Royal Economic Society Issue no. 174 Newsletter July 2016 The conference issue Before we turn to more recent matters, let’s note that Correspondence this is the conference issue, the issue in which we publish a report of the Society’s Annual Conference. Letter from Germany p.3 This heroic task was taken on this year by Ferdinando Giugliano. The excellent results can be read starting on page nine. Features But there have, of course, been other events too, some of them foreshadowed at the Conference on which Europe after Brexit p.5 Ferdinando reports. This included a plenary session at Conference Report p.9 which the presenters were in broad agreement that the UK’s exit from the EU would involve substantial The public trusts academic economists but the media costs and a show of hands that showed overwhelming are losing interest p.13 support for this view from the audience. We all know the result and there are interesting issues for econo- Reforming the Society’s constitution p.15 mists to ponder, in addition to the outcome itself. This includes the unwillingness of the media to report the The productivity fallacy p.16 widespread consensus amongst academic economists Exploring economics at University College London p.20 and the denigration of ‘experts’ by a man who, until recently, had been Secretary of State for Education! Simon Wren-Lewis reflects on the declining status of academic economists in media circles and offers Obituaries some explanations. By chance, an economist who was at the forefront of Maurice Peston p.22 macro-policy debates in an era when academic econ- omists were frequently called upon by radio and tele- vision to elucidate for listeners, died in April. We are RES News p.24 very pleased to publish an entertaining and affection- ate obituary of Maurice Peston by Danny Blanchflower. The referendum took place just days before we went Conference diary p.26 to press. Michael Burda’s ‘Letter from Germany’ gives the Berlin view of the UK’s possible exit from the EU (before the event) and in an article written against a very tight deadline, Andrew Duff gives some firm indicators on what happens next. Royal Economic Society Economic Royal THE ROYAL ECONOMIC SOCIETY • President: Professor Andrew Chesher (UCL and cemmap) • President-elect: Professor Peter Neary (Oxford) • Past-president: Professor John Moore (Edinburgh) • Secretary-General: Professor Denise Osborn (University of Manchester) • Second Secretary: Professor Robin Naylor (University of Warwick) For other members of the Executive Committee, go to the Society pages on the website where all those involved in the structure and governance of the Society are listed. The Royal Economic Society is one of the oldest and most prestigious economic The Society’s associations in the world. It is a learned society, founded in 1890 with the aim Newsletter ‘to promote the study of economic science.’ Initially called the British Economic Association, it became the Royal Economic Society on receiving its Royal Charter in 1902. The current officers of the Executive The Newsletter is first and fore- Committee are listed above. most a vehicle for the dissemina- The Society’s bee logo tion of news and comment of inter- The Society’s logo, shown below, has been used from its earliest est to its readers. Contributions from days. The story behind the use of the bee refers to the ‘Fable of readers are always warmly welcomed. the Bees’ by Bernard Mandeville, an 18th Century essayist We are particularly interested to receive which alludes to the benefits of decentralisation by looking letters, reports of conferences and meet- at co-operation amongst bees and showing how the pur- ings, and news of major research projects as suit of self-interest can be beneficial to society. The well as comment on recent events. Latin quote comes from Virgil and speaks of the drive of bees. Visit our website at: www.res.org.uk/view/resNewsletter.html The Newsletter is published quarterly in January, April, July and October Newsletter - subscription rates The Newsletter is distributed to members of the Society free of For membership benefits, sub- charge. Non-members may obtain copies at the following subscrip- scription fees and how to join tion rates: the Society, see back cover • UK £5.00 • Europe (outside UK) £6.50 • Non-Europe (by airmail) or go to: www.res.org.uk £8.00 Next issue No. 175 October 2016 Deadline for submissions 16 September 2016 Editor Administration Officer Prof Peter Howells, Mrs Amanda Wilman, Centre for Global Finance, Royal Economic Society, Bristol Business School, Office of the Secretary-General, UWE Bristol, Rm E35, The Bute Building, Westburn Lane, Coldharbour Lane, Bristol BS16 1QY University of St. Andrews, St. Andrews, Fife, KY16 