Tag Archives: free market economics

Oliver Goldsmith’s ‘The Deserted Village’ updated

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Sweet Auburn, loviest of village of the plain,

…

Where smiling spring it’s earliest visit paid,

And parting summer’s lingering blooms delayed

As a child I lived in many such Auburns, the first I can recollect was located in the Gloucester Cotswolds, the last in the Sussex Weald. Just as does Oliver Goldsmith, I also lament the loss of a community and a way of life which I cherished. My childhood came to a sudden and abrupt end when my father told me he was losing his job and that we would have to move as the house was a tied cottage. Suddenly I was thrust unprepared into the world of insecurity and anxiety, that is the adult world. Fortunately my father was offered a job on a nearby estate. Its owner was an old lady who wanted her estate run as if time had stood still. Employing a man in his fifties working as her gamekeeper schooled in the old ways suited her. If I gave this estate a anthropomorphic description I would call it a Mrs Haversham of an estate, it was one in slow decay that was desperately trying to cling its lost youth.

Oliver Goldsmith was lamenting a way of life destroyed by the enclosures. A period in which the people were denied access to the common land through the introduction of hedges and fences which now denied them access to the common land. (Breaking the fence to access the former common land was made a hanging offence under the infamous Black Acts.) If the agricultural poor were denied access to the common land they lacked the means to sustain themselves by farming that land. These people left the villages to find work in the towns. There was a similar depopulation of the countryside that started in the 1960s with the introduction of agri-business. The old country way of life with its intimate connection to the countryside was just not profitable. On the estate on which I lived most of my school mates and their families were given notice to quit, when the new owner introduce the new methods of farming. Although I cannot be certain of the exact number I think that at least fifty people were turned off the land.

The new lord was in contrast to his father. He was a man who had spent his formative years in the trenches of the Western front. There he got to know his men and had got to respect and value them. Death or the threat of it made brothers of them all. He as with many other junior officers was wounded in an attack on German lines. Sharing a casualty station and sharing the suffering of wounded and dying men of his unit can only have enhanced his sense of fellowship. He was noblesse oblige personified, he for example built retirement cottages on the estate for those who were to old or ill to work. A man blinded and wounded in the war was found a house and given a job minding the estates chicken. It mattered little that he contributed little to the estate, what mattered was that his sacrifice on behalf of the country was recognised. A man incidentally who us children found terrifying, were were scared to look upon his scarred face. Now to my shame I must admit our reaction was to run away on seeing him.

Writing this brief essay was to explain why I share Oliver Goldsmith’s sense of loss. I can read his and identify aspects of a lost rural life that are so similar to those he describes. He wrote of the village parson who cared deeply for his community, I knew two such Parsons. He writes of a terrifying schoolmaster, I experienced a terrifying choirmaster Mr P. Although beneath that gruff exterior I later discovered was a kindly and caring man. He was a teacher of the old school who believed fear was the best way of securing obedience amongst a group of unruly choirboys. One memory of him I cherish and that was when he spoke about me to a new choirboy. He said that ‘when J … joined the choir, he knew as little about music as that wooden bench. Now look at him’.

This essay is not intended to be a lament for a lost way of life, or to be a complaint about the ruthlessness of money obsessed landowners. Rather a celebration in prose a celebration of a lost way of life. What I also wish to show that despite all the changes in the countryside that had occurred since the 18th century there was still much that Oliver Goldsmith would have recognised in rural communities of the 1950s and 1960s. The loss of which I lament as much as did Oliver Goldsmith.

Alternative and/or Socialist Economics are overdue a revival

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Politicians have constantly complaining about economists, usually for not giving them the they want. Only recently Michael Gove a leading Brexit campaigner complained that the people were fed up with experts. What he was complaining about was the fact that economists weren’t making the upbeat predictions about Brexit that he wanted. It was disappointing to him that all these economists who were backing the free market reforms of his government were no longer supporting him.

Michael Gove is typical of many politicians in their misunderstanding of economics. While throughout the course of his political career economists tended to speak with one voice, that of the Neo-Liberal free marketers, that resulted from the suppression of alternative economic voices. Free market economists of the Chicago school dominated the universities and the professions, maverick economists were marginalised or silenced. When he proposed that the UK leave the European Union, the largest and most prosperous free market in the world they could not support him. What he had misunderstood that while some economists were willing to ignore the evidence that a precipitate break from the EU would be bad for the EU economy, most economists subscribe to the view that there subject is evidence based and could not back a policy that was contrary to the facts. Free market economists could not support a policy that led to the U.K. breaking with the world’s largest and most prosperous free market.

However Michael Gove is not totally to blame for his misunderstanding of the nature of economics. Economists fail to recognise the divisions within society and the conflicting interests of the various groups that make up society. What they prefer is one ‘great theory of economics’, a theory that explains everything and benefits all. In the 1980s for a variety of reasons mainstream economists adopted the free market economics of the Chicago School. This is its essence stated that the free market brought about the most equitable of outcomes. The free bargaining of sellers and consumers would deliver the best outcomes for all. No longer would the state be ineffectively second guessing what the people or consumers wanted.

Contrary voices such as that of Michael Polanyi were ignored. Michael Polanyi argued that the unregulated free market was the worst possible of outcomes. He stated that the state was in effect could be better at second guessing what people wanted, than the market. In a free market the rich and powerful have undue influence over how the goods and services that the economy produces are distributed amongst the people. Not only could they claim the lions share of the wealth, but they could also deny the majority a fair share of the nations wealth. The health care system in the USA provides an example of his thinking. There the well off can have access to the best health care in the world, but also deny access to adequate health care for the majority. Health care in the USA is run by for profit health care providers. These health care businesses are usually companies owned by shareholders. Those share holders that hold a majority of the companies shares are the super rich and they are not going to permit their business to provide loss making services, as they want the best possible return on their investment. The provision of universal health care to the less well off is a loss making service, so it is not provided. The poor and less well off instead have to rely upon the health care provided by the hospitals run by charitable institutions. These institutions are poorly funded and cannot provide the best of care. Michael Polanyi would argue that health care is a universal good, as all have a right to good health care and only a state run health care service can provide health care for all.

When only one voice is heard the result is bad policy making. Michael Polanyi has long since been forgotten and the government only gets policy advice from free marketers of the school of Friedrich Hayek and Milton Friedman. Now al too often government policy has been that of trying to fit square pegs into round holes. Every government embarks on a new policy to make health care services more market efficient, each reform costs billions, yet is considered necessary by each new government. Never does any health minister ever stop to think that their policy might be wrong and that there are alternatives to remaking the NHS into a faux free market. What all ministers believe is that by dividing the NHS into competing buyers and sellers (hospitals are sellers, selling there service to the various local health trusts) they get the most efficient of health services. Never do they understand that each new bureaucratic structure they impose on the NHS is yet another costly diversion of resources away from front line services and that these expensive bureaucracies may prevent health care being provided in the most effective and efficient way.

