Ethan Ilzetzki's picture
Affiliation: 
London School of Economics

Voting history

Towards a High-Wage, High-Productivity Economy

Question 2: What is your evaluation of the following statement: “A well-designed government-stipulated wage increase can lead to higher productivity”?

Answer:
Disagree
Confidence level:
Not confident

Question 1: Which of the following statements most closely reflects your understanding of the relationship between productivity and wages.

Answer:
Wage increases can in some cases increase long-run productivity
Confidence level:
Not confident
Comment:
In the long run, wages are driven by productivity, not the other way around. I cannot dismiss the possibility that there are some industrial policies that would raise workers' bargaining power and wellbeing and therefore their productivity, certainly in the short run. But these are minor in the long run relative to the opposite direction of causation.

Post-Covid Fiscal Rules for the UK

Question 3: Which of the following variables should fiscal rules target to best improve the performance of the UK macroeconomic policy going forward.

Answer:
No explicit target
Confidence level:
Very confident
Comment:
Fiscal rules in the UK have to date only increased uncertainty and made fiscal policy less credible. Rules have been changed frequently and broken, giving the public little sense on the path of policy in the medium term. They have also ratified the contractionary bias in fiscal policy in recent decades. Discretionary policy would be preferable. This doesn't mean having an erratic policy. Each budget should contain a clear discussion of medium turn policy goals. Absent formal rules, the chancellor will also be freed to discuss more contingencies, giving greater policy clarity. The OBR would continue to play an important role of forecasting, monitoring, and evaluating policy.

Question 2: What impact has the sequence of fiscal rules adopted in the UK since 1997 had on the conduct of fiscal policy in the UK?

Answer:
Harmed
Confidence level:
Confident
Comment:
I stated in my answer to the first question that fiscal rules had no impact on the conduct of fiscal policy. Therefore, a more accurate answer to this question would have been that they had no impact on macroeconomic policy more generally. I stated "harmed" in response to this question to highlight that the general culture of what is viewed as "serious" fiscal policy in the UK has been an excessive attention to public debt. This led to very misguided austerity policies starting in 2010 and risk an premature tightening of policy in the recovery from Covid 19.

Question 1:  What impact has the sequence of fiscal rules adopted in the UK since 1997 had on the level of UK public debt? 

Answer:
No impact
Confidence level:
Confident
Comment:
There is a strong (sometimes excessive) culture of attention to deficits and concern about the public debt in the UK. Chancellors particularly feel that talking the talk on deficits is the way to look "serious". They have also justifiably paid less attention to deficits in the first phase of the global financial crisis (but unfortunately began austerity far too soon) and the first year and a half of the Covid pandemic. Fiscal rules have merely ratified this norm, which would have maintained public debts and deficits pretty much at the same levels if policy was set via discretion.

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