Patrick Minford's picture
Affiliation: 
Cardiff Business School
Credentials: 
Professor of economics

Voting history

The Future of Central Bank Independence

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Question 1: Do you agree that central bank independence in the Eurozone and the UK will decline over the next 48 months?

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Answer:
Disagree
Confidence level:
Not confident
Comment:
The commentary described above in the background reveals wide disquiet with the behaviour of central banks in the context of the run-up to the financial crisis, its attempted resolution and its aftermath. In order, central banks allowed a sizeable credit boom to develop in the run-up; it failed to resolve the resulting contraction by providing sufficient liquidity to the banking system and the Lehman collapse resulted, triggering the acute crisis downturn; afterwards central banks coordinated around a massive regulatory backlash which prevented the recovery of credit and worsened the crisis recovery process badly. These actions have badly shaken confidence in central banks' competence. Within the euro-zone the problems are wider than the ECB, with Southern Europe still weak and with large-scale unemployment. But the ECB, as the only active prosecutor of stimulus, attracts the blame for failure. In the UK the Bank has also failed in these aspects. Its intervention in the Brexit debate was seen as politically inspired and at variance with its mandate. The QE programmes in the UK and the euro-zone are highly unpopular with savers; this has added a further element to the discontent. Nevertheless, both these institutions have now become enormously powerful bureaucracies, having accumulated responsibility for financial stability and controls (macro-pru). Governments in the EU and the UK have many other problems to cope with and are unlikely to tangle with these bureaucracies, when they would like their cooperation over economic growth. The euro-zone may of course contract in size with some countries leaving. But this will not dislodge the ECB in the smaller zone that would survive.

Are academic economists ‘in touch’ with voters and politicians?

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Question 2: What do you think is the most likely reason that a majority of UK voters went against the near unanimous advice of the economics profession?

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Answer:
No opinion
Confidence level:
Extremely confident
Comment:
The polling evidence suggests that voters knew the 'consensus' view was highly negative and were worried about it. On this factor there was an anti-Brexit majority of some 22% apparently around the time the Treasury published its first (long-term) report. This makes it clear that these views were widely publicised and known. However by the time of the vote this anti-Brexit percentage had fallen to 6%, indicating there had been swing on this factor on the basis of the arguments as understood. Note that it was still negative, clearly indicating that the consensus was known and powerful. However of course voters had strong views on non-economic factors, which is why I cannot really answer these questions. Basically they did not believe the economic consensus views sufficiently to be deterred from voting to leave on other grounds.

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Question 1: Do you agree that the economics profession needs an institutional change that promotes the ability to communicate more effectively with policy-makers and the public at large and to make clear when economists have a united view; and do you agree that we need to introduce leadership to help achieve this improvement through coordinated efforts?

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Answer:
Strongly disagree
Confidence level:
Extremely confident
Comment:
There is already a body representing economists as a profession, the Royal Economic Society. There are also unions to which economists belong, such as UCU. Economists have views on policy choices but it is quite inappropriate for a professional body to disseminate policy views, as opposed to representing the profession on matters of academic organisation or other academic or professional matters. This was a highly controversial matter on which economists differed greatly in their views. It is true that many UK economists were in favour of Remain but many were not. Usually a head count of how many there were on each side does not establish which side is right, in ANY science. As it happens the 'consensus' view of the remain economists was publicised vigorously by Remain, even including a statement by the Chancellor that the economic case for Remain was a 'Fact'! So certainly these consensus economists did not fail to have their view communicated! Very much the contrary. The RES held a panel meeting at its conference at which no Brexit supporters were invited to speak. This was a strange one-side decision. however if the RES or any other organisation purporting to represent economists were to make it their official policy as professional representatives to put forward a policy view on such a central matter of UK economic policy they would risk discrediting the profession in UK public opinion even more dramatically than it has been already by vociferous majorities in favour of poor UK economic policies over the past decades. The UK majority of economists have repeatedly opposed successful UK economic policy programmes including: --Thatcher 'monetarist' counter-inflation --Thatcher trade union reforms --privatisation --the rather moderate 'austerity' programme of the last Chancellor They also supported: --the failed policy of joining the ERM --joining the euro which most now agree would have been disastrous for the UK Had the RES formally associated itself with these majority views its credibility would have been utterly destroyed. One saving grace in the generally appalling record of majority UK professional opinion among economists is that there is at least respect for freedom of thought and expression in our profession; and indeed that these majority views do Not get translated into some sort of professional body's official actions.

National Living Wage and the UK economy

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Question 2: Do you agree that the new NLW will have a muted effect on wages and prices?

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Answer:
Disagree
Confidence level:
Confident
Comment:
With such a large rise in low-paid wages, there will be effects right up the wage scale. It will generally raise wage costs therefore and not merely in low wage industries. This will also put upward pressure on prices. Assessing just how large this effect will be is not easy: and what is 'muted'? But if one roughly assesses the rise in the minimum as around 40% in 2020, then it would be surprising if wages overall were not pushed up around 10% and prices similarly. This is far from 'muted' whatever that may be. It reinforces my view that the effect on employment through general 'competitiveness' in the open economy will reinforce the micro level elasticities found in applied work.

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Question 1: Do you agree that the new National Living Wage is likely to lead to significantly lower employment?

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Answer:
Strongly agree
Confidence level:
Extremely confident
Comment:
The introduction of the NLW goes against the previous policy instituted by Labour for a minimum wage targeted at the lowest paid workers on the grounds that they could suffer from employer monopsony power. In addition the Low Pay Commission was given the task of keepi ng the minimum at a low enough level to ensure it had the smallest possible impact on the demand for low-paid workers. This has meant that the minimum wage has been kept to around the 40% of median earnings level. I considered this policy inadvisable but there is only weak evidence that the minimum had much of an effect on jobs, it seems because the Commission was largely effective. Unfortunately, as I feared would happen, the Low Pay Commission has found it hard to hold the line. Oddly this has been due to a Conservative government introducing the NLW as the new minimum. This will push the UK, if implemented, to the position of high minimum wage countries like France, with its 60% of median earnings target. France has very high unemployment among low-paid workers. I consider it important that a future Conservative government restores the authority of the Low Pay Commission to set the minimum wage according to its original remit.

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