Archive for October, 2010


I came across the following article by Meghnad Desai and Robert Skidelsky, which I have quoted from in its entirety. I am an LSE-alumni and still remember attending a guest lecture by Hayek about the price-mechanism. Although I don’t necessarily agree with some of the proposed remedies, it does present a very concise explaination of the current economic problem.

“To speed up the recovery, look beyond the economic theories of Hayek and Keynes. There is a third, and fourth, way

We must be in a jittery state for a slowdown in the rate of growth to be hailed as a triumph of recovery. The fact is no firm momentum of recovery exists. Take your pick of the forecasts. We might manage 1.8% this year at best, 1.6% next year. The comprehensive spending review has laid down a path for real-terms cuts in public spending over the four years to 2014-15 and the elimination of deficit over the same period. The capital budget is projected to decline by 46% in real terms. The government is hoping that deficit reduction will by itself “crowd in” private investment that is not there right now. In the meantime we expect the Bank of England to do some more quantitative easing, keeping short run interest rates low.

Many are urging a Keynesian boost to deficit spending to revive the economy and/or avoid double-dip recession. We assume that this is unlikely either because experience shows that the multipliers are low and the government believes the markets have no appetite for a big deficit-spending financed fiscal reflation; or because the government thinks the present crisis is not a Keynesian one induced by insufficient demand, and hence a fiscal boost could be counter-productive.

It would also seem that quantitative easing has not had a stimulating effect on the economy. Wherever the money has gone, it is not into the real economy. A similar situation prevails in the US where, as Alan Greenspan pointed out in the Financial Times of 6 October, corporates are using the money supply to buy liquid assets rather than “real” investments.

Consumers are also not spending but saving to deleverage, and even so consumer indebtedness is still dire. Much more deleveraging will have to be done before the negative wealth effect will vanish and spending resume.

This is very much what Hayek‘s theory leads one to expect. The crisis, he says, occurs because there has been a long run of cheap credit resulting in malinvestments, like today’s sub-prime mortgages. Expectations of lending banks change, we have a reversal of cheap credit and the boom collapses.

Hayek’s account of crisis origins can be made consistent with Keynes’s if one takes the world economy as a whole. For Keynes the crisis is caused by an excess of saving over investment. A contemporary Keynesian would say that one part of the world, led by China, earns more than it spends, and another part, notably the US, spends more than it earns. Cheap credit in the west was the “correct” response to the flood of saving from the east. But because there were insufficient outlets for “real” investment in countries like the US that already had abundant capital, cheap money led exactly to a Hayekian crisis: a credit boom leading to malinvestments that ended in bust.

The essential point is that both Hayekians and Keynesians believe that once the economy has collapsed, recovery takes a long time. Hayek believed that recovery from the crisis caused by over-consumption and under-saving has to run its course, and cannot be speeded up by a Keynesian fiscal or monetary stimulus. It requires time before consumers recover from their undersaving and business gains confidence that profitability has been restored. Keynesians believe that, once aggregate demand has subsided, a fiscal and monetary boost is the only way to get the economy growing again.

If we don’t want to wait for Hayekian “natural forces”, but at the same time recognise that orthodox Keynesian fiscal policy and monetary stimulus (if it works) will only recreate the old unsound structure of production, is there a way of speeding up recovery?

Two unorthodox policy moves to revive the economy are worth considering. First, in order to make consumers spend rather than save we could adopt Silvio Gesell‘s idea of stamped money. This money loses purchasing power if not spent immediately. The easiest way to put money in consumers’ pockets would be to give them a shopping voucher valid for one month after issue.

Second, a recovery loan that will mop up money in banks, firms and households for which there is no present use – and use it for infrastructure projects: the high-speed rail link, road building and repairs, and house construction by local authorities; or projects to do with carbon emissions – insulating houses, and solar panels. A company could be set up to raise money for these projects that would not add to the deficit.

The idea is to do things that would boost spending immediately, with the aim of reviving private investment by changing business expectations.

We can agree on the need for a recovery programme, even if we disagree about the origins of the crisis. The economist Lionel Robbins accepted Hayek’s view of the Great Depression’s origins but came to believe in the Keynesian remedy. As he said, you don’t deny a drunk who’s fallen into an icy pond blankets and stimulants on the ground that his original trouble was overheating.”

Lord Desai is emeritus professor of economics at the LSE and a Labour peer. Lord Skidelsky, an emeritus professor of political economy and crossbench peer, is author of Keynes: The Return of the Master

The Daily Telegraph has reported that the UK has the most developed digital economy in the world with the largest online e-commerce market per person.

Researchers, commissioned by Google, have found that online business is worth a staggering £100bn a year with internet revenue accounting for 7.2% of the UK’s GDP.

The UK also has one of the largest online advertising market world wide, second only to the US. The research also found that if the internet was an economic sector in its own right it would be the fifth largest – outweighing the construction, transport and utilities industries in this country.

