Simon Wren-Lewis's picture
Affiliation: 
University of Oxford
Credentials: 
Professor of economics

Voting history

Wages and economic recoveries

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Question 2: Do you agree that the different behaviour of UK real wages relative to Eurozone wages during the Great Recession is in large part due to the UK having different labour market policies?

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Answer:
Disagree
Confidence level:
Confident
Comment:
There are two main factors that account for the relatively poor performance of UK real wages. The first is a very slow recovery in GDP per head. This slow recovery is partly the result of UK fiscal austerity, but there are almost certainly other factors at play. The second is the large depreciation in sterling in 2008 during the financial crisis, and now a second depreciation following Brexit. Both factors are likely to be more important than labour market policies.

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Question 1: Do you agree that lower real wage growth was beneficial for employment levels during the Great Recession?

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Answer:
Neither agree nor disagree
Confidence level:
Extremely confident
Comment:
There are too many potential mechanisms here that we do not know enough about. Workers may well have 'priced themselves into jobs', but in doing so they may have reduced both aggregate demand and the incentive for firms to invest in more productive techniques. Productivity growth in the UK has been particularly poor compared to other countries, and while this has undoubtedly contributed to low real wage growth, causality may also go in the other direction as well.

Happiness and well-being as objectives of macro policy

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Question 2: Do you agree that quantitative well-being analysis should play an important role in guiding policy makers in determining macroeconomic policies?

 
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Answer:
Strongly agree
Confidence level:
Extremely confident
Comment:
The central role of spells of unemployment for happiness is an excellent example of why these measures are useful in influencing policy. Arguments that such data is not 'well understood' is I'm afraid part of a regrettable tendency in macro to ignore empirical evidence. In this particular case recent empirical studies which show that unemployment can influence the earnings of the children of those unemployed indicate exactly why the happiness results make sense. Central banks should pay much more attention to this happiness data than the implications of what governs social welfare in very simple microfounded models.

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Question 1: Do you agree that subjective well-being measures, or at least some of the subindices from the typical survey measures, are now reliable enough to give useful insights when used in macroeconomic empirical analysis?

 
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Answer:
Strongly agree
Confidence level:
Very confident
Comment:
Survey measures of subjective well-being are useful indicator measures of well being. GDP is also an indicator of well being. All indicators have their deficiencies, which means using a range of measures when appropriate. For example, conventional happiness or life satisfaction surveys may indicate changes rather than the level of our well being, which could explain the Easterlin paradox. But these surveys remain very useful indicators.

The Future of Central Bank Independence

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Question 2: Do you agree that the traditional argument that less central bank independence leads to higher inflation will (still) be relevant over the next 48 months in Western economies?

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Answer:
Strongly agree
Confidence level:
Very confident
Comment:
The critical economy is the US. If, as expected, Trump embarks on a large fiscal expansion, the Fed will want to raise rates. They will almost certainly come under political pressure not to do so, and if that pressure succeeds rates may not rise and inflation will be higher. The politics of Trump are sufficiently wild and reactionary that it is quite possible we will see the end of CBI in the US.

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