Print Story It is my belief, brother, that your misogyny is largely theoretical
By TheophileEscargot (Wed Jul 23, 2008 at 09:15:11 PM EST) Reading, MLP, Economics (all tags)
Reading. "Clarissa Oakes". "The Chancellors' Tales: Managing the British Economy". MLP.

What I'm Reading
Clarissa Oakes was the latest Aubrey/Maturin novel. After having left Sydney under a cloud, Aubrey is infuriated to discover a woman on board, a fleeing convict smuggled into the cable-tier by a midshipman.
"Everyone knows how I hate a woman aboard.They are worse than cats or parsons for bad luck. But quite apart from that, quite rationally, no good ever came of women aboard -- perpetual trouble, as you saw yourself at Juan Fernandez. She is an odious wench, and he is an ungrateful scrub."
Trouble ensues, and there's also some action by land in the Pacific islands. Another good entry in the series.

What I'm Reading 2
The Chancellors' Tales: Managing the British Economy, edited by Howard Davies. Fascinating book (if you're into macroeconomics, which I think we all are). It's adapted from five lectures given by Chancellors of the Exchequer Denis Healey, Geoffrey Howe, Nigel Lawson, Norman Lamont and Kenneth Clark. Only the two who became PMs are missing: Major and Brown.

The Chancellor of the Exchequer is the minister in charge of the UK economy, which in this period before central bank independence included fiscal and monetary policy. Already it seems a little odd for one man to have this much power, as they casually talk about how I raised interest rates and introduced such-and-such a tax.

(Irrelevant digression: the exchequer was originally: "a quadrangular surface about ten feet in length, five in breadth, placed before those who sit around it in the manner of a table, and all around it it has an edge about the height of one's four fingers, lest any thing placed upon it should fall off. There is placed over the top of the exchequer, moreover, a cloth bought at the Easter term, not an ordinary one but a black one marked with stripes, the stripes being distant from each other the space of a foot or the breadth of a hand. In the spaces moreover are counters placed according to their values.")

Despite the position's power, they all complain of the difficulty of reconciling the pressures of the job, fighting political pressure from all the "spending departments" for more money, pressure from the PM to court popularity and time economic actions to match political events, pressure from the press, and a constant chorus of "you're doing it wrong" from economists. They all staunchly defend the principle of having a non-economist run the economy.

They are of course primarