I link to Ian Cowie’s blog. If you are reading this, it is there on the right hand side of your screen if you scroll down to ‘Interesting blogs’
What I did not realise was that the Daily Telegraph use that link to feed any and all financial articles so when I click on it, often as not, I don’t get Mr Cowie (erudite, informed and sympathetic to his readers most of whom are bereft of a PhD in Economics), I get someone else entirely.
Today, I got Andrew Lilico and his article entitled, ‘On what is and is not an argument about Ricardian Equivalence (long and wonkish, but politically relevant)’
Merely the title he gave his tome should have served as an urgent health warning to anyone foolishly trespassing within reach of his intellectual wit. Having been fooled by the ambiguity of it and walked off that very short pier a simple mouse click entails and then floundered hopelessly in the mire of his tortured logic, I was only saved by the divine intervention that caused my laptop battery to fail (clearly God is not ready for me yet). All I can say is, don’t go there unless you are a fairly determined but as yet undecided suicidal. Even the most awful death would be a blessed release.
The worrying thing is, though, that clearly governments are being advised by an army of Lilicos (just read his CV and the comments below his post, assuming you can make it that far before suffering a cardiac infarction). There are loads of Economynists out there and not one of them can agree with the other.
George Osborne, a gullible man, sadly all too real
I self administered a couple of squirts of Nitrolingual and a handful of Inderal tablets and pressed on finally getting to the penultimate paragraph:
“Relative to a tax-funded programme, deficit-funded spending isn't expansionary in this case, because if consumers face a one-off tax increase of $100 billion they will not cut their consumption by $100 billion in the first year, either. If the spending is expansionary at all, it is precisely as expansionary whether funded by taxes or by debt. Krugman is mixing up Ricardian Equivalence with the claim that consumers are forwards-looking (which is a requirement for Ricardian Equivalence, not the theorem itself).
If this is the sort of educated yet conflicting advice that grocer’s daughters or Selfridge’s towel folders get when assuming office, flushed with an ardent desire to heal the world, no wonder we are in such shit and they age so quickly.
Financial markets, the basis of our economy, are based on a fiction. While exhorting Joe Public to be responsible, to go easy on the store cards, to beware the £1000 instant credit for the new plasma and to invest 70% of their income in personal pension plans and private health insurance, the government injects yet more taxpayer funded cash into the economy through the banks to stimulate yet more lending, resultant debts, however bad, that can be repackaged and turned into bottom line assets and sold on to other financial institutions some of whom, you may be shocked to learn, fail.
Western governments ridicule African leaders for their vanity projects but how would you classify Trident nuclear submarines and a high speed train link from London to the north? Who the hell wants to go up there at high speed? If I am heading north, I would at least like the time to get smashed. The Olympics, the most internationally visible expression of self adulation pale into insignificance in comparison and all are funded on the ‘never never’ of government borrowing.
Lilico described his own article as ‘Long and Wonkish’. Well, it was definitely long. I am not sure about ‘Wonkish’ though, mainly because like the rest of his article, I haven’t a clue what it means. Perhaps it is an economist’s term for gratifying one’s self over the first draft of one’s manuscript. All those big words and obscure references that plebs will not be able to understand, but the giggling Wonkers behind the bike sheds will.
Personally, I subscribe to the greatest, yet sadly fictitious, economist of all time. Would that our politicians could absolve their responsibilities for a whole country as efficiently as some of us run our own households based on the Micawber principle:
"Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery."
You cannot borrow yourself out of a hole. All you can do in such a situation is skulk at the bottom of it, foregoing the nuclear deterrent, alternative power and the plasma TV until you can afford to pay cash for the ladder to get you out again.
Mr Lilico may have given us a decisive insight, who's to know? Certainly not I. It is all Greek to me.
Andrew Lilico. Self confessed Wonker and educated person
Many thanks for the interesting read - I wanted to post a reply sooner, but I’ve had to bounce children almost continuously for the last week. Bah! Humbug! By the way, did you get my email?ReplyDelete
I think a lot of talk pertaining to economics generally and finance specifically is designed to be dry and opaque. When I analyse such texts with my students the first reaction is apathy. However, when we cut through the fluff and distill the ideas a little, the students are fascinated (or at least that’s what they tell me). They understand how economics shapes everything in our world, but because it is so damn boring they prefer to leave it to others to figure out. When I point out that doing this makes them a mere passenger in their own lives, they ask what choice they have.
If more people had an inkling of what is going on in the City and on Wall Street the system would be forced to change (take a look at http://www.amazon.com/Treasure-Islands-Uncovering-Offshore-Banking/dp/0230105017/ref=sr_1_4?ie=UTF8&qid=1325495260&sr=8-4 for a brilliant exposé of tax havens as an example of how the market has been distorted by large corporations). You might also enjoy the short video at www.crisisofcredit.com
I’m a liberal capitalist in the sense that I think everyone should have equal access to information and markets and the freedom to make decisions for themselves (and live with the consequences) within a regrettably necessary tight regulatory framework. However, what we have now is a distortion of the system. How can I as an individual possibly compete with Goldman Sachs when trying to optimise my investments? Theoretically we have access to the same information and markets, but that just sounds like a bad joke. Maybe I could hire them to do the job for me, but then we hear stories about how Goldman Sachs bet against their own customers. If a large bank is threatened with bankruptcy, they get money from the government. How is it that these bailouts were passed so quickly? I’m sure a large part of it is to do with the fact that many people don’t know the difference between millions, billions and trillions. How can it be that after a crash in 2008 that threatened our entire way of life we are already back to business as usual with an even bigger crash looming? Why don’t more people realise that if a company is too big to fail, it is simply too big? It always amuses me that defenders of the status quo describe themselves as capitalist, whereas what they actually want is to centralise power - not to government perhaps, but to big business. That is the very antithesis of true capitalism.
It also destroys democracy. If everything is privatised and government’s role removed, what is the point in voting when the government no longer has any relevance? Sure, I could buy shares in my electricity provider, but I think this stealth disenfranchisement by means of unnecessary complexity and asset-stripping of the government is very dangerous. We are then mendaciously offered referenda on everything, overthrowing centuries of our tried-and-tested system of using elected representatives to make these decisions. What possible use is a referendum on intricate aspects of fiscal policy when a sizeable percentage of the population can’t read a bus timetable? Besides, the referendum is never about the question. It is actually a confidence vote in the government of the day.
Sorry about that. I feel a bit better now - I think I needed to get that off my chest. I hope you disagree with everything so that I get the opportunity to release even more frustration.
When I taught economics (at the high school level), the first thing I would tell them is that it is a pseudo-science. I would then tell them that it tries to describe the world in a certain way, and that it is about choices. Then, I would tell them that knowing the ideas was vital, but the terms were made up to make econ. look like a science.ReplyDelete
And Lilicos is a wonker with an "a". Childish? Yes; but no more so than that article he wrote. Big words don't make maturity - hell, all my students knew a whole slew of big words.
As for his defense, all I can say is: awkward.