What economists know but politicians do not. Is that a health service run by health care professionals might adopt some wasteful practices such as over ordered get of medicines, but the cure for this problem is far more costly. If the most efficient distribution of medicines is to be ensured a new bureaucracy of stock controllers, accountants and financial controllers of all kinds. The cost of these bureaucrats far exceeds the cost of any over ordering by medical professionals. In the well managed private hospitals of the USA administrative costs account for 40% of the costs of running the business. Unfortunately in the U.K. the government with its various reforms is trying to divert an increasing share of the health care budget to these financial controllers.

Although Michael Polanyi who once was a well known economist he is now virtually unknown amongst contemporary politicians. Contemporary economists are overwhelming free market economists and little is published that is contrary to the consensus view. What is now needed is a ‘Dead Economists’ society. A society that popularises all the policy prescriptions of these long dead economists. There are a number that I can recall such as Michael Polanyi, J.K.Galbraith, Piero Staffa and John Maynard Keynes. If politicians were familiar with Friedrich Hayes’s work other than his short populist text, ‘The Return to Serfdom’, they would realise that he would have been critical of much ill thought out policy making. There are numerous economists who have written about the problems that face contemporary U.K. and suggest policy solutions, but all are ignored. What politicians want are the simple easy to under policies offered by the free marketers, they have little patience with good economic practice, as it is time consuming and does not offer the simple answers that make good headlines in the popular press. Donald Trump rather than be seen as a maverick politician contrary to the mainstream of politicians, should seen as representative of current political process in which politicians have a limited time span and want solutions produced within five minutes.

Our Dirty Streets are not so much a consequence of Neo-Liberalism as the Poor Policy Choices made by our Politicians

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As a fan of Scandinavia noir I am always struck by the cleanliness of the streets, which is such a contrast with the streets of the city where I live. Italy is always said to be a country where local government does not work, yet my experience of Italy is very different. When I stayed in Pisa, I would always come across the street cleaners when returning to my hotel late at night. Apparently the council was concerned that leaving rubbish uncollected in the streets would encourage rats and mosquitos. (Obviously there are exceptions, as in Naples where the Camorra control refuge collection.) British towns and cities seem to demonstrate a certain air of neglect, it is obvious that refuge collection is not a priority. What is not realised is that this dirtiness of the British city is not so much a characteristic of the national character, but a consequence of policy decisions of government.

This is a neglect imposed on local communities by central government consequent on it adopting the policies of Neo-liberalism. One of the tenets of Neo-liberal practice is that private enterprise is superior to public enterprise in the provision of goods and services. If however the state or local authority preferred to keep a service within the private sector, it should be run as if it was a private business enterprise. In practical terms this meant respect for the bottom line. If the private sector ethos was adopted by the public sector the same level of service could be delivered at a lower cost of the tax payer. Also these efficiencies in service provision meant that more could be delivered for less.

When working as a manager in local authority social services, I encountered this new philosophy first hand. The funding to local government had been cut and I was at a meeting with fellow managers to discuss how best to implement these cuts. This particular meeting was about home care; the local authority employed care staff to look after the elderly and the house bound. Our senior managers were enthusiasts for this new philosophy of work and had decided that twenty minutes of care would be all that any housebound individual needed. What we agreed on was a certain minimum of care that could be achieved in twenty minutes. Light dusting only was permitted in the room in which the individual spent most of their time. Using a vacuum cleaner to clean the carpet was forbidden, as it would take up too much time. There were a whole of list of don’ts, that is time consuming care activities. To ensure that the staff were not tempted to do more than the minimum, they were given so many clients to visit, that if they did more than the directed minimum, they would end up working more hours than those for which they were paid. This new service delivery scheme was regarded as a success as it mean fewer care staff were needed for home care, which meant a big cost saving for the local authority. What the housebound elderly or sick wanted was irrelevant.

A similar approach is applied to refuge collection. Funding for such has been cut by the central government to encourage the adoption of cost cutting efficiency As a fan of Scandinavia noir I am always struck by the cleanliness of the streets, which is such a contrast with the streets of the city where I live. Italy is always said to be a country where local government does not work, yet my experience of Italy is very different. When I stayed in Pisa, I would always come across the street cleaners when returning to my hotel late at night. Apparently the council was concerned that leaving rubbish uncollected in the streets would encourage rats and mosquitos. (Obviously there are exceptions as in Naples, where the Camorra control refuge collection.) British towns and cities seem to demonstrate a certain air of neglect, it is obvious that refuge collection is not a priority. What is not realised is that this dirtiness of the British is not so much a characteristic of the national character, but a consequence of policy decisions of government.

This is a neglect imposed on local communities by central government consequent on it adopting the policies of Neo-liberalism. One of the tenets of Neo-liberal practice is that private enterprise is superior to public enterprise in the provision of goods and services. If however the state or local authority preferred to keep a service within the private sector, it should be run as if it was a private business enterprise. In practical terms this meant respect for the bottom line. If the private sector ethos was adopted by the public sector the same level of service could be delivered at a lower cost of the tax payer. Also these efficiencies in service provision meant that more could be delivered for less.

When working as a manager in local authority social services, I encountered this new philosophy first hand. The funding to local government had been cut and I was at a meeting with fellow managers to discuss how best to implement these cuts. This particular meeting was about home care, the local authority employed care staff to look after the elderly and the house bound. Our senior managers were enthusiasts for this new philosophy of work and had decide that twenty minutes of care would be all that any housebound individual needed. What we agreed on was a certain minimum of care that could be achieved in twenty minutes. Light dusting only was permitted in the room in which the individual spent most of their time. Using a vacuum cleaner to clean the carpet was forbidden, as it would take up too much time. There were a whole of list of don’t, that is time consuming care activities. To ensure that the staff were not tempted to more than the minimum, they were given so many clients to visit, that if they did more than the directed minimum, they would end up working more hours than those for which they were paid. This new service delivery scheme was regarded as a success as it mean fewer care staff were needed for home care, which meant a big cost saving for the local authority. What the housebound elderly or sick wanted was irrelevant.

A similar approach is applied to refuge collection. Funding for such has been cut by the central government to encourage the adoption of cost cutting saving measures and the ending of what were seen as over friendly employee policies. The local authority can only manage this service by giving a time limit to each individual household refuge collection. Speeding up refuge collection is achieved by making householders take there bins on the pavement for collection. These refugee collectors know that if they delay themselves by collecting the rubbish strewn in the street, they will be unable to complete there work in time forcing them to work for free in their own time to finish their round. In consequence any difficult or time consuming tasks are left undone. Problematic streets or houses will be left untouched, as to tackle them would be take up too much time. Given human nature, the refuge collectors will be tempted to avoid the more difficult tasks claiming that it would contravene their terms of employment, which demands the minimum of time spent on each task. When the work practice emphasises quantity not quality, it is easy to understand why our streets remain dirty.

What has been had the most impact on the provision of public service provision is the self denying ordinance adopted by the politicians. The one that tells them that they should never interfere in the free market and that free markets work best if all power is ceded to the entrepreneur. If all entrepreneurs were gifted and benevolent this would be fine. Instead they have used this freedom from regulation and oversight to enrich themselves at the expense of society and the state. They have been given a licence to make money, a licence that imposes no obligations on them. Only today I read an article explaining how a property developer could make £50,000 a year. All they had to do was convert a house into a series of micro flats and charge the tenants exorbitant rents. This £50,000 would in come in part or wholly from the state. Either the tenants received tax credits to help pay their rent or the tenants received housing benefit which would be used to pay the rent. Only recently two major rail companies walked away from a contract the run the East Coast railway. The government never questioned there reasoning, it was sufficient for them to claim that the continue to operate the railway would cause them to lose money.

