Roger Farmer's picture
Affiliation: 
University of Warwick
Credentials: 
Professor of Economics

Voting history

The “Spend Now, Tax Later” Budget

Question 1: How will the increase in the corporate tax rate from 19% to 25% affect the UK’s international competitiveness in the medium term?

 

Answer:
Moderate damage
Confidence level:
Confident
Comment:
The US is contemplating a similar corporate tax increase. This is unlikely to cause major shifts in location of businesses particularly as tax rates remain within the bounds of similar countries.

The ECB’s Green Agenda

Question 2: Would you support changing the ECB’s mandate to incorporate the EU’s target of carbon neutrality by 2050, if such a change is deemed legally necessary to adopt your preferred approach?

Answer:
No
Confidence level:
Extremely confident
Comment:
See my answer to Q1.

 Question 1: Which of the following actions is the most advisable approach for European Central Bank to address the environmental impact of its bond-purchasing policies?

Answer:
No change in policy
Confidence level:
Extremely confident
Comment:
We are entering an era of central bank policy creep which endangers the mandate for central bank independence. Central banks, including the ECB, were granted independence from political constraints to protect the control of the money supply from political bias. The reasons for independence are well documented in the work of Kydland and Prescott for which they were awarded the Nobel Prize. Central Bank independence is one of the few successes of economic policy advice which followed from the rational expectations revolution. Large sections of the European polity have never been comfortable with the European project. Political power is on loan from the people and, for legitimacy, it requires regular refreshment through popular elections. The mechanisms that grant political legitimacy are already tenuous in the case of the EU. The further centralisation of political power in the hands of unelected 'experts' at the ECB, by extended their policy mandate to engage in climate policy and or other non monetary objectives, will damage public trust in the institution itself. This will not end well.

Should We Worry About Post-Covid Inflation?

Question 2: Which of the following will be the greatest inflationary (or deflationary) force facing the UK economy?

Answer:
Public debt
Confidence level:
Confident
Comment:
Let me qualify. The level of public debt is much less important than the rate of growth of public debt. The danger is that the public finances will become dependent on nominal borrowing that will become politically, very hard to reverse.

 Question 1: Which of the following scenarios is most likely to hold on average for most of the upcoming decade?

Answer:
The BoE will be unable to avoid inflation exceeding its target
Confidence level:
Not confident
Comment:
Making statements about future inflation is a dangerous game. But in evaluating the likely alternatives, the scenario promoted by Goodhart and Pradjan is, IMO, more likely than the alternatives. Inflation, as we all know, is almost and everywhere a fiscal phenomenon (to misparaphrase Friedman). Once national treasuries become hooked on deficit finance, it will be very difficult for them to put down the crack pipe.

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