From Tim Price – The Price of Everything (Great Britain) –
“Sir, Robert Skidelsky and Marcus Miller (Letters, February 27) consider that the Nobel Prize winner Friedrich Hayek offered a “counsel of despair” in the Great Depression. Next, we have the minatory clichés “writing on the wall” and a call for George Osborne to “change gear” or “let someone else take the wheel”.
“By chance, having literally been chauffeur in 1975 to Hayek at a Mount Pèlerin conference and thus spending some hours with him, may I declare an interest. Hayek was a delightful passenger. His view of the self-adjusting powers of markets is in fact a counsel of well-founded optimism. Indeed, as we discussed, allegedly “austere” Britain recovered from the 1930s slump faster than “New Deal” America where, in H.L. Mencken’s withering phrase, Roosevelt was “addicted to the spending arts”.
“The real “hoax” is the neo-Keynesian delusion that sub-optimal capital projects and monetary manipulations led by the knowledge-poor mechanisms of the state can do a better job than the relatively better informed, risk-disciplined actions of players in properly constituted markets. The Skidelsky / Miller imagery of the economy as a single automobile – a fixed construct with all parts known to the manufacturer – precisely illustrates the misconception that centrally operated levers and controls are appropriate to outcomes in the social sciences, and would have been gently derided by the unfailingly polite Hayek as such..”
– Letter to the editor of The Financial Times from Mr Peter Smaill of Borthwick, Midlothian, UK, 28 February 2013.
Charlie Munger tells a lovely story about Max Planck which may be apocryphal. After winning the Nobel Prize for Physics in 1918, he was invited to lecture widely. Planck had a chauffeur who drove him across Germany for the purpose. This chauffeur memorised the lecture and one say suggested, “Professor Planck, why don’t you let me give the lecture and we’ll switch places ?” So the chauffeur gave the lecture. At the end of the lecture a physicist stood up and posed a difficult question which was clearly beyond the chauffeur. The chauffeur replied, “Well, I have to say I’m surprised that a citizen of an advanced city like Munich is asking so elementary a question. So I will let my chauffeur respond.”
Few “professions” have been so widely discredited and fallen from recognition so quickly as the central banking priesthood has done over recent weeks. The 1810 Bullion Committee surely issued the definitive judgment on the efficacy of monetary policy as dictated by technocrats:
“The most detailed knowledge of the actual trade of a country, combined with the profound Science in all the principles of Money and circulation, would not enable any man or set of men to adjust, and keep always adjusted, the right proportion of circulating medium in a country to the wants of trade.”
In other words, since the job of controlling monetary policy, money supply and interest rates is beyond “any man or set of men,” perhaps we should let a free market decide.
But then most economists are as ignorant of history as they are unaware of the practical limitations of economic theory.
One might have thought that a magazine titled ‘The Economist’ might have some awareness of these limitations. Apparently not. Fresh from its defeat in campaigning against Brexit, ‘The Economist’ is now turning its blind eye to the inevitable deficiencies of central banking and the maintenance of a clearly sub-optimal status quo. Hands off the Bank of England, it cries in its latest edition, dismayed by the growing storm of criticism of Mark Carney and his explicitly political if ultimately futile huckstering for Remain.
Is there a word or phrase for defending the indefensible whilst massively missing the wood for the trees ? Being ‘The Economist’, perhaps. It is not about whether Mark Carney is the right man for the job. (He isn’t, but that’s not the point.) It’s whether the job should be conducted in the first place. It’s about whether the institution should exist. (You can sign to try and have Mark Carney along with his fatuous QE policies defenestrated here.)
Peter Smaill gets it:
“The real “hoax” is the neo-Keynesian delusion that sub-optimal capital projects and monetary manipulations led by the knowledge-poor mechanisms of the state can do a better job than the relatively better informed, risk-disciplined actions of players in properly constituted markets.”
A moment’s silence, please, for the demise of those properly constituted markets – done in by the price rigging machinations of those same central bankers.
If Mark Carney does elect to leave, or is pushed, ‘The Economist’ will clearly get a chance to publicly polish its credentials as reliably on the wrong side of just about everything in matters of modern economics – perhaps the Germans have a phrase for crowning irony. But they’ll be in good company. The Financial Times has consistently reported on “the Guvnor” through the prism of messianic delusions of adequacy. This is how Claire Jones and Sarah O’Connor fawned over his arrival at the Bank in their FT article of 2nd July 2013:
“Mark Carney, the new governor of the Bank of England, could hardly have timed his arrival better. Even before he launched his bid to revive the UK economy, following years of little or no growth, data signalled that the recovery is gaining momentum without his help.”
What a difference a few years, a failed attempt to keep us in the EU straitjacket, and a few hundred billion pounds of squandered money makes. The title of their article ? ‘Carney eschews car for the Tube and times his arrival to perfection’.
Never mind. At some point Mark Carney will return to his Canadian homeland having conclusively smashed the credibility of modern central banking here in the UK. If he goes back via the Atlantic, such are his presumed talents he can probably walk back.