Rather than blaming Neo-Liberalism for this situation, it is the politicians who are to blame. They failed to have an elemental grasp of human psychology. If you give a group of powerful and ruthless people the freedom to act as they please, they will do just that. If profit maximisation is the sole motivating factor for running a service, the business owners will do whatever they can to maximise their profits. If reducing the quality of the service improves profits, that will be done. One illustration of this is a proposal by one of the privatised rail company was to strip all the seats out of the carriages in its commuter trains and replace them will diagonal resting places. This would have enabled the company to squeeze even more people on to its trains, increasing both revenue and profits.

Our politicians are as hapless babes in the cut and thrust of the market place. When a business tenders for a large contract, it incurs substantial costs in drafting that tender. If it fails to win the tender it will have to bear the cost of failed bid. Our political babes have allowed those who submit losing tenders, to sue them for the money they lost in preparing the contract. These naive innocents are quite happy to acquiesce in this most uncommercial of practices. The business men and women who compete for contracts for the privatised services have been more or less able to draft the terms on which they compete for government business.

What renders our politicians so helpless is that they have so decimated the civil service and local government in there desire to create a small minimal cost government, that they lack the staff who are either qualified or experienced to manage out sourcing successfully. Not so long ago the staff devising a contract for the running of a railway service, were so incompetent in their drafting and in the subsequent negotiations, that the losing tenderer was able to successfully take the the Ministry to court and win back the contract it had lost. It is not unknown that for a government so lacking in-house expertise, that it will turn to one of the large accounting companies asking them to draft the out sourcing contract. This same accountancy company could also be advising one of the companies bidding for that contract. With the out sourcing of government services to the private sector, it is always win, win for the private sector and lose, lose for the government.

Returning to the start of my essay the dirty streets of British towns and cities is a consequence of the adoption of least cost minimal service practices, associated with out sourcing and competitive tendering. This could be said to be a consequence of the adoption of Neo-liberalism, but really it’s down to the naivety of the political classes. To put it another way the wrong people are in charge of the provision of public services, people with the wrong mindset. When for those in charge the priority is the bottom line, non profit making services will be delivered for the lowest cost, even if that means the service is minimal and delivered barely acceptable standards. What is needed is the services to be put in the hands of those whose priority is to maximise the common good. Obviously cost efficiency is important but it should not be the main criteria for service provision. The least cost health care option is to provide no health care, but it is not necessarily the best option. measures. The local authority can only manage this service by giving a time limit to each individual refuge collection. Speeding up refuge collection is achieved by making householders take there bins on the pavement for collection. These refugee collectors know that if they delay themselves by collecting the rubbish strewn in the street, they will be unable to complete there work in time and will be forced to work for free in their own time to finish their round. In consequence any difficult or time consuming tasks are left undone. Problematic streets or houses will be left untouched, as to tackle them would be take up too much time. Given human nature, the refuge collectors will be tempted to avoid the more difficult tasks claiming that it would contravene their terms of employment, which demands the minimum of time spent on each task. When the work practice emphasises quantity not quality, it is easy to understand why our streets remain dirty.

Intellectual stupidity a practice common to both Economists and Politicians

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Intellectual stupidity is not a concept that is to be found in book on either the subject of economics and politics. This is a concept that was created by Robert Musil. He distinguishes between two types of stupidity, natural and intellectual. The first is the one due to physiological factors, it occurs when an individual lacks the mental capacity for higher order thinking. Although he would be criticised today for his use of this offensive word, he can be justified when its contrasted with intellectual stupidity. A term Hannah Arendt had in mind when she criticised evil as personified by Adolf Eichmann as banal. This was a man who lacked intellectual curiosity, he was unable to empathise with the millions of victims of the holocaust. He thought the was a good man because he made the trains to the death camps run on time. The fact that these trains took millions to their deaths was no significance to him. Their deaths were somebody else’s responsibility. He was in his mind a good administrator not an essential player in the holocaust.

Politics and economics practitioners are blighted with a similar failing. Milton Friedman was guilty of this failing. When Milton Friedman was told that the Chilean government when introducing the free market reforms he advocated were imprisoning, torturing and killing opponents of these reforms, he said it was a price worth paying. Just as with Adolf Eichmann his vision all that mattered was the introduction the Chicago School of Economic management to human societies. Human rights was for him just a matter of secondary concern. Recent political history has been dominated by such practitioners of intellectual stupidity.

In Britain such stupidity has been demonstrated by successive governments in there implementation of the free market economy. They see there role as being facilitators of a Hayekian free market system. When ever such reforms produce failures such as the collapse of Carillon, a company to which many government sources had been outsourced; it was a consequence of poor management with the company. Never was the policy of privatisation of government services considered to be a flawed concept. The ‘Economist’ magazine while exposing the failures of Carillon’s management mounted a strong defence of the outsourcing of government services. Now two other outsourcing giants Capita and Interserve are in trouble. Yet our government remains committed to outsourcing as a policy practice. This is demonstrates intellectual stupidity, as government ministers cannot contemplate any alternative policies or thinking.

Intellectually stupid politicians are always trying to second guess their civil servants. Rather than seeing them as experienced administrators who can offer them practical and useful advice on policy matters; they are seen conspirators who are trying to obstruct their policies. The traditional civil service practice of providing the minister with a series of policy alternatives from which to choose is seen as a threat to the integrity of government policy making. Just recently a senior politician who studied history at University decided that economists at the Treasury were conspiring to undermine Brexit, by producing erroneous data on the consequences of leaving the EU. This politician who has only a brief acquaintance with the subject of economics, claimed he could see not just errors but treachery in the work of these Treasury economists. This failure to accept any alternative view of events to the individual’s own is typical of the intellectually stupid thinker.

Why is intellectual stupidity the default mode of thinking of our politicians?

Perhaps part of the explanation lies in the books they read. Friedrich Hayek’s book ‘The Road to Serfdom’ can be read in a few hours, possibly on a wet afternoon, when there is nothing else to do. In this short book he claims to offer the solution to our contemporary malaise. There is no end to these books that claim to have the answer. Another such is Ayn Rand’s ‘Atlas Unchained’, yet another writer who claims to provide the solution to our current malaise. What these books encourage in their readers is a cult like belief, that they alone have the exclusive possession of the truth. The blinkered mindset of an ‘Moonie’, Jehovah’s Witness or Scientologist, is mirrored in the thinking of so many of our leading politicians. The lack of curiosity about alternative thinking is characteristic of the intellectually stupid.

These politicians have also been to the elite universities and this has given them an intellectual arrogance. They after a short period at university just ‘know’. One exemplar of this type is the politician who is an English graduate who decided that he did not need any advice from experts in their field (educationalists and economists), as he had acquired sufficient understanding ‘to know’. He as with so many of his colleagues ‘knows’ any further knowledge would be superfluous to the task in hand. These politicians can be best described as ‘generic’ politicians, as such they believe that they have already possess all the skills and knowledge necessary for the most demanding of political positions.