9AL Email: [email protected] [email protected] Fax: +44 (0)1334 462479 Email: [email protected] Designed by Sarum Editorial Services: www.sarum-editorial.co.uk www.res.org.uk/view/resNewsletter.html 2 Correspondence Letter from Germany — Brexit, seen from Berlin Writing a few days (17 June) before the British referendum on continued EU membership, Michael Burda at the Humboldt University of Berlin reflects on the externalities involved in that decision. NUNDATED BY NONSTOP SPAMMING that even an and helped liberate Bergen-Belsen. He had his own spe- American in Germany can receive on Brexit, I have cial opinion about the Germans and I am sure he would Ito paraphrase Winston Churchill: Never has so much have voted to Leave, and he casts a long shadow over his been written by so many to be read by so few. offspring. Yet it is so telling but also so very curious that Showboating and attention-grabbing in the social media most of the Brexiteers are well over 40. But the fact that are de rigueur with the most dire and outlandish state- my relatives are undecided tells a story of its own. The ments on the consequences of Brexit in both directions. present perception of UK voters is that the EU has robbed Our Donald would be impressed by the trumpeting; he them of their sovereignty, not that it has opened markets has undoubtedly inspired some of the political tactics. for their companies or lowered prices for their consumers. While I think I know where the elite stands, the voting The latter was the original intent of the Union, but in the public is 50-50 and it will go to the wire. minds of many, the former is reality. Again a quick look at Norway would be instructive. Rich, closed, and protected. Yes, there is a very real probability that in the referendum Is that where Great Britain wants to be in the future? of 23 June, the United Kingdom, with 65 million inhabi- tants, will vote to leave the EU. Europe, with its rickety Why is this happening now? and presently unsustainable governance, will come dan- Critics of the EU certainly have a point, and the UK cer- gerously close to ungluing itself. In this comment I’d like tainly does not have a monopoly on such critics. The to point out what that means, seen from the land of European Union is cumbersome and ungovernable, and Vorsprung durch Technik. I am writing this note not the behemoth grows larger with each new accession. Yet knowing the outcome, but as someone very concerned it is also cheap: 1 per cent of GDP remains a bargain for a with its consequences. And the problem will not go away common legal framework for business, human rights and with a vote to Stay. legal principles, product market regulation and standardi- Regardless of the outcome, tensions leading up to the zation, minimum labour standards including child labour, stay-or-leave vote strongly suggests that all of Europe — job safety standards, environmental protection… Where and not merely the UK — has reached an integration sin- else in the world is there an automatic cap on the size of gularity. A large slice of the political class in most coun- ‘big government’ like in the EU? tries of the Union has concluded that deeper economic and It is all too easy to forget how far Europe — and the UK especially political integration offer no further welfare in particular — has come is a result of the European gains, at least not for the median voter. Unfortunately, this Union, and not in spite of it. As Gordon Brown points out defensible assessment has been conflated with one that the in a viral video filmed in the ruins of Coventry Cathedral, EU itself has outlived its usefulness and is of no further the counterfactual to the EU is more likely to be centuries benefit, or even detracts from welfare. In this judgment, of chronic warfare than the decades of peace since its an accumulated capital stock of European law, rules, founding. How can that not be related to common values directives and regulations can be thrown to the wind, and common prosperity? devaluing the knowledge and human capital accumulated Observing the process of economic integration since 1945, by tens of thousands of UK civil servants over the with ever deeper trade, migration, and capital mobility, one decades. Tant mieux, many will say. Yet divorcing the EU must conclude that it leads inexorably to interdependencies will be a bonanza for lawyers, not for economists. (I that are not only economic, but increasingly and ultimate- remember that Shakespeare had some interesting thoughts ly political. And that is the trigger for the integration sin- about the lawyers.) There is no guarantee that what gularity. Europe — including the UK — obviously wants emerges in its stead will be any better.