Policy uncertainty comes with a price, and the threat of secession is the ultimate uncertainty.
“Splitting equals extreme economic pain,” said Anil Kashyap of the University of Chicago Booth School of Business. Between budget concerns and monetary challenges, Scotland and England, Wales, and Northern Ireland are “better together,” he said.
In the survey, carried out by Chicago Booth’s IGM Forum, 62% of respondents agreed that “one consequence of separating from the rest of the UK would be greater macroeconomic instability for Scotland for many years”, while 5% strongly agreed.Others panelists thought the upshot less clear: “Pegging the Scottish to the English pound might essentially replicate the current state of affairs,” said Larry Samuelson of Yale. Meanwhile, Oliver Hart of Harvard maintained that once the issues of currency and position within Europe are resolved, “things may be OK” (but firmly classified a Scottish pound as a “bad idea”).The lone dissenter, Robert Hall of Stanford, gave this enigmatic comment with his disagreement: “Small English-speaking countries have excellent records” for macroeconomic stability, he said.
Of course, to many Scots, said Alberto Alesina of Harvard, “instability may be a price worth paying for independence.”
Participant | University | Vote | Confidence | Comment | Bio/Vote History |
---|---|---|---|---|---|
Daron Acemoglu | MIT | Agree | 5 | Bio/Vote History | |
Alberto Alesina | Harvard | Agree | 8 | more instabilty may be a price worth paying for independence | Bio/Vote History |
Joseph Altonji | Yale | Agree | 4 | Bio/Vote History | |
Alan Auerbach | Berkeley | Agree | 7 | Bio/Vote History | |
David Autor | MIT | Agree | 5 | Bio/Vote History | |
Katherine Baicker | Harvard | Agree | 2 | Bio/Vote History | |
Abhijit Banerjee | MIT | Uncertain | 7 | It depends on the exact institutional details of the separation. | Bio/Vote History |
Marianne Bertrand | Chicago | Agree | 5 | Bio/Vote History | |
Markus Brunnermeier | Princeton | Agree | 5 | Bio/Vote History | |
Raj Chetty | Harvard | No Opinion | Bio/Vote History | ||
Judith Chevalier | Yale | Agree | 8 | Bio/Vote History | |
Janet Currie | Princeton | Did Not Answer | Bio/Vote History | ||
David Cutler | Harvard | Agree | 2 | Bio/Vote History | |
Angus Deaton | Princeton | Strongly Agree | 9 | Bio/Vote History | |
Darrell Duffie | Stanford | Agree | 8 | Yes, but greater long-run macro instability could be merely due, as for many small countries, to less size-related diversification. | Bio/Vote History |
Aaron Edlin | Berkeley | No Opinion | Bio/Vote History | ||
Barry Eichengreen | Berkeley | Agree | 5 | Many reasons to be uncertain, but lack of established CB institutions and the drawbacks of the euro & sterilization are reasons to agree. | Bio/Vote History |
Liran Einav | Stanford | No Opinion | Bio/Vote History | ||
Ray Fair | Yale | Uncertain | 5 | Bio/Vote History | |
Amy Finkelstein | MIT | Agree | 4 | Bio/Vote History | |
Pinelopi Goldberg | Yale | No Opinion | Bio/Vote History | ||
Austan Goolsbee | Chicago | Uncertain | 6 | no one knows | Bio/Vote History |
Michael Greenstone | MIT | Agree | 2 | Bio/Vote History | |
Robert Hall | Stanford | Disagree | 7 | Small English-speaking countries have excellent records for macro stability. | Bio/Vote History |
Oliver Hart | Harvard | Agree | 7 | The main uncertainty concerns whether Scotland retains the pound (bad idea) and stays in Europe( good idea). Once resolved things may be OK. | Bio/Vote History |
Bengt Holmström | MIT | Agree | 6 | Bio/Vote History | |
Caroline Hoxby | Stanford | Uncertain | 10 | We should be uncertain. Short-term uncertainty would be high, yes, but "many years" depend on choosing sound policies for real growth. | Bio/Vote History |
Hilary Hoynes | Berkeley | Agree | 8 | Similar case as the EU. Shared currency is a constraint. | Bio/Vote History |
Kenneth Judd | Stanford | Agree | 4 | One major challenge would be how to handle the volatility in oil revenues. | Bio/Vote History |
Steven Kaplan | Chicago | Uncertain | 3 | Instability high initially, but could force left-leaning government to govern more effectively. In medium run, may be better for Scotland. | Bio/Vote History |
Anil Kashyap | Chicago | Strongly Agree | 9 | Splitting = extreme economic pain: sharp budget adjustment needed, big monetary challenges, big financial risks, they're "better together". | Bio/Vote History |
Pete Klenow | Stanford | Uncertain | 3 | Bio/Vote History | |
Jonathan Levin | Stanford | Agree | 2 | Bio/Vote History | |
Eric Maskin | Harvard | Agree | 5 | Bio/Vote History | |
William Nordhaus | Yale | Agree | 8 | Bio/Vote History | |
Emmanuel Saez | Berkeley | Agree | 7 | Bio/Vote History | |
Larry Samuelson | Yale | Uncertain | 1 | This is unclear - pegging the Scottish to the English pound might essentially replicate the current state of affairs. | Bio/Vote History |
José Scheinkman | Princeton | Uncertain | 7 | Macro instability will result if announced policies (currency board, nationalizations) are followed. | Bio/Vote History |
Richard Schmalensee | MIT | No Opinion | Scotland would be poor when their oil runs out in a few years, but stability would seem to depend on currency, EU, other uncertainties. | Bio/Vote History | |
Carl Shapiro | Berkeley | Agree | 3 | Bio/Vote History | |
Robert Shimer | Chicago | Agree | 3 | Change creates the potential for instability, but a floating currency with good governance could be stabilizing | Bio/Vote History |
Nancy Stokey | Chicago | Uncertain | 4 | Not obvious why fluctuations would be greater. It depends also on what happens to the currency and what happens with the EU. | Bio/Vote History |
Richard Thaler | Chicago | Agree | 1 | I suppose this is right, but there is some much uncertainty about how things would play out that I have no confidence in any predictions. | Bio/Vote History |
Christopher Udry | Yale | Uncertain | 4 | Bio/Vote History | |
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Contact: Anil Kashyap is available for further comment at [email protected].
Press contact: Neil Atherton at Noir sur BlancTel. +33 (0)1 41 43 72 83 / E-mail: [email protected]