This lack of intelligent curiosity is demonstrated in these three remarks made by politicians about food banks in the U.K. The first said that increase in food bank use food was because people were attracted there by the free food on offer. Another said increased food bank use was a good thing, as it had shown that his government was more effective than the former at publicising this service. The last said people go to food banks for many reasons. What none of these politicians could say that people on low incomes were reduced to such desperate straits, that they were forced to go to food banks to get the food they needed for themselves and there families. Just as Adolf Eichmann could not bring himself to admit the his trains were taking the Jews to there death, so these conservative politicians cannot admit that there policies are creating such widespread impoverishment that thousands are now forced to go to food banks in order to survive.

This callousness is not the consequence of intellectual dishonesty, but a thinking that prevents thinking of either the Jews or the less well off, as people of any consequence. They are demonised either as a threat to the well being of the German people or a threat to the well being of the British economy and society. The political philosophy of both Adolf Eichmann and contemporary conservatives treats certain groups of people as inferior beings who lack the rights accorded humanity in general. A world view best summed up by the Nazi official who called Jews vermin.

What Robert Musil writes about intellectual stupidity is very similar to the thinking of Augustine on evil. He describes evil as a not knowing of God. People who don’t know God commit what we term bad acts. Augustine as a Neo-Platonist also equated God with Good, so people who did not choose to know God could not know good. The intellectually stupid chose not to know the evil of their actions and as such are unable to know good. These intellectually stupid would be the people who Augustine’s would accuse of doing evil acts.

Seeking Solace in Philosophy

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As an economist the quality that you most need is equanimity. Why, because as an economist you are all to aware of the follies of the politicians and the damage their policies can wreak on the economy and society. A concern heightened by my anxiety about the futures of my daughters and my expected grandchild. When a senior banker accused some of our leading politicians as being ‘clueless’ on the economy, I mouthed a silent ‘hear, hear’. What an economist needs is some defence mechanism that prevents them from being overwhelmed by pessimism. When one writer called economics the miserable science he was all too correct in his opinion.

Perhaps I should adopt the philosophy of Democritius, who dispelled this anxiety about the follies of mankind and in particular its leaders in laughter. However laughter is only a temporary source of relief and soon the feeling of pessimism returns. I find some solace in the classical Greek philosophy of scepticism. A philosophy which demonstrates that all which passes as human knowledge is fallacious. This is of some comfort when I realise that the ‘reforming’ policies of our latest group of reformist minded politicians are based on little more, that what can be described as a set of incoherent and wrong headed series of assumptions about human society. While I can get some pleasure from demolishing these policies in my mind, it does not help alleviate the blackness of mood.

Philosophy has always been a refuge for me. I can retreat to my philosophy books, which takes me to a world far removed from the pettiness of what passes for the public debate. Ever since I was introduced to him at university I have been entranced by the figure of Socrates. When Plato writes of about Socrates and one of his students going to the cool river bank to escape the hot sun in Athenian sun to find the a more congenial place for discussion, I feel that I could be there with them. Aristotle writes that the highest form of human activity is this, the contemplation of the great questions that have always puzzled and intrigued mankind. Students of philosophy such as myself enjoy the intellectual cut and thrust in the dialogue employed by the greatest of philosophers. What we understand is that there are no simple or easy answers to the great questions posed by the nature of human existence. While practising this very Western form of active contemplation, I can get so lost in the books that I’m reading so that I forget the world outside.

When devising his philosophy Plato would make use of the myth to make his reasoning comprehensible to his audience. Plato’s the cave is one very familiar myth, but there are others. One of my favourites is the myth of human creation in ‘The Timeaus’, he uses this myth to explain the fallibility of human understanding. Mankind he writes is fashioned by the demiurge (the divine craftsman) out of clay. If mankind is made out of some inferior substance to that of which the Gods are composed, they are therefore incapable of understanding or sharing superior knowledge possessed by the Gods. Compare this to the less interesting contemporary myth of the market, which dominates current policy making. It’s a myth that tells us little about the economy. The central tenet of market theory is that there is a price at which markets clear, that is there is a price at which supply equals demand. There has never been a market in which an equilibrium of supply and demand has been attained. In reality markets are inherently unstable, as supply and demand are constantly changing and are never equal. Consequently the myth of the market as a guide to policy making is unhelpful, although perhaps to call it useless is going too far. This is why I prefer philosophy to economics, the stories it tells are more interesting and more truthful.

Recently stoicism has begun to find favour. This is practical philosophy devised by the classical Greeks. Its purpose was to help its practitioners lead the good life. This practical philosophy teaches that the only things that one can control are the one’s own emotions and feelings. There is a story which demonstrates this. There was a stoic philosopher on a ship caught in a storm. He was the only person to remain calm during this storm. When asked why he was indifferent to the crisis, he said that the observed a pig on the ship. The pig seemed undisturbed by the storm, so he imitated the behaviour of the pig. There was nothing he could do to avert the possible impending disaster, so the only practical policy he could adopt was to remain calm, as his getting anxious would do nothing to avert the possible impending crisis. Those things in life that the individual cannot control they call the ‘indifferents’. There are many ‘indifferents’ that the individual cannot control, also some such as good health they can influence by adopting a sensible diet. Anxiety comes from worrying about these ‘indifferents’ over which the individual has little control.

Donald Trump and the alt. right are a threat to the way of life that enjoy. There ever willingness to resort to violence or to threaten its use, is a threat the the tolerant civilised lifestyle which I value. As is also his constant demeaning of various ethnic groups as the threatening other. As this is an indifferent over which I have little control, the person who suffers if I obsess about this is me. Constantly being anxious is damaging to the human personality. Being a good stoic I am concerned about the irrational and erratic behaviour of our leaders, but I am not going to be overwhelmed by my anxieties on that score. Also I can influence this particular indifference by becoming political active. I can become part of the resistance.

John Stuart Mill gives me solace when I read that freedom, is the freedom to think. Whatever the alt. right does it cannot control my thoughts. In doing this I do have an advantage in that I am retired and can devote my time to reading my philosophy books. Perusing one of Plato’s dialogues on Socrates I can lose myself in the world of the Classical Greek philosophy. Also I can counter the nasty xenophobia of the alt. right by going to my local coffee shop, and there I can immerse myself in the Italian culture. What can be more engrossing than a discussion of the merits of the various types of pasta, while enjoying a cup of Italian coffee. What I am trying to say is that for a stoic there is much I can focus on to enjoy in these unhappy times.

Stoicism offers an interesting historical parallel, Seneca one of the best known stoics lived in a Rome, whose ruler was the narcissistic Nero. Given the predominance of narcissistic leaders in the Anglo Saxon world, who mistake their personal well being and success as metaphor for that of society, one can see the value of reading Seneca. Despite being an advisor to one of the most capricious and unpredictable of Emperors, he not only survived in that role for many years while others perished, but he did for many years act as a restraining influence on Nero. During those years he lived a modest moral life in keeping with the tenets of stoicism. Although even he lost his life as Nero’s paranoia intensified. His ‘Letters’ and plays I believe should be required reading for staff in Donald Trump’s White House.

