Andrew Mountford's picture
Affiliation: 
Royal Holloway
Credentials: 
Professor of economics

Voting history

Deal or no deal: The Greece standoff

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Question 2: Do you agree that Greece would be better off defaulting right now rather than signing to the agreement under consideration?

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Answer:
Disagree
Confidence level:
Not confident
Comment:
What I know about Greece is what I read in the newspaper but from this it seems that Greece's problems fit neatly into our current theories of economic growth which ascribe a large role in the ultimate determinants of growth to the quality of institutions. Greece's institutions are reportedly very poor, e.g. http://www.ft.com/cms/s/0/6c55d1ba-980b-11e4-84d4-00144feabdc0.html , and so the current deal in which Greece agrees to raise funds for partial repayment in return for large infrastructure investment from the EU seems like a move in the right direction, providing of course these funds are monitored effectively and not misused . (http://www.spiegel.de/international/europe/eu-commission-president-juncker-on-greece-and-tsipras-a-1039738.html ) The funds are intended to be raised, in part at least, from a tax on the wealthy i.e from those who had benefitted from the previous poor governance which also seems efficient .( http://www.bbc.co.uk/news/world-europe-33228119 ) Indeed,as an economist, one of the baffling aspects of the recent financial crises is the seemingly great desire among policy makers to insure ex post those who made bad investments. If the market's incentive mechanisms are to work then those who lend to people/companies/football clubs /governments who have little chance of paying the money back, must lose money. In this respect the situation of Greece is not unlike that of the people of a developing country who, on successfully overthrowing an oppressive military regime, are weighed down by the debts built up by the previous regime for the military expenditures used to subjugate them. As has been noted before by prominent economists, the prospects for development and world growth will be improved if lenders know that such “odious debts “ would not need to be honoured by a new representative regime. ( see e.g http://www.brookings.edu/research/articles/2003/03/spring-development-kremer )

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Question 1:  

Do you agree that, on balance, the implementation of the agreement as outlined in media reports will have a non-trivial negative effect on Greek GDP?

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Answer:
Disagree
Confidence level:
Not confident
Comment:
What I know about Greece is what I read in the newspaper but from this it seems that Greece's problems fit neatly into our current theories of economic growth which ascribe a large role in the ultimate determinants of growth to the quality of institutions. Greece's institutions are reportedly very poor, e.g. http://www.ft.com/cms/s/0/6c55d1ba-980b-11e4-84d4-00144feabdc0.html , and so the current deal in which Greece agrees to raise funds for partial repayment in return for large infrastructure investment from the EU seems like a move in the right direction, providing of course these funds are monitored effectively and not misused . (http://www.spiegel.de/international/europe/eu-commission-president-juncker-on-greece-and-tsipras-a-1039738.html ) The funds are intended to be raised, in part at least, from a tax on the wealthy i.e from those who had benefitted from the previous poor governance which also seems efficient .( http://www.bbc.co.uk/news/world-europe-33228119 ) Indeed,as an economist, one of the baffling aspects of the recent financial crises is the seemingly great desire among policy makers to insure ex post those who made bad investments. If the market's incentive mechanisms are to work then those who lend to people/companies/football clubs /governments who have little chance of paying the money back, must lose money. In this respect the situation of Greece is not unlike that of the people of a developing country who, on successfully overthrowing an oppressive military regime, are weighed down by the debts built up by the previous regime for the military expenditures used to subjugate them. As has been noted before by prominent economists, the prospects for development and world growth will be improved if lenders know that such “odious debts “ would not need to be honoured by a new representative regime. ( see e.g http://www.brookings.edu/research/articles/2003/03/spring-development-kremer )

Monetary policy and the zero lower bound (ZLB)

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Question 2: Do you agree that the benefits of reforming the monetary system to allow materially negative policy interest rates outweigh the possible costs?

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Answer:
Disagree
Confidence level:
Not confident at all
Comment:
Any policy is subject to people changing their behavior to get around it and so with radical new interventions it's not clear what is feasible/possible or what the costs are -(unknown unknowns etc...). However, that said, it seems to me that if you think that the economy's problems are caused by an inability to impose a negative real rate of interest then why not raise the price level by imposing a steadily increasing sales tax on all goods? The revenue raised could be redistributed so that the poorest are made no worse off. If the remaining revenue was spent on making society more productive (infrastructure, education, housing) then the marginal product of capital wouldn't remain low for long and interest rates should rise.

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Question 1: Do you agree that it is feasible for the UK authorities to change the monetary system so that materially negative policy interest rates could be safely implemented? (In answering, you may wish to explain your reasons and define your view of 'material')

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Answer:
Disagree
Confidence level:
Not confident at all
Comment:
Any policy is subject to people changing their behavior to get around it and so with radical new interventions it's not clear what is feasible/possible or what the costs are -(unknown unknowns etc...). However, that said, it seems to me that if you think that the economy's problems are caused by an inability to impose a negative real rate of interest then why not raise the price level by imposing a steadily increasing sales tax on all goods? The revenue raised could be redistributed so that the poorest are made no worse off. If the remaining revenue was spent on making society more productive (infrastructure, education, housing) then the marginal product of capital wouldn't remain low for long and interest rates should rise.

The Importance of Elections for UK Economic Activity

Question 2: Do you agree that the outcome of the general election will have non-trivial consequences for aggregate economic activity (employment and GDP)?

Answer:
Strongly Agree
Confidence level:
Extremely confident
Comment:
The different parties have different attitudes to public investment. The low level of investment in the UK economy (both public and private) means that the productivity of the UK both now and in the future is significantly below potential. Any government that significantly increases public investment will have a significantly positive effect on the UK economy.

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