Essays

The Economic Challenges Facing an Independent Scotland

Many of you will be aware of a poll that was conducted in 2011 in the Scottish Social Attitudes survey. Respondents were asked how they would vote on independence if they could be sure they would be £500 better off. That question produced a 2:1 majority in favour. Then they were asked how they would vote if they would be £500 a year worse off. That question produced a 2:1 majority against.

Scotland’s Economic Future

In Shakespeare’s ‘Macbeth’–‘the Scottish play’ – Macduff poses the question, ‘Stands Scotland Where It Did?’ The answer was not historically accurate and even less reassuring:

‘Alas poor country!
Almost afraid to know itself. It cannot
Be call’d our mother, but our grave.’

– Professor Sir Donald Mackay

The Map is Not the Territory: An Essay on the State of Economics

The reputation of economics and economists, never high, has been a victim of the crash of 2008. The Queen was hardly alone in asking why no one had predicted it. An even more serious criticism is that the economic policy debate that followed seems only to replay the similar debate after 1929. The issue is budgetary austerity versus fiscal stimulus, and the positions of the protagonists are entirely predictable from their previous political allegiances.

A good crisis gone to waste

The turmoil following the collapse of Lehman Brothers three years ago was an opportunity to
reform the world’s financial system. It was missed, and the new crisis promises little change.

Economics: Rituals of rigour

After mistaken claims made ahead of the global crisis won much academic support, long-held assumptions were called into question – but the real world often remains overlooked or ignored.

Should We Have ‘Narrow Banking’?

The credit crunch of 2007–8 was the direct and indirect result of losses incurred by major financial services companies in speculative trading in wholesale financial markets. The largest source of systemic risk was within individual financial institutions themselves. The capital requirements regime imposed by the Basel agreements both contributed to the problem and magnified the damage inflicted on the real economy after the problem emerged. This chapter argues that regulatory reform should emphasize systemic resilience and robustness, not more detailed behavioural prescriptions. It favours functional separation of financial services architecture, with particular emphasis on narrow banking—tight restriction of the scope and activities of deposit-taking institutions.

Scotland would gain few benefits from going it alone that it cannot already get as part of the United Kingdom

The SNP’s victory in the 5th May elections, which delivered an overall majority of 69 out of the 129 seats, means that the party can now fulfil its commitment to push for a referendum on independence. But independence, if achieved, would bring complications—both political and economic.

Narrow Banking and all that

You are the recently appointed First Minister of an independent Scotland, sitting in the elegant drawing room of Bute House, enjoying a relaxing moment after a stressful day. Then you receive an urgent call from the Governor of the Central Bank of Scotland. A few minutes later, the Governor is shown in. He explains that within a few days the Royal Bank of Scotland will be unable to roll over its facilities and will run out of cash. What do you do?

The Future of Markets

Markets are not a well oiled physical machine: they are a constantly changing, adaptive biological system. Pluralism is their motive force, their essence chaotic, their development inherently uncertain. If we could predict the evolution of markets, we would not need markets in the first place.

Narrow Banking

The Reform of Banking Regulation We should spend less time trying to ensure that our regulators can regulate financial behemoths with turnovers bigger than the GDP of many countries and more on trying to redesign the financial services industry so that regulation focuses on the interests of the public as consumers of financial services. Download […]