When I read Erasmus’s ‘Adages’ I am reminded that the curse of having leaders pursuing policies that are ruinous to their countries in order further their own personal ambition is nothing new. Renaissance Italy in which he lived was plagued by wars between the Princes and Dukes of the various city states, which might have brought fleeting glory to these men, but which were ruinous for there various city states and the Italian nation. Is there no more insightful into the psyche of politicians, than Erasmus’s adage that ‘war is sweet to those who have never tried it’? Despite the almost constant internecine warfare in Italy, Erasmus still managed to write and publish his criticisms of the crass behaviour of the ‘great’ men of Italy. Although, as with many writers living in authoritarian states to avoid persecution, his critiques of foolish and arrogant leaders were set in the past or given such ambiguous settings that no contemporary leader could consider themselves libelled.

Reading philosophy reminds me of the heights to which the human spirit can rise, in contrast to the gutters of the human spirit in which so many of our contemporary leaders reside. This is why I find solace in philosophy.

Why I am such a poor economist

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Actually I think I am quite a good economist, but I fail to match up to the standards by which professional or academic economists judge other economists to be good. This failing in my practice of economics began to develop in 1966. Then I was appalled by an article I read, which was written by two economists from my university advising the government of the island of Mauritius on how to improve their failing economy. It was a blue print for the most severe form of what today would be called Neo-Liberal economics. A reform programme that if implemented would have impoverished thousands if not millions of Mauritians. There was also a professor at my university who advocated an increase in unemployment as the best means of ending the inflation that beset the British economy of the 1960s. Today most academic economists now see increased unemployment as a useful policy tool in management of the economy. Then in the 1960s, it was heresy, as too many people remembered the misery caused by the mass unemployment of the 1930s.

Unemployment has always been seen as a necessary feature of a functioning market economy by economists. They believe that a certain level of involuntary unemployment is a required to make the market function efficiently. If there are people unemployed there will always be workers available to for expanding firms to recruit and there will always be workers made newly unemployed by failing businesses. Unemployment when explained in these terms can be seen as justified, as the free market model suggests that there is but a short time in which workers remain unemployed. Unemployment then is a short term pain suffered by a few, their temporary period of pain was for the benefit of all.

However the economy never worked in the way described by economists. There were a number for whom unemployment was a temporary situation, but there were many for whom unemployment was for the long term and who were subject to life of poverty and misery. What economists failed to take into account was there was always a mismatch between the location of  unemployed workers and the location of the expanding businesses. Large scale unemployment always occurred in areas where many businesses were failing or where many had already failed.

Economists had an answer to this problem, the unemployed workers should move to the areas in which there was work available. This is a solution of unbelievable callousness, it treats people as if there were a resource similar to other non human factors of production. One that should be used as the business though fit. Never have economist recognised the inhumanity of their policies. One can be sure that all economists are unfamiliar with Steinbeck’s ‘The Grapes of Wrath’. A book in which he describes the miseries suffered by the ‘Oakies’, the people forced off the land in Oklahoma by the Great Dustbowl and forced to look for work in California.

What makes me a bad economist is that I can’t accept the inhumanity of my subject. The golden rule of economics is that labour or humanity is just a resource like any other and should not be treated differently. This is very much the accepted rule today. It is unusual to find any economist speaking against the closure of any business and the unemployment it creates. All they see is human resources freed to work in more profitable sectors of the economy, the recent spate of closures of retail businesses to economists just part of the structural change in the economy. Put simply online competition in the retail trade has forced many high street shops to close, which they see as a consequence of the essential restructuring of the market.

One might add that in a British economy that is struggling there are few of the profitable sectors of business that will recruit these workers. Usually redundant workers find work in which they are paid an average of 30% less than in there previous work. Skilled workers are forced to take relatively low paid work in call centres and warehouses. There is no happy ending to a period of unemployment that the economist claim.

There is to an economist such as myself (one who sees unemployment as an evil to be avoided wherever possible) an alternative explanation for the closure of these high street shops. For me an equally important factor in this situation is the inflexible and dysfunctional commercial property market. The shops are always situated in central areas of towns or cities where the shop sites command premium rents. Economic theory states that when the demand for a resource declines its price should fall. Recently the House of Fraser appealed to its landlords for a reduction in their shop rentals in light of there falling profits. There landlords will ignore their plea and continue to demand sky high rents. All these city centre or high street sites are owned by large property companies whose only concern is to extract the maximum possible rent from these sites. It matters little to them if the shops fail and thousands lose their jobs. What matters most to them is the rents remain high, even it that means the site remains vacant. These people are eternal optimists and will wait as long as it takes to find a new tenant who will pay there extortionate rents. What makes me a bad economist to my peers is that I would seek a different solution to the problems of the failing high street. The solution for me is to introduce some form of rent control, there are plenty of mechanisms that can be used to ensure that a fair rent is charged for a property. This would benefit the economy as it enable many viable businesses to survive that would otherwise be put out of business through excessively high rental costs. Also it would preserve many thousands of jobs that would otherwise be lost.

Before anybody criticises me for being unfair to the commercial landlords through forcing them to let properties for uneconomic rents. It should be noted that all our city centre properties are owned by a few large property companies. These companies operate an informal cartel in which they co-operate in their self interest to maximise their rental incomes. In the past it was quite usual for such cartels to be regulated by the state to prevent them from abusing their powers.

Where I differ from so many economists is that I believe that policy measures or economic practices that create unemployment should not be a first resort. The first option businesses consider to increase profits, should not be to shed staff. The hollowing out of a business whereby labour costs are reduced to a minimum through shedding staff and premises closed to reduce costs to increase overall businesses profitability should be made difficult to undertake*. When hollowing out of a business occurs it is not just the staff who suffer, but the customers who experience poor customer service or a reduction in the quality and range of goods on sale.

The problem for me is the inhumanity of much economic theory and practice. I cannot accept economic policy and business practices that damage society’s well being as ever being justified. Not only is much of current business practice as sanctioned by economics harmful to individuals but it is also harmful to the state. When workers are paid wages that are insufficient to support themselves and their families, the state has to step in to provide in work benefits. The cost of these in work benefits are very substantial and represent a huge subsidy to bad employers, as state struggles to ensure that these low paid workers get a living wage.

What I have to answer is why economists are so indifferent to the suffering of their fellow inhumanity. Why don’t economists care? The answer I think can be found in the writings of Wittgenstein. He introduces the concept of the language game, language for him is not universal there are groups with society that have their own language or language codes which have meanings that are understood only by them. One such group are economists we use words and phrases that have no meaning to outsiders, such as monopsony, giffen goods and zero lower bound. Some I can easily explain to non economists others I would find it practically impossible so to do. Economists have their own unique language embedded in which are truths only known to economists. The supreme good in which economists believe is the free market. The greatest gift that mankind gave to itself was the creation of the free market which ensures the most efficient and equitable distribution of goods and services. All economic policy making should be directed towards ensuring the most efficient operation this free market. Other economists such as myself that don’t share this belief are dismissed as poor economists.

