Nicholas Oulton's picture
Affiliation: 
London School of Economics
Credentials: 
Senior Visiting Research Fellow

Voting history

The UK Productivity Puzzle

In the last two questions you are asked which government policies are best suited to help the UK emerge from its productivity growth slowdown. Question 3 asks for your most preferred policy option, while question 4 asks for your second choice. You may use the comment section to outline specific policy recommendations.

Question 3: Which of the following policies would best help improve private sector productivity?

Answer:
Tax and subsidy policies
Confidence level:
Very confident
Comment:
Given my answers to Questions 1 and 2, the first best policy would be to revive demand in the rest of the EU. But this is not within the UK’s power. So my preferred policy is to increase incentives for business investment of all types in a radical way, say by giving 100% investment allowances against corporation tax in the first year. Infrastructure investment may help here too as it may crowd in some business investment.

Question 2: Which of the following was the second most important cause for the slowdown in UK productivity growth?

Answer:
None of the above, other, or no opinion
Confidence level:
Very confident
Comment:
The second most important cause was the continuing rise in the labour force, mainly due to migration and made possible by our flexible labour market. In all EU countries demand for exports slowed down as a result of the Great Recession. In most other EU countries this led to rising unemployment and falling employment, with labour productivity less affected. But in the UK employment rose at the same rate after the crisis as before, mainly due to migration. So inevitably productivity growth fell, as business investment declined and capital deepening flatlined.

Question 1: Which of the following was the most important cause for the slowdown in UK productivity growth?

Answer:
Low demand (including due to the financial crisis, austerity policies, or Brexit)
Confidence level:
Very confident
Comment:
I have argued that the reason why the UK experienced a particularly sharp slowdown in productivity growth was a combination of two factors. First, the slowdown after 2007 in demand for UK exports concentrated as they are on the EU. And second, our very flexible labour market which allowed the labour force to go on rising at the same rate after the crisis hit as before, mainly because of migration. The after effects of the banking crisis may also have impacted negatively.

Bitcoin and the City

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Question 2: Do you agree that the regulatory oversight of cryptocurrencies needs to be increased?

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Answer:
Strongly agree
Confidence level:
Very confident
Comment:
In practice crypto currenices have been strongly linked to criminality as the Mt Gox affair shows. A parallel is the Albanian Ponzi schemes of the 1990s which seriously destabilised Albania. One strand of current policy is to crack down on money laundering and tax evasion through tax havens. So it would seem odd to let crypto currencies get around these restrictions. It would be a good idea if the "crypto" were taken out of crypto currencies. But then they might not be very attractive to investors and promoters.

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Question 1: Do you agree that cryptocurrencies are currently a threat to the stability of the financial system, or can be expected to become a threat in the next couple of years?

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Answer:
Disagree
Confidence level:
Not confident
Comment:
They are not currently a threat but they could become one if left unregulated.

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