Who will be the next winner of the Nobel Prize in economics? One answer is that it might be a modest and quietly spoken professor who sits in an eyrie-like office, high above the busy Euston Road in central London.
Earlier this year, Richard Blundell was awarded the Nemmers Economics Prize, second in prestige only to the Nobel. Seven of the past 11 Nemmers winners have gone on to win a Nobel. And Blundell has been widely tipped in recent years for the profession’s big gong itself.
There’s something of a paradox about the career of Blundell, a professor of economics at University College London (UCL). While he’s extremely influential within the economics community – with his dense econometric papers notching up tens of thousands of citations from peers – he has little public profile.
And yet he spends a very large share of his time grappling not only with complex econometrics but with highly newsworthy public policy issues as director of research at the Institute for Fiscal Studies (IFS). “My holy grail is getting the tax and benefits system right,” he cheerfully confesses when we meet.
John Van Reenen, one of Blundell's former PHD students (and now a distinguished economist in his own right at the Massachusetts Institute of Technology), argues that one of Blundell's major contributions has been to use econometric techniques and micro-economic data to analyse and improve public policy. He singles out the example of Labour's 1999 New Deal for Young People, which Blundell's research showed was having a big positive effect.
"His approach to econometrics is always as a tool to help understand the data and [policy] questions – not simply an end in itself," says Van Reenen. Another pre-occupation for Blundell is the economic impact of inequality, something Jeremy Corbyn forced to the top of the agenda at this year’s general election.
“Economists are often accused of not worrying about inequality – it’s just unbelievably untrue,” Blundell says, plainly frustrated by some of the recent attacks on the profession as a handmaiden of tax-cutting, welfare-slashing, political ideologues.
And while the IFS tends to avoid talking about political power, Blundell makes no bones about the fact that one of the major challenges presented by the high share of income flowing to the super-rich is indeed political. “If the top 1 per cent are in command of 20 per cent of income, which influences the kind of products you can produce, it also has political influence,” he says.
“There’s some inevitability that very high amounts of wealth in a few hands means that they’re incredibly powerful. It can be for the good. Bill Gates does good. But there are probably as many that don’t.”
Blundell is also concerned with the welfare of the other end of the income distribution, what he describes as “the bottom 20 to 25 per cent”. And here Blundell is also, somewhat uncharacteristically for an IFS man, happy to wade into political waters, laying into George Osborne’s plan in 2015 (which Theresa May’s Government has still not ditched) to slash tax credits and present a higher minimum wage as a form of compensation.
“The minimum wage doesn’t really replace other types of in-work support because it doesn’t bring family incomes to the level we want in reducing poverty,” he says. “They go hand in hand in my view. I don’t like this idea that the minimum wage is a substitute for tax credits. If we end up going down that route that’s a very poor policy to take.”
But Blundell, in keeping with the IFS ethos, is resolutely non-partisan. He suggests the Labour leadership is backwards-looking when it comes to tackling inequality.
“I think the problem in the policy debate – whether it’s Brexit or Corbyn – is the kind of romantic vision of the past. Britain in the 1970s, where we had the lowest level of inequality, even if that was a good time, which I very much doubt – you just can’t replicate that.”
Instead of trying to turn the clock back through high personal marginal income tax rates, he wants governments and competition authorities to be much more proactive in breaking up firms that have too much market power. He also wants the practice of governments taxing wealth at a lower rate than income – not least through low and patchy capital gains levies – to be put to an end.
“We should try and tax all sources of income at a reasonable marginal rate – and there’s no question that we don’t do that. A lot of the reason is the lack of co-ordination across jurisdictions.”
“That’s one of the reasons I’m depressed about the way things are moving. I’d like to see more [international] co-ordination [on tax]. Europe’s a great vehicle for that,” he continues, warming to his theme.
Brexit clearly weighs heavily on Blundell. “I wish [the vote] had never happened,” he admits, stressing the adverse impact the rupture is likely to have on the higher education sector by cutting off EU funding flows and disrupting research networks. “One of the great benefits of the internationalisation of the economy and of academia is that I have colleagues from all over the world – a lot from Europe,” he says. “We operate Europe-wide, you don’t even think about it. We’re extremely worried about how that’s going to develop.”
Blundell cuts a more youthful figure than his 65 years, which may have something to do with his five miles of daily cycling between his Gospel Oak home and his Euston office. Though he admits that the London traffic can be “a little disturbing” he thinks the environment for cyclists is actually improving. “It’s probably safer than it’s ever been, but there are a lot more cyclists,” he says, taking a suitably statistics-driven approach to the subject.
He’s still enthusiastic about his work, pointing to the new research opportunities presented by the “big data” revolution and what he sees as the swing towards his kind of empirical economics. “I’m certainly not planning on stopping! It's a very exciting time. There are more challenges for empirical economics than I’ve ever known so it’s wonderful. All the young economists want to do empirical economics,” he says, a note of satisfaction in his voice.
Nor is he concerned about the relevance of the subject, with Brexit, inequality, nationalisation, the minimum wage, and welfare cuts all jostling for position at the top of the news agenda.
“You need an economics degree to understand the news,” he jokes.
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