There is one example from the 19th century which best demonstrates how economists think. When the Irish potato famine was at its height in 1846, the government suggested that it should import wheat from Russia to distribute to the starving Irish. Economists, landowners, land owing politicians and farmers objected. It would be an interference in the free running of the market and no good ever comes from government intervention in the market. Governments they said do not understand the workings of the free market. These objectors argued it would lower the price of wheat in the British market and put British farmers out of business. This they argued it would be bad, as it would reduce the number of farmers working in the industry and reduce in the long term food production in the British Isles, so causing problems in the future. Anybody familiar with Irish history knows that the government rejected the proposal to import wheat to feed the starving Irish, preferring to let them starve. To those who would say this is an unfair depiction of the mind set of economists, my rejoinder is that they know nothing of the thinking of the economists employed by HM Treasury.

Economists always have a defence against the claims that the practice of economics is an exercise in inhumanity. They will claim that the free market will in the long term provide all the benefits and goodies that it is possible for an economy to provide. All that is required in patience however Keynes provided the best retort to this thinking he said ‘that in the long run we are all dead.’

*One easy means of making hollowing out a less popular practice, would be to reintroduce the employment protection policies of the past, such ending the practice of zero hours contracts and other short term employment contracts that make it easy to dismiss staff. Re-introducing fair redundancy payments for dismissed workers would be another.

When a visitor encountered the philosopher Democritius* in his garden, he to his surprise found him laughing uncontrollably. When asked why he was laughing, he said it was at the follies of mankind. If Democritius was living today he would have found plenty to laugh at in the follies of our leaders.

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One of the more interesting of the Greek philosophers was the sceptic philosopher Pyrrho. This was a man so sceptical about the possibility of there being such as human knowledge, that he did not bother to look where he was going went he went walking, as he thought that if he was going to fall into a ditch there was little he could do to prevent it happening. While this story recounted by Diogenes Laërtius is apocryphal it does illustrate quite clearly the nature of his thinking. As all human knowledge was fallible, he said that we should be wary of putting too much trust in the great systems of the philosophers that claimed to ‘explain everything’. Why I value Pyrrho is he an  antidote to stupid thinking. Whenever I contemplate the latest popular fashion in contemporary thinking, I always think of Pyrrho. I am wary of the latest popular enthusiasms, whether it be for hygge, Gloop the philosophy of Gwyneth Paltrow or Neo-Liberalism, as on examination they all seem to rest on similarly filmsyl foundations.

Unfortunately politicians with a naive belief in rightness of free market economics are particularly prone to such stupid thinking. The politicians of the New Right,  despite their claims to realism are often the enthusiasts for the silliest of ideas. One such is the idea that the when the UK leaves the EU it can install an computer based system to record all foreign trade transactions. This scheme will operate so efficiently it is believed, that traders will find litle difference betwen the new trading system  and the current regulation free trade system. Traders will find it as easy to move goods in an out of the country as they do at present. The only flaw is that there is no such system anywhere in the world and the record of governments installing new computer systems is one of failure. This government has spent seven years trying and failing to introduce a computer system to pay benefits, the much derided universal credit system. If this scheme in which all the recipients of this benefit are already known and yet the government finds it impossible to get the scheme to work effectively, how can it possibly develop an IT scheme that will be able to handle the thousands of daily transactions that make up our international trade. Already the fallibility of the HMRC computer system enables thousands of people to avoid paying tax. Yet even although they know this, these Brexiters claim that they will be able to introduce a new marvellous IT system which will have none of the failings of any of its predecessors.

What Pyrrho would have advised these politicians and economists of the New Right to do; would have been to look at the past history of government failure in the procurement and introduction of new IT systems. This would have reminded the Brexit enthusiasts that there has never been a government IT scheme that has not been a magnificent failure.

If they were not convinced by that, he could have told them to look at the problems of IT in the defence system.  The operating system in our new aircraft carries is Windows XP, an operating system so outdated that Microsoft has stooped supporting it with updates. The vulnerabilities of this operating system were exposed when hackers (from North Korea)? were able to shut down so many of our hospitals that relied on this as an operating system. Also the broadband speeds available to these carriers does not exceed 8mb, a speed slower than most household broadband systems.  Pyrrho would have told these politicians to stop being foolish and indulging in stupid fantasies and instead address the reality of the real world of flawed computer systems.

Why blame economists when all the failures that I have outlined are those of the politicians? Quite simply because all these politicians of the New Right and our Brexit are believers in the economic philosophy called Neo-Liberalism. Neo-Liberal thinkers such as Friedrich Hayek and Milton Friedman have taught that mankind has invented the best possible of social institutions and that is the free market and that the role of politicians is merely to ensure the smooth operating of this market.

It would be anathema for these politicians to install customs barriers at our sea and airports, as that mean introducing a barrier into the smooth working of the free market. Their philosophy then poses for them an unsolvable problem. Having decided that the UK must leave the free trade area that is the Single Market and the Customs Union, how do they introduce customs barriers that are not customs barriers? They know that once they introduce customs checks on imports and exports at Dover, they face the possibility of there being long tailbacks of traffic. Some estimates state that these queues will be up to 15 miles long. Now having introduced a problem that has no solution, they resort to a fantasy answer. The IT system for exports and imports that they propose only exists in the realms of their imagination, it is incapable of an existence in the real world. Its nonsense but nobody in government wants to admit to this.

What puzzles me is the great majority of these politicians who are enthusiasts for this scheme studied philosophy at one of our elite universities as part of their Philosophy, Politics and Economics degree. Even although scepticism is not the fashionable mode of philosophy in our universities, philosophy departments do boast that they teach their students critical thinking. Obviously our politicians of the New Right seem to think that this is a skill that only applies to essay writing.

*Democritius was a philosopher who lived in the fourth century BC in the cityl of Adbera, Greece.

A suggestion from an economist as to how the free market could be made to work for the benefit of all

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All the evidence from the economy suggests that the free market system is failing. The list of markets that are failing seems almost endless. Perhaps the most obvious failing market is the housing market. In 1973 a minister (when the state directly provided social housing) could state with some justification that there were no homeless people, today the reverse is true. Yet despite the evidence of thousands either living in temporary local authority accommodation awaiting rehousing andthe  countless others living in unsatisfactory private rental property, politicians deny that the housing market is broken.

Why do politicians not recognise the failure of the free market system? One answer is political fashion, which to paraphrase George Orwell pigs ‘public sector bad, private sector good’. This belief in the supremacy of the market system for providing goods and services can be traced back to one influential thinker, Friedrich Hayek. In his book ‘The Road to Serfdom’  (1944) lauded the supremacy of the free market over any alternative economy model. In this very readable book he states that freedom is the free exchange of goods and services between individuals. When the state decides what people want it is tyranny, an economic tyranny comparable to the political tyranny exercised in the fascist and communist states of Europe. Although to this economist cannot see how the provision of state subsidised social housing is a deprivation of economic liberty.

