Since the financial crash, and all the stuff about speculative financial markets, hedge funds, greedy bankers and their obscene bonuses for doing precious little of real worth, and then all the stuff about global warming, and BP’s poisoning the Gulf of Mexico … with all that going on it’s difficult to stand back and take a longer view of our situation. But it may be useful and instructive to try.
DNA scholars like, Spencer Wells (‘Pandora’s Seed: the unforeseen cost of civilization’), study human evolution from the genetic record stored in our DNA. Homo sapiens separated off as a distinct species around 195,000 years ago. Human population seems to have been relatively stable for around 115,000 years while people migrated from Ethiopia across Africa and the Middle East, it is presumed in search of food supplies to hunt and gather. Then population appears to have crashed, almost to extinction, around 70,000 years ago, probably as a result of climate changes reducing food supplies. Around 60,000 years ago population started to recover and spread across the globe. Then around 10,000 years ago, a watershed in man’s history, population started its continuous expansion from a few million to over 6 billion today, with a massive increase starting in the late eighteenth century. The change 10,000 years ago was caused by the conversion from hunter-gathering to farming and 250 years ago by industrialization.
Continue reading The Long View
Twenty five years ago Guy Routh published a book entitled ‘Economics: An Alternative Text’, proposing the outrageous idea that economic theory should be based on observation and an understanding of how things work. He quotes Richard Jones “if you want to find out how the world works, you must look and see.” This approach was, and is, completely outrageous; that’s not how economic theory works. And it is economic theory by which we are all ruled. Orthodox theory is based on the statement of axioms, ‘plucked from the air’, from which logical, usually mathematically calculable, deductions are made. The fact they bear no relation to the real world is of little importance to the ‘madmen in their ivory towers’.
Continue reading Guy Routh’s Critique
The dilemmas facing the new British government, though not them alone, in dealing with the biggest ever peace-time indebtedness, are how much of public expenditure to cut, what to cut and how to cut it and above all when to start. Do too little too late and “the markets” won’t like it and that would bring untold disasters. Do too much too soon and we’ll be in for a double dip recession. And then “the markets” would forsake us for good and all. We need to reduce short term indebtedness before its costs bring the recovery to a shuddering halt. That mustn’t be allowed to happen since its only a recovered economy that will eventually repay the long term debt and finally get us out of this mess.
Well, where are the very clever economists who invented all this jargon about double dip recessions and “the markets”? It’s exactly the sort of conundrum their sophisticated mathematical models should be able to solve. They have the computational power at their disposal; why are they not doing their sums and coming up with the answers?
Media commentators are continually condemning politicians of all parties for not being straight up with us, telling us the bad news about what they intend to cut. But, till now, politicians have probably been 100% honest on this score if nothing else. The simple fact was they didn’t know what they were going to cut. Because the economists hadn’t come up with any coherent suggestions. Because they didn’t know either. Because their fancy mathematical models didn’t work any better on that, than they did on credit default swaps, or eliminating the risk on sub prime mortgages, etc etc etc.
Maybe it’s time for people controlling the real world – who Keynes referred to as ‘the madmen in authority’ – to ignore theoretical economists, and apply the lessons of experience and common sense instead.