In his column on the UK’s Office for Budget Responsibility, the Oxford university and King’s College London economist Daniel Susskind overstates his case that the true causes of growth are one of the great mysteries of economic thought (“The OBR has been a victim of its own success”, Opinion, FT Weekend, March 8).
From the work of the Nobel laureate American economist Professor Robert Solow — recently deceased and much-mourned — we know an awful lot about the proximate determinants of growth, namely the pro-growth effects of investment in physical and knowledge capital, and in skills.
We know, for example, that the effect of building 1.5mn new houses — which is the Labour’s party target by the end of the parliament — will be small, given this is only around 3 per cent of the housing stock. By the same logic, we also know that the cumulative effect of decades of under-investment in public infrastructure is holding growth back.
True, we know rather less about the political and institutional processes that drive these investment decisions. It is also true that the measurement of growth will become more difficult.
As we spend more on defence, for example, contrast the ease of estimating the extra output of ammunition versus that of national security.
We need to redouble our efforts to understand the economics and politics and to measure the economy better. Trumpian nihilism opens the policy advice door to snake oil sellers.
That really will make UK growth worse.
Jonathan Haskel
Professor of Economics
Department of Economics & Public Policy
Imperial College Business School
London SW7, UK