Hayek was a voice speaking in the wilderness until the economic crisis of the 1970s happened. In Britain in 1976 inflation hit the unheard rate of 27%. Politicians desperately looked for a solution and found one in the writings of Hayek and his prophet Milton Friedman. The next twenty years saw a bonfire of regulations and a rush to transfer what public sector services and businesses to the private sector. What politicians hoped and believed was that the introduction of the free market economy was the once and for all solution to the economic ills of the this decade.

Hayek still grips the imagination of the political classes. The privatised railway system in Britain is one of the most expensive and inefficient in the developed world. Yet despite polling evidence suggesting that a majority of British voters would welcome the re-nationalisation of the railways, the majority of politicians regard this as beyond the pale. Only an outsider such as the current opposition leader would argue for this popular cause. There is one certain outcome from this election and that is even if the opposition won the election, the consensus view within parliament would effectively nullify any attempt to return to a nationalised rail service.

There is one failing in the free market philosophy of Hayek that is always ignored. He assumes that the exchange of goods and services takes place between individuals who are equals. The worker for him is free to bargain with the employers to obtain the best possible wage. In Hayek’s impossible scenario the worker and employer equally benefit from the exchange. What he does not recognise is that there is no equality of power in this exchange. While the employer is free to buy the workers labour at the lowest possible wage he can negotiate, the employee very rarely has the power to negotiate the highest possible wage. History demonstrates that in a market lacking employment protections and trade unions, the worker rather than being able to negotiate the best possible wage has to accept the going rate, no matter how poor. It is a market in which Says law applies. Rather than workers negotiating for the highest rate of pay possible, they have to accept the wage whatever rate of pay the employers are prepared to offer.

When the market works well it is unrivalled as a means of exchange of goods and services. The problem is that in Britain it rarely works well. It is the unequal distribution of bargaining power that prevents the market working to the benefit of all. When one person has significantly more bargaining power than the other, be that person an employer or landlord, the other person is at a significant disadvantage. They will inevitably lose out, whether it be having to accept a low wage or by paying a high rent for inferior accommodation. The only way to make the market work is to introduce some equality of power into the relationship. Only then will the more powerful not be able to exploit the less powerful.

One solution would be to introduce legislation to remedy the imperfections in the free market, as was the practice in the 1950s and 60s. However this is not possible when the majority of political classes are committed to Neo-Liberalism or the free market economy. A majority of the of the current generation of politicians would oppose any such policy. There is another solution that might appeal to the free market politician. Greater equality could be introduced into the market and through the legal system so making the exchange of goods and services a more equal relationship. At present civil law with its remedies for civil wrongs is unavailable to the majority of the population, because of the high costs of legal action. Not only is there the high  cost but the wealthy subject of a legal action can spin out a case almost indefinitely so discouraging all but the most determined and wealthy of plaintiffs. A reformed legal system that made justice available to all could make Hayek’s free market work in a manner which he intended. The free market politician would have no reason to object as such a change would only be to enforce the rights of the individual and not subject the business to the whims of the almighty state.

This might seem an incredible statement but the legal system of the Roman Empire particularly that of Justinian was in some ways superior to that of contemporary Britain. Under this system the aggrieved individual could bring their case before the local magistrate. These magistrates seem to have had more power than contemporary British magistrates. They could interrogate the plaintiff and witnesses before arriving at a verdict. From what I understand of the Roman system there was an approximate equality of position of the plaintiff and defendant, something lacking in British courts.

There already exist in Britain a network of small claims courts(1). The remit of these courts could be extended to include a new category of civil wrongs. These courts would retain the principle of not penalising the less well off plaintiff, by not privileging those defendants that have legal representation and through preventing the defendant claiming their legal fees from the plaintiff. What matters would be that the court proceeding do not privilege the wealthy, making these courts accessible to the poorest.

There is one example demonstrates the ugly nature of our current legal system. The British Human Right act gives every person the  ‘right to enjoy the privacy of your own property.’ In our unbalanced legal system a rich property developer was able to persuade the high court, that privacy meant the right to develop their property regardless of the noise nuisance it caused the neighbour’s. In a fairer legal system there would have been a counter claim by the less well off neighbour, which would have prevented this nonsense becoming law.

One further requirement would be an amendment to the Human Rights Act, an amendment that included new rights such as a fair recompense for work. These rights could be incorporated in a relatively short document as they are only statements of principle and it would be the role of the courts to define what these rights meant in practice.

What I am proposing is a remedy for market failure. A remedy that restores a measure of equality in  the bargaining process in the free market. Rather than looking to government to remedy market imperfections, individuals working through the court system will able remedy the failings of the free market. Employers and landlords will be less inclined to adopt exploitative or abusive practices, if they know doing so will involve them in having to defend such practices in open court. Instead of a race to the bottom in which employers vie to adopt most exploitative cost cutting practices to save, there would be a move upwards towards a fairer employment regime.

A salutary lesson for this left of centre economist is that the legislature cannot be relied upon to protect the rights of citizens. Individual legislators are too easily corrupted by powerful corporate interests. As the recent past demonstrates they are only too willing to legislate away the right of citizens to further the corporate interest. Not so long ago a senior member of the government (of a party claiming to represent the workers) saw his role as frustrate the EU commissions attempt to increase the rights of agency workers.There is an old adage that states that the person who can be best relied upon to defend your rights is yourself. The record of the Westminster parliament over the past forty years only too clearly demonstrates the truth of this adage.

This is only intended to a sketch of how the free market could be changed to the benefit of all. Today’s news has demonstrated the need to find an alternative to seeking remedies through parliament. The Prime Minister announced that she would be introducing a policy which entitled all workers to a 12 month period of absence to care for an ill relative. What she failed to make clear was that this would be unpaid leave. A meaningless reform on a par with all the rights of the Soviet citizen that were written into that country’s constitution. Rights that in a police state were meaningless.

(1) There are a number of tribunals that at present that consider these wrongs,but I have left out reference to them for ease of writing.

Why economists lie

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I should start with a disclaimer, I am an economist who likes to think that I am generally honest. What I am protesting against is the tendency of many practitioners of my profession to lie. They lie when faced with problems to which they have no solution, by claiming that to have policy solutions that in practice are unrealistic or untrue. 

Rousseau in his writings used the term amour-propre, words which have many synonyms in English and they include pride, self respect and vain glory. It is the last which is a fault that afflicts so many economists. They are the self acknowledged experts on the economy and are never willing admit that they are stuck for an answer. When a problem occurs they will look for an answer from their memory bank and choose one which seems to be offer the best solution. It is not an original solution, but one borrowed from the collective memory bank of all economists. What matters to the economist is that their answer will be judged as correct by their fellow economists not that it is the correct solution to the problem posed by the economy.  Given the complexity of the economy, they can always blame the failure of their policy recommendations on unexpected events.  The familiar its somebody else’s fault excuse is always available as a defence for a failed  policy. In this case its either the fault of the economy when they claim that the fault lies with  unexpected changes in internal or international economy, or its the politicians who fail to understand the policy prescriptions and implement them wrongly. When the great reforms of the 1980s were imposed on the British economy which led to a decimation of the British manufacturing sector; economists introduced another lie, which was that the pain being endured now would lead to a better future in which a revitalised economy which would work to the benefit of all. A future which never materialised.

