The problem with the world is that the intelligent people are full of doubts, while the stupidest ones are full of confidence. Charles Bukowski. Economics policy making explained in a nutshell.

Perhaps I should start by explaining that rather in this essay I extend the meaning of the word stupid to include those that accept the unquestioningly the truths they are told. Truths stated and explained in the mainstream media, which has the advantage of enabling one to appear conventionally clever. Such an individual one in possession of these truths can speak fluently and convincingly at any social gathering. Westminster politics is the place where these mainstream truths can be heard most frequently. Such truths are the one told by a billionaire to a British politician on solving the problem of unemployment. His truth was that the unemployed have it made to easy for them, they are protected from the consequences of their indolence by government handouts. Cut them or get rid of them and these lazy blighters will be forced to work to avoid starving. A view expressed hundreds of times in Westminster debates during a parliamentary session, although in a slightly more sophisticated format. Similar to that expressed by the French economist Say in the infamous ‘Says law’, *that the only solution to widespread unemployment is for the unemployed to price themselves back into work by accepting wage cuts.

Am I being a little unfair in writing that anybody who fails to use their ability to think for themselves and who prefers accept the second hand truths of the mainstream discourse, is stupid I think not. Also the word stupid is much more headline grabbing than the word unthinking.

Economics is for me not a subject with any answers. The answer to yesterday’s problem is not todays answer. While the problem might appear the same, it is likely to be different in significant ways. The economy is a dynamic organism that is constantly changing and what was true yesterday may not be true today or tomorrow. An overstatement as obvious much remains unchanged otherwise organised society would be impossible. What is significant is the unnoticed changes that make fools of us all. Economics at its best provides us with the tools for understanding the economy. Just as the doctor relies upon their experience and the ‘online doctor to identify and diagnose an illness, so an economist should do the same. Hugh Laurie playing the Sherlock Holmes like doctor in the tv series ‘House’, has all the characteristics I would expect of a good economist. Not content with what seems the obvious he probes and looks for the hidden cause of the malaise.

As investigation into autopsy records showed that doctors made the incorrect diagnosis in thirty percent of autopsy’s. I suspect that if such accurate autopsy analysis was possible in economics the proportion of wrong diagnosis would be significantly higher. Economists must expect to be wrong in their diagnosis as often as they are right. This makes humility a required characteristic for economists, unfortunately most prefer arrogance. Modest engaging economists are few and far between, the showman is the more usual behavioural template for an economist. The economist who appeared on television in a striking all leather suit is all too typical.

Unfortunately most economics graduates leave university believing they have learnt all the answers from their studies there. Particularly those Philosophy, Politic and Economics graduates who dropped economics in their final year.Truths that are hallowed by time, truths that have stood the test of time. One such is the main policy instrument used for managing the economy, changes in the interest rate charged by the Bank of England. A technique of economic management perfected in the mid 19th century. Unfortunately a policy discredited by its failure to have any real impact on the great downturn in economic activity known as the Great Depression. Damningly dismissed as a policy by Keynes with the words that it was as effective as moving a ballon by pushing on its string. Nevertheless economic opinions shifts and its now back in favour, despite its past failings. Similarly the adoption of Neo-liberal economics, a policy whose fundamentals were established in Alfred Marshall’s ‘The Principles of Economics’ 1890. The Treasury who acts as the government’s economics policy advisor and director, is staffed with those student economists from the elite universities schooled in orthodox economics. A truth stated by the Liberal Democrat Lord Oakeshott, who said the Treasury was staffed by Neo-liberals. With so many ‘one school’ economists in the corridors of power, it is not surprising that economic crisis are made to fit the policy, rather than the nature of the crisis determining the policy action.

Is it unfair to see similarities between the certainty of our Westminster politicians and Treasury economists and that of the fool?

*Jean Baptiste Say ‘A Treatise on Political Economy’ 1803.