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Five Myths and a Menace
January/February 2011

I wonder whether enough has been made by Adam Smith scholars, which I do not claim to be, of the intellectual connection between Smith and Charles Darwin. Darwin himself records how, during his last year at Cambridge, he spent much of his time studying Smith. And I have long been struck by the parallel between Smith's explanation of how economic order and growth is secured by the free interaction of individuals seeking their own personal satisfaction, "as if by an invisible hand", and Darwin's revolutionary insight, a century later, of how the remarkable natural order could arise spontaneously as a result of natural selection, without the need for an intelligent designer or divine watchmaker.

Be that as it may, I have been toiling in the field of political economy — and how refreshing it is to see the revival of that almost obsolete but wholly accurate term — for the best part of half a century now, first as an observer of policy-making as a journalist, starting on the FT in the 1950s, and for the past 36 years as a politician and sometime minister, as both a close observer and a practitioner.


Against protectionism: Milton Friedman and Ronald Reagan 

Throughout that time, I have found both Adam Smith's insights and his approach to the subject, however distant in time, both convincing and congenial. Not that I was brought up on him. My economics tutor at Oxford (I specialised in philosophy, but I did do some economics) was Keynes's pupil and first biographer, the endearingly eccentric Roy Harrod. Keynesianism ruled the roost, and Smith was known, to the extent that he was known at all, as the author of two books, one — The Wealth of Nations — of purely historical interest, and the other — The Theory of Moral Sentiments — of no interest at all. But I discovered him, to my instruction and delight, myself, and I hope the themes of this article are in his spirit. (I have borrowed my title from the film Four Weddings and a Funeral.) 

Myth No.1

Myth number one is that economics is a science. It goes back quite a way. Economists, at least since Marshall, have mistakenly sought to dignify their calling by describing it as a science, and increasingly chosen to add verisimilitude to this pretence by clothing their propositions in the language of science, that is to say, mathematics. But economics is not a science. On scientific matters we rightly expect a high degree of certainty, and are ready to leave many important decisions to properly educated experts. By contrast, economic policy is more like foreign policy than it is like science, consisting as it does in seeking a rational course of action in a world of endemic uncertainty. 

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slightly optimistic
September 6th, 2011
3:09 PM
Re 'Myth No3': "policies to promote the replacement of carbon-based energy by substantially more expensive renewable energy, notably wind power, will bring great benefit to the British economy and in particular create millions of so-called "green jobs"." In today's New York Times, David Brooks reports on experience in the US - 'Where the Jobs Aren’t'. http://www.nytimes.com/2011/09/06/opinion/brooks-where-the-jobs-arent.ht... Brooks concludes: "We should pursue green innovation. We just shouldn’t imagine these efforts will create the jobs we need."

mf
February 14th, 2011
9:02 PM
This discourse ignores some inconvenient facts. Chief of them is the fact that market economy, as a mechanism, can not function under conditions of sustained exploitation of labor. Sustained exploitation of labor shrinks demand, unless this demand is maintained by issuance of fraudulent credit, as it has been over the last three decades. This, in a nutshell, is the present dilemma in so called advanced economies. The second dilemma, that affects all, is that western civilization cannot be extended to all, in its present form, because it is too resource intensive. Hence, carbon based fuels are cheap only as long as 80% of the population of the planet can be kept in poverty. This, in a nutshell, is why this very long discourse (though it could have been longer) is also quite entirely useless. It misses the point altogether.

R.Bacon
January 24th, 2011
9:01 PM
At last, a one-handed economist.

slightly optimistic
January 18th, 2011
4:01 PM
'Accountancy Age' published its list of prime movers in finance for 2011, which includes former UK Chancellor of the Exchequer Lord Lawson. Surely well deserved - not only is he mischievously asking in a House of Lords inquiry who/what prevented auditors from alerting us to the financial crisis, but he's moving on to help with some of the issues for the French presidency of the G20.

George Fischer
January 15th, 2011
2:01 PM
Lord Lawson masterly discourse brings to mind Alfred Marshall's dictum in 1901: " In my view every economic fact whether or not it is of such a nature as to be expressed in numbers, stands in relation as cause and effect to many other facts, and since it NEVER happens that all of them can be expressed in numbers, the application of exact mathematical methods to those which can is nearly always a waste of time, while in the large majority of cases it is positively misleading; and the world would have been further on its way forward if the work had never been done at all."

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