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

Voting history

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.

Brexit and financial market volatility

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Question 2: Do you agree that the possibility of Brexit significantly increases uncertainty and volatility in financial markets and the economy in general?

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Answer:
Strongly Disagree
Confidence level:
Very confident
Comment:
Here the question widens and I will just say this. There is a great difference between swings in the exchange rate or short term exchange rate volatility and damage to the economy. The economy's behaviour depends on fundamentals which will be greatly improved by Brexit. Short term falls in sterling will actually stimulate the economy in the short run; consequently share prices will likely move in the opposite direction. Neither volatility is damaging to the economy. Volatility is a fact of economic life; the job of economic stabilisers, such as interest rates and the exchange rate, is to ride out such short term shocks so as to prevent economic damage. The key policy aim must be to get the fundamentals that create growth as right as possible. To this end, and I am afraid contrary to much status quoist economist and civil service opinion, I have to say that Brexit is an important liberalising policy, similar to previous Thatcherist supply side reforms. Its aim is to remove the UK from the protectionist and corporatist regulative environment of the EU and place it firmly back into the world of global competition.

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