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

Voting history

Secular Stagnation

Question 2: Do you think that current structural and fiscal policies should place a considerably greater emphasis on pushing the natural rate into positive territory?

Answer:
Neither agree nor disagree
Confidence level:
Confident
Comment:
Again, I think the definition involved is confused and so cannot really give a clear answer. If the UK and the US and related advanced economies (not to speak of the emergent economies) have no particular 'stagnation' problem, whereas Japan and the euro-zone do for the reasons given, then there is in principle a good real return to be had on capital in the former set of countries and a low or even negative one to be had in Japan and the euro-zone. the answer to this problem is for capital to flow from these countries to the others until the real rate rises in them to the world level. I would agree that in these latter two countries there would be room for stimulative policies under suitable 'reform'- which in Japan would mean 'third arrow' policies and in the ruo-zone would mean the abandonment of the whole current 'euro orthodoxy'. But my firm assessment is that neithr poltical development is at all likely.

Question 1: Do you agree- making your own definition of secular stagnation clear if you disagree with that offered here- that it is more likely than not that the advanced Western economies have entered into a period of secular stagnation?

Answer:
Neither agree nor disagree
Confidence level:
Confident
Comment:
The definition is confused. It is either stating that there is a 'demand problem' (such as a failure of the monetary and credit system) or that there is a 'productivity/supply problem' (such as distortions in the labour market, lack of competitive entry into industry, regulative obstacles). On the facts of growth it is clear that in all western economies the 'trend level' has dropped; understanding why remains elusive but it looks like some key industries (especially banking but also matreial-intensive ones) have been hit hard by a long-lasting shock(s). As for recovery to, and growth at, a new lower trend level the UK and the US, as well as many other advanced economies outside the euro-zone and Japan, seem to be on a similar track to the past. the post-crisis recovery may have taken longe but it is now proceeding. So for these economies 'secular stagnation' does not fit- even if as always there are particular supply-side weaknesses Japan and the euro-zone are another matter. In Japan it has been found impossible to have 'structural transformation' to a service-based economy; lack of competition and regulative excess is endemic and there is political stalemate. The Abe two arrows on demand are powerful but the thrid arrow- on supply has fallen to the ground. Thus Japan counts as secularly stgnant for 'suppy reasons'. The euro-zone is also secularly stagnant. Here there are twin reasons. On the demand side the euro straitjacket plus the new bank regulative structure have caused problems for bank credit and general confidence. On the supply side hoped-for 'reforms' (such as in Italy) are slow to appear because with demand so weak and unemployment so high there is huge political opposition from losers. Looking back, it is clear that creating the euro was a strategic mistake from which the euro-zone may not recover.

Migration and the UK economy August 2014

Question 2: Do you agree that current government policies with respect to non-EU migration (including policies on students, skilled workers, and family migration) are effective in maximizing the gains to the economy from migration while minimizing any possible negative impact to specific groups?

Answer:
Strongly Disagree
Confidence level:
Extremely confident
Comment:
Because of the pressures exerted by very high levels of uncontrolled EU net migration government policy has targeted non-EU migration in order to reduce overall net migration to 'tens of thousands'. This was never feasible and has not been achieved; net migration has risen above 200,000. The result has been problems for students getting study visas, for families wishing to be reunited, and for firms obtaining skilled workers. In most countries outside the EU immigration control is exerted across all foreign entrants. Within the EU few countries are the magnet that the UK is because of its relatively free and dynamic labour market. Thus the UK has a considerable problem with immigration control from within the EU and its single labour market. The achievement of across-the-board immigration control which does not unduly penalise particular groups will require the UK to derogate from the single EU labour market.

Question 1: Do you agree that migration to the UK can be expected to be beneficial for the average income of current UK inhabitants in the upcoming decade?

Answer:
Disagree
Confidence level:
Confident
Comment:
Immigration is increasingly problematic in the UK because of the accession of several poor countries to the EU. Unskilled workers with low incomes in these countries can obtain access to an extremely generous first world welfare state which gives benefits to around half of the employed labour force besides those unemployed. Thus their expected permanent income in the UK will exceed their marginal product, causing a net reduction in existing UK residents' income. Against this there are skilled immigrants whose marginal product is high (eg professors of economics); from these there will be a surplus, in the form of tax revenue, for existing UK residents. It seems to me that the downside from the former is now prospectively greater than the upside from the latter. To these considerations must now be added rising congestion costs of higher population; these generally are not well priced into the choices facing immigrants. A further point is that certain sections of the population experience the costs of immigration disproportionately, while other segments gain the benefits but do not compensate the losers; this creates political tension around this problem,

UK House Prices and Macro-Prudential Policy July 2014

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Question 2: When housing-related risk is deemed excessive from the viewpoint of financial stability, do you agree that the correct response is to deploy macro-prudential tools, leaving interest rates focused on the needs of inflation and aggregate real activity?

 
Answer:
Strongly Disagree
Confidence level:
Extremely confident
Comment:
Macro-prudential tools, by which I take it meant intervention in particular markets for lending by creating restrictive rules of engagement, are distortionary of market outcomes. They therefore cause welfare costs. General control of money and credit is the role of monetary policy. It may well be that merely looking at an inflation target is inadequate, since inflation expectations have turned out to be very strongly anchored by the very fact of inflation targeting; monetary policy should be concerned also with the growth of money and credit. By paying attention to this monetary policy should make additional action by macro-prudential tools redundant. Even at the zero bound for the safe interest rate money creation remains a tool of general monetary policy; thus it is hard to see a suitable role for macro-prudential tools.

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