Nobel Prize winning economist, Paul Krugman, in his NYT op-ed blog accuses the economics profession of over sexing fears of post Brexit referendum short-term consequences. He argues that sloppy thinking is always a vice.
Source: The Macroeconomics of Brexit: Motivated Reasoning? – The New York Times
To be absolutely clear, Krugman confirmed that the long run economic consequences of Brexit are massively damaging. Because of the loss of trade, he expects an output loss of 2-3% in perpetuity. This is a truly staggering loss of UK wealth (see earlier blog).
However, Krugman argues strongly that the short/medium term consequences have been seriously overstated by the economics profession and are not based upon sound economic theory. This is significant because politicians, like former UK Chancellor, George Osborne, hyped up the consequences of Brexit.
Regular readers of this blog will know that I campaigned passionately for Remain. But I’m a realist. I’m beginning to adjust to a post-Brexit world.
But it’s not just about the trade and immigration deal that the UK strikes with the EU and other countries.
It’s very much about other radical policy changes in post-Brexit Britain. The UK must pay for the permanent loss of output amounting to 2-3% in perpetuity. How this is achieved deserves some serious analysis and debate. Here are a few straw-man suggestions:
- Radical change to public services at both the national and local level
- Higher national productivity
- Far greater innovation
- Increased exports
- Massive increase in skills
- Reduced energy consumption
- Reduced waste
- Reduced population, e.g. export people/ lower immigration
- Reintroduction of national service