What I am leading is a campaign for economists to say I don’t know. A willingness to look  at each situation afresh and use the skills of economic analysis to come up with original and new solutions to economic problems. Unfortunately the majority of economists believe that the economic toolset was largely completed in the time Alfred Marshall, whose most influential book the ‘Principles of Economics’ was published in 1890. All that is now required is a tinkering with the toolset left by Marshall to develop the economic policies needed for today. (Marshall systemised the study of market economics, developing a series of tools of economic analysis which are widely used today.)

The great change in the practice of economic policy making in the 1980s was the introduction of monetary economics associated with the American economist Milton Friedman. What was not realised was that he was merely adapting the quantity theory of money which was explained in a  book published  by Irving Fisher in 1911 to the world of the 1980s? Plagiarism in economics is not frowned on but worshipped, so long as the correct work in plagiarised.

Perhaps self censorship might be a more accurate term to describe the practice to which I am objecting. However every economist when studying the subject at university will either be taught about the flaws in the dominant model of economic analysis or would have come across them in one of the texts that they have studied. Yet once they leave university to practice their profession, they suppress their knowledge of the weaknesses or flaws of the favoured method of economic analysis. The act of forgetting probably becomes second nature to the practising economist. Deliberately ignoring the evidence that might suggest that their suggested policy remedies are flawed is an act of dishonesty. Lord Oakshott the former Liberal Democrat Treasury Minister once said that the British Treasury is populated by free market fundamentalists. What he was saying was that  Treasury economists were excluding from their economic policy making any evidence or thinking that was contrary to the free market model of economic analysis. This suggests that economic policy making by the government will be constantly subject to error, because of the wilful deception practised by Treasury economists.

Why economics fails

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There is it seems a present a desire to doubt the validity of economics and the skills of its practitioners.  Just yesterday there was Chief Economist at the Bank of England issuing a mea culpa on behalf of the profession, in which he apologised for his and their failings and said that economists must do better in the future. He is just another ‘failing expert’, as Michael Gove would have said. When Michael Gove said in the EU referendum debate that the people were fed up with experts and were best of without them, one assumes that he was speaking about economists. However Michael Gove as with many politicians is adept at deflecting the blame for their own mistakes on to others. Politicians are those in charge and they make the decisions on matters of economic policy and not the economists. Yet whatever failures of government policy that occurred in the period 2010 to 2016, Michael Gove and his colleagues will never put there hands up and accept their share of the blame. Politicians such as him have a list of scapegoats to use to disguise their failings and another such favourite is the  EU. Teresa May’s disparaging comments about citizens of the world being citizens of nowhere can be paraphrased to describe contemporary government ministers, they are the ‘ministers of nothing’ knowing and caring little about their departments. Just sitting out their ministerial brief waiting for an upgrade to a more high profile ministry.

While it is the politicians that have been responsible for the disasters of recent policy making, economists still share some of the responsibility, in that they have encouraged politicians to develop an almost papal like sense of infallibility. Neo-liberal or free market economists claimed in the decade 1970-80 to have discovered the holy grail of economic policy making. They claimed that at the heart of any economy there was a self regulating market which when left to itself produces the best results for all. This market mechanism was capable of outthinking any politician. If  left to itself it would settle on the natural equilibrium levels of growth, employment and inflation, which would in turn mean society would enjoy a level of prosperity that it would otherwise never achieved if the economy had been managed by politicians. All the politicians had to do was to create the optimum conditions in which to enable the market to work unhindered, which was quite simply a bonfire of regulations. They can maintain an Olympian disdain knowing that they know  the answers to everything and have to hand the one key policy measure, impose the free market on the seemingly intractable problem.

One thought  that never occurred to these politicians or economists is fallibility of human thought, never in history has mankind ever succeeded in creating the perfect social organism. They seem to have forgotten such schemes are referred to as utopian in the history books, because they are always hopelessly impracticable.

What cannot be said is that there were no warning signs. When with great enthusiasm the Conservative government of the 1980s followed the policy prescriptions of Milton Friedman, failing to notice that his major policy prescription was unworkable. He said that the government should be regulate the economy through control of the money supply. Unfortunately he had not done his homework, as in practice it proved impossible to define what exactly was money supply. The Bank of England came up with at least five possible descriptions of money supply. There preferred choice was description number 3, what was known as M3. The only reason for choosing M3 was that it was easier to calculate than the other possible choices. Then having settled on M3, they realised that it would be extremely difficult to devise ways of controlling this money supply. All possible solutions would involve interfering in how the banks managed their finances. Instead the government opted for controlling by money supply by controlling demand for money. If they changed interest rates this would either or lower the price at which people could borrow, so if they put up interest rates people would borrow less and the amount of money (bank deposits) in circulation would fall. Never once did it occur to the government that controlling interest rates was not the same as controlling the money supply. Interest rate changes could change the supply of money held but it was a very indirect and imprecise control. Unlike what Milton Friedman desired what the government used as a very rough and ready measure to control money.

Politicians were obvious to the problems of implementing this policy, is it because the economics of the time was encouraging them not to think and question. They cannot claim not to have any warnings of the volatility of the free market as there were many financial crashes from the period 1979 to 2008.Yet these politicians believing they possessed the holy grail of policy making were  able the collapse of the Asian tiger economies or the dot com crash.  In consequence the great financial crash of 2008 which should have been foreseeable became the catastrophe that came out of nowhere, a veritable economic tsunami.

What economists should also be blamed for is there willingness to overstate their abilities and knowledge of all things economic..The economy is one of the most complex of mechanisms developed by mankind and yet economists all to often suggest that they really do know, when they don’t. I as an economist take my lead from Socrates. The oracle at Delphi told him that he was the wisest of men, yet this was a man who claimed to know nothing. Was not the oracle stating that Socrates was wise because he was the only man prepared to acknowledge his ignorance? I always wished that as a teacher I had told my students that I really knew nothing about economics. Yet as an economist I know a thousand times more things about the economy that any politician. What I see Socrates as saying is not that he lacks knowledge but answers. He was I believe using his ignorance as ploy to unsettle  his rivals, as a reading of any of Plato’s dialogues does demonstrate that Socrates knew quite a lot. Any economist when faced with a problem should be prepared to state his ignorance, as with a rapidly evolving and every changing economy, yesterdays’ knowledge is never sufficient to provide today’s answers. As  an economist what I possess is a knowledge of problems that have occurred in the past which appear to have some similarities with the problem at hand. Using that knowledge I could suggest a variety of policy solutions and recommend that which I think would be most effective. However I know that in what is an ever changing economy events may happen to make my policy recommendations ineffective. Humility should be part of the economists weaponry. I know that I can’t give Michael Gove the definitive answer he craves, the world is much more complex than the one viewed from Westminster or his newspaper column. I do know that my answers are better than his on all matters economic, as some knowledge of the economy and its workings are always better than none.

The last word I leave to Erasmus, ‘only a fool boasts of their ignorance’ or should it be ‘that only a fool takes pride in their ignorance’. A faulty memory prevents me recalling Erasmus’s exact words.