Examination of Witness (Questions 1-19)|
24 MAY 2006
Q1 Chairman: Professor Blanchflower,
welcome to the Committee and congratulations on your appointment.
Maybe you have read the papers this week and think you have been
prejudged; let me tell you, as Chairman, you have not been prejudged
and you have got a very fair hearing here, as any witness has,
so we welcome you on that basis. At the appointment hearings we
focus on two issues, in terms of your professional competence
and your personal independence, and it is those angles from which
we are coming; so welcome. As well as that, we have quite a range
of questions. How were you appointed to the MPC and when did the
appointment process begin and what did it entail?
Professor Blanchflower: I was
contacted first by the Permanent Secretary, who asked me if I
was interested in the appointment; then there was a period of
about a week where I had a return conversation with him and they
suggested that they would like to offer me the appointment and
further conversations took place. Eventually I talked to the Governor
and we made sets of arrangements and eventually I agreed. The
whole process took about 10 days and it was done prior to the
announcement in the Budget.
Q2 Chairman: Thank you. It has been
reported that you have agreed to travel from the USA for the purposes
of attending MPC meetings. Do you intend having your main residence
in the UK or will you commute from the USA?
Professor Blanchflower: My main
residence is going to be in the US, my family and my children
are there, but I am going to be here for the time of the appointment,
so the arrangements are that I will be here for the 12 days a
month that are necessary for my appointment, to do all the meetings.
Q3 Chairman: Your time commitment
to the UK will be 12 days every month?
Professor Blanchflower: The appointment
is three days a week and I will be here for those, but I have
no other teaching responsibilities and so I will be doing work
as well while I am at Dartmouth.
Q4 Chairman: You have a link with
Professor Blanchflower: I am going
to teach a couple of classes a year to the Scottish Economics
Q5 Chairman: You envisage yourself
being here for more than 12 days a month?
Professor Blanchflower: I think
Q6 Chairman: Probably half and half?
Professor Blanchflower: Yes. My
daughter is at college here, my family are here, my eldest daughter
is here, so the intention is I will be here to do my commitments
to the MPC but my family are all here.
Q7 Chairman: Who will bear the cost
of your travel from the USA; has that been arranged?
Professor Blanchflower: Yes. The
Bank is going to take account of that.
Q8 Chairman: How do you respond to
concerns that your teaching and consulting commitments in the
USA will make it difficult for you to have the same level of knowledge
of the UK economy as that of other members of the MPC?
Professor Blanchflower: I have
no teaching commitments in the US. I simply have an office. I
am on what is called `leave of own charges' so this is my primary
responsibility. I have just an office and no responsibilities
there. My consulting work is essentially on the other two days
a week but entirely flexible, with very few commitments, other
than one or two days a year I have to attend hearings. My focus
in most of my research over the last 25 years has been primarily
on the UK, it has been on other things but if you look at my publications,
either in the title or in the content, they have been greatly
about the UK, often UK-US comparisons, but I have been very close
to movements in the UK labour market and other markets too, and
to others, including the US. My focus I think certainly can be
Q9 Chairman: You have some arrangements,
I think, with the Chicago public schools; is that your consulting
Professor Blanchflower: I have
been doing consulting work over the years for the city of Chicago
and currently for the city of Detroit. I have been their expert
in a number of matters particularly to do with school segregation
and programmes for small businesses. I advise those cities, yes.
Q10 Chairman: Again, concerns are
expressed that maybe you will not have your ear close to the ground.
How many UK regional visits do you plan to undertake each year?
Professor Blanchflower: I intend
to do a lot, actually. The great tradition in labour economics,
unlike in monetary theory or other things, is really to be very
close to the ground and to hear about how businesses behave and
how individuals behave. Currently I have two visits being organised
now; my intention is to do four or five, or more.
Q11 Chairman: Where are they to?
Professor Blanchflower: The plan
is to go to Scotland for one and to Wales for one, and they are
being scheduled at the moment, that is between now and November,
and obviously when I am in post more will come about.
Q12 Chairman: You will be doing English
Professor Blanchflower: Yes; that
is my intention. It just happened that Wales and Scotland were
available so I said I would do those and I was happy to do them.
Q13 Chairman: On that basis, how
important are regional considerations in setting monetary policy,
say, in the USA, which you know well, and to what extent do regions
of the USA differ in terms of inflationary pressures and expectations
and can you have a read-across to the UK?
Professor Blanchflower: That is
a tough question. I think the strength that I bring, in many ways,
is that my research has a great deal to do with regions. I
have spent a lot of time worrying about disaggregation of things.
I think my expertise is in the micro foundations of macro. I have
studied a lot of regional stuff in the UK, and most recently in
the US. It is very hard really to get very good details on inflationary
pressures by regions, but I think the expertise that I have is
relevant in that regional things are important. An example would
be the current issue about net migration. Migration from the US
to the UK of, say, 250,000 people has very different implications
if all those folks came to London from if they went to Scotland.
I have regional knowledge. We have relatively little information
about inflationary pressures area by area, but I have expertise
in those areas.
Q14 Chairman: You are described as
a happiness guru and one of your researches indicates, and I am
reading here: "Increasing the frequency of sex for women
from once a month to once a week generates as much happiness as
would a $50,000 per annum pay rise." Does that apply
in all cases?
Professor Blanchflower: No, I
would not say I was a happiness guru. My interest is a technical
one. I have been interested in well-being and trying to understand
what impacts well-being and trying actually to measure the effect
that money has on happiness. That happens to be just one part
of what I do, it is one small paper of many that I have written.
It is about really trying to value well-being, trying to think
about how much happiness a unit of money would bring and then
trying to scale it against other things. It has been fairly
sensationalised but it is a very small part of what I do.
Q15 Chairman: We will describe it
as empirical determinants of happiness?
Professor Blanchflower: I think
that is how we would describe it. I am a type that measures things.
Q16 Chairman: To what extent do you
believe that your appointment signals a greater official
recognition that growth should not be measured solely in monetary
Professor Blanchflower: Obviously,
I do not know what the Chancellor's thinking on it was, but certainly
my research has to do with trying to think about well-being, distress
and thinking about growth, in a sense that, as an intermediate
good, if you like, growth per se is not the thing we care
about, it is well-being, living standards, impacting on people.
I think you might signal obviously that there is an interest in
it, because that is the kind of work that I do and obviously it
is of current interest. I know about some of these issues. How
you should signal it I am not exactly sure, maybe you should ask
Q17 Chairman: The Committee have
been discussing this issue amongst ourselves, so maybe at some
future date you could be an expert witness?
Professor Blanchflower: I would
be happy to do that. I think this is a growing area and obviously
interesting questions come from this kind of work. I was one of
the early people to work on it, so I know about it.
Q18 Chairman: I do not want you to
offend either myself or Mr Thurso, but you have said that "Scots
may be brave, but they are neither healthy nor happy." Why?
We have a balance of numbers: half the Committee are getting upset
Professor Blanchflower: Chairman,
this is not a value judgment, this is merely an observation in
the data. In a sense, it related to your previous question.
Q19 Angela Eagle: It is the fried
Professor Blanchflower: The Scottish
Parliament had said that we need to push for growth in GDP and
I had tried simply to look to see what were the other measures,
what other things did there appear to be in the data, and on happiness
measures the Scots did not appear as happy as some others. It
is not a value judgment, Chairman, it was just what the data said.
Chairman: You will find a buoyant, happy
bunch here. Over to Michael.