resignations has reached the Resolution Foundation: I’m filling in for Ruth, but she will be back next week. Last time I filled in I brought you insights on AI and Manchesterism, and those stories are still very much with us.

In fact, this week we’re considering a lot of slow-burning questions which could come to a head soon. Who should (and who will) capture the gains from AI? Should the state own more of our services? And is the triple lock finally running out of road?

Below you’ll find reads on all three, plus a look ahead to Thursday’s MPC decision.

Have a great weekend,

Mike

Deputy Chief Executive
Resolution Foundation

Counting AI’s cost. The idea of a “job centre in your pocket” got some coverage this week, but the launch of the AI Economics Institute (AIEI) also deserves attention. It’s a Treasury-DSIT joint venture, helmed by Professor Simon Johnson, which aims to answer questions on the economic opportunities and risks presented by AI. But this interesting Substack argues that too many people are fixating on the wrong question. Counting “exposed” jobs doesn’t tell us what might happen next. Instead, we should follow the money – and it’ not heading into Treasury coffers. The gains from AI-boosted productivity could well flow to US tech giants rather than British workers or the Exchequer, leaving us poorer just as the need to invest in adjustment becomes greater. Talk about a vicious circle. The author puts the gap between the best- and worst-case fiscal scenarios at over £100 billion. That number ought to focus minds at the AIEI from day one.

Long odds. There’s a natural experiment underway across the pond. A federal ban on sports betting was struck down by the Supreme Court in 2018, and since then the industry has grown from roughly $5 billion wagered to over $121 billion in 2023.  This paper asks how that change has impacted food sufficiency (defined as having enough to eat in the previous week), and… it hasn’t gone well. The researchers find that legalised sports gambling reduces food sufficiency by 2.1 per cent among working-age adults without a college degree, with non-white adults seeing a 4.6 per cent decline. The average gambler loses $275 over a quarter, but the damage concentrates in married households, suggesting one person’s gambling habit quietly empties the fridge for others. Across nine states, that makes for 284,000 food-insufficient households, costing as much as $130 million in excess healthcare spending annually. The house always wins.

(Re-)Owning it. Is nationalisation making a comeback? Economic historian Nicholas Mulder thinks so – and on the IMF podcast he explains why that’s not automatically good or bad news. From German energy to British rail, governments are reasserting control over key industries, with Andy Burnham pushing for more. But Mulder’s focus is less on ownership than oversight. Norway made state oil work through democratic accountability, but Congo, Jamaica and Chile’s spree of nationalisations arguably tipped them into debt crises. In a world of supply shocks and geopolitical turbulence, more state intervention is probably inevitable; the real question is whether governments have the institutions to make it stick.

Bending, not breaking. Against all expectations, American healthcare spending has not gone (more) stratospheric in recent years. This paper asks whether Americans are finally slowing the upwards curve of medical spending. Earlier forecasts failed to predict this historic healthcare spending slowdown, expecting it to grow from 17 per cent of GDP in 2010 to 21 per cent in 2024. Instead, it rose to just 18 per cent (it was 11 per cent in the UK). The authors argue this is partly down to technology, estimating that new innovations account for about a fifth of the undershoot. They conclude that, even though the cost curve has been bent, it is not nearly enough: the US still spends more than any other country on healthcare, in exchange for poor health outcomes that don’t justify the price.