Google’s survey found that almost two thirds of the £100bn figure is due to internet consumption and that the remainder of the money is from the UK’s internet infrastructure, government IT spending and net exports.

For every £1 that is spent online, £2.80 is exported contributing to the UK’s position as the world’s leading nation for e-commerce. The offline economy exports 90p for every £1 imported.

Analysts at Boston Consulting Group said that the amount by which the internet contributes to GDP is expected to increase by around 10% each year and will make up 10% of GDP by 2015 – although this is mainly a result of an increase in online consumption.

Please note the views expressed in this blog are the views of the author, Andre Brown and do not represent the view of Locayta, its employees or its shareholders. For more information about Locayta, visit www.locayta.com

Research carried out by YouTube has found more than 40% of social network users like competitor brands on sites like Facebook.

The survey, supported by the Internet Advertising Bureau, examined the way in which consumers users YouTube and Facebook, and found that 41% of people ‘like’ multiple brands even if they are in direct competition, while 53% share content from competing brands on YouTube.

The report also revealed that more than 60% of people who ‘like’ or share content from brands on social networks aren’t even consumers of the brand. 75% of people said that they felt more positive about a brand or product if they have shared content from it.

Respondents also have different opinions on the validity of having a presence on social networks, with just under 50% saying it was a good idea, 36% said they were neutral and 18% said it was a bad idea.

The research also found that despite Facebook and YouTube being popular sites, only one third of respondents used both.

The majority of people saw both sites as ‘fun’ and ‘entertaining’, with Facebook also being described as ‘social’ and YouTube as ‘interesting’.

Please note the views expressed in this blog are the views of the author, Andre Brown and do not represent the view of Locayta, its employees or its shareholders. For more information about Locayta, visit www.locayta.com

The Office of National Statistics has reported a 0.5 per cent increase in retail sales in September 2010 compared with September 2009, with predominantly non-food stores increasing sales by 3.8 per cent. Not all areas saw an increase with household goods stores reporting a 2.0 per cent decrease.

Between August and September total sales volume decreased by 0.2 per cent, despite predominantly food and non-food stores both increasing by 0.1 per cent. Within non-food stores there were increases across all sectors apart from textiles, clothing and footwear stores which fell by 0.8 per cent.

Total sales volume for the quarter to September showed a 0.9 per cent increase compared to the same period a year earlier. Food stores decreased by 2.1 per cent while predominantly non-food stores increased by 4.3 per cent.

The seasonally adjusted value of retail sales for September 2010 was 2.4 per cent higher than in September 2009. For the three months to September 2010, it was 2.7 per cent higher than the same period 12 months earlier.

Please note the views expressed in this blog are the views of the author, Andre Brown and do not represent the view of Locayta, its employees or its shareholders. For more information about Locayta, visit www.locayta.com

John Lewis has been ranked the number one retail website in terms of usability.

The 2010 Webcredible Ecommerce Usability for High Street Retailers gave the company a score of 91 out of 100, placing it ahead of the 2009 winner, Marks & Spencer (M&S).

M&S scored a credible 86 and dropped down to third in the rankings, behind the Early Learning Centre’s web site, which ranked second with a score of 90.

The top five was completed by WHSmith (85) and Boots (80) in the list compiled after an evaluation of 20 retailer websites using 20 “essential guidelines” that all e-tailers should adhere to.

Measures included analysis of the search button position on a site and whether the online service is made clear to users.

A number of retailers didn’t fare well in the rankings including Tesco Direct, Topshop and Monsoon-Accessorize, which scored 65, 67 and 69 respectively.

Scores generally compared favourably to 2009, reflecting retailers’ decision to place greater focus on their websites in the last 12 months..

A spokesperson for Webcredible said “ The overall increase in the range of scores indicates that many websites are starting to put effort into improving their website based on the guidelines.”

Please note the views expressed in this blog are the views of the author, Andre Brown and do not represent the view of Locayta, its employees or its shareholders. For more information about Locayta, visit www.locayta.com

Following an increase in traffic to their website of 1.5% of total traffic to 3%  from mobile phone users, ASOS, the online retailer, has launched a mobile site designed to work across all mobile devices including Blackberry, Symbian, Android and iPhone operating systems.

The retailer reported that 24,000 orders have been processed over the past six months through mobile phones using the main website, with 175,000 visits to the site from mobile devices in an average week.

Customers will be able to access the mobile site via www.m.asos.com , but will also be redirected to the mobile optimised versions of the site if they type www.asos.com .

The site will feature the full ASOS range and features, including “save for later” and multiple refining options are offered. Integration with the existing site’s checkout and customer accounts services have been incorporated to further streamline the user experience.

It will be interesting to see if others follow suit in the lead up to the Christmas retail shopping season.

Please note the views expressed in this blog are the views of the author, Andre Brown and do not represent the view of Locayta, its employees or its shareholders. For more information about Locayta, visit www.locayta.com

A recent YouGov survey has found that three in five UK consumers think online targeting is poorly targeted and often out of context and lacking in relevance.

The research found that only a quarter of ads were considered relevant to the respondents, with many people finding that brands are wasting money on poor campaigns that do not connect with the desired audiences.

Just over half of those surveyed stated that they would choose targeted ads over a comprehensive approach if it meant there would be less of them; while 20% said that they never trust any ad displayed on a site they had never visited before regardless of whether the ad was targeted or not.

Attitudes were fairly similar across the UK, with respondents in Wales and Northern England sharing the opinion that they would not trust ads on sites they were visiting for the first time. Consumers in London were the least likely to trust an ad from a site they did not know.

The research is pretty clear that targeted ads are often misplaced, often out of context and most of the time not relevant.

It is becoming more and more evident that there is too much emphasis placed by advertisers on using targeted ads to reach their intended market, the chance to target larger groups of people and cast a wider net is very appealing but it certainly lacks the human touch that we expect in every other walk of life, so why should this be any different online?

Please note the views expressed in this blog are the views of the author, Andre Brown and do not represent the view of Locayta, its employees or its shareholders. For more information about Locayta, visit www.locayta.com

Hot on the heels of Marks and Spencer and John Lewis launching mobile websites, Debenhams has released a mobile commerce iPhone app, as a result of a high volume of visits to the main site from iPhone users.

The app includes a barcode scanner, the first of its kind from a high street retailer, which the developers hope should make the app useful for researching products and prices on the go.

The homepage offers links to the various shopping options, a store finder tool and the afore mentioned barcode scanner.

Initial reviews suggest that the functionality is granular enough to allow customers to browse the app to a manageable number of products, at which point customers can narrow their search by size, colour, price and brand.

A full review of the new site, highlighting the many plusses and areas that require work can be found on the Econsultancy site .

For the discerning iPhone user it would appear that Debenhams has taken a step in the right direction and offered a fully functioning app as opposed to some of its competitors who have chosen to offer a mobile version of the site.

Please note the views expressed in this blog are the views of the author, Andre Brown and do not represent the view of Locayta, its employees or its shareholders. For more information about Locayta, visit www.locayta.com

To follow up from an earlier blog looking at why search sucks on so many websites, it is probably worth taking a look at what makes a good site search and how this can be achieved.

So what makes a good search site?

  • Language – it is important to use statistical data model that uses mathematical definitions to index data. This means that without having to actually understand the actual meaning of each word, an understanding has been created based on the statistical importance of the word. Furthermore users don’t need to know how to structure their search query as the search engine will work this out based on statistical importance.
  • Spelling mistakes and typos – to solve the problem of misspelling, two algorithms (tri-gram analysis and Levensthein edit-distance) can be used. Tri-gram analysis breaks the misspelled words into blocks of characters and tries to work out how to correct the word in relation to what it knows about the words in the index, using edit-distance as a measure of how misspelled the word is. Together, these two algorithms provide an efficient spell-correction capacity.
  • Naïve search results – using a statistical method can solve a number of relevancy problems. Indexed data uses information about the distribution of terms within the data set to create a weighting system that is applied automatically to rank search results.
  • Field weightings – search result relevance can be greatly improved if field weightings have been applied. Weights are applied to different fields within a product data index.
  • Optimisation and control – being in control is very important for many clients…which can be done by creating a control panel to set the search engine to suit individual needs

Search is becoming more scrutinised by the day and to achieve a great site search it is worth considering the points mentioned and ensuring that the needs of an individual site is taken into consideration.

Please note the views expressed in this blog are the views of the author, Andre Brown and do not represent the view of Locayta, its employees or its shareholders. For more information about Locayta, visit www.locayta.com

Google’s chief economist, Hal Varian, announced last week that the search engine giant is planning to launch the ‘Google Price Index (GPI)’, a daily measure of inflation that they say could one day provide an alternative to official statistics.

The index will highlight how economic information can be gathered in a faster way using online sources. The current format, the Consumer Price Index, collects data by hand from retailers and only publishes the results on a monthly basis with a time lag of a number of weeks.

Mr Varian, speaking at the National Association of Business Economists conference in Denver, Colorado, stated that the GPI was something of a work in progress and would not confirm or deny that Google would publish the results.

Varian said that the GPI shows a “very clear deflationary trend” for all web-traded goods in the United States since December 2009. Despite the fact the data is not seasonally adjusted, Varian added that prices increased for the same time period 12 months earlier.

The UK had shown a slight inflationary trend for the same period, which Varian attributed to the weakness of the pound.

Google insist that the GPI is not a direct replacement for the CPI mainly because the mix of goods sold on the web does not fully represent the wider economy.

Although admitting that financial analysts are still more accurate in the current analysis, Varian said he believed Google search data can help to improve the accuracy of their forecasts.

It remains to be seen if the index will ever be launched but it is something which will capture people’s interest for the foreseeable future.

Please note the views expressed in this blog are the views of the author, Andre Brown and do not represent the view of Locayta, its employees or its shareholders. For more information about Locayta, visit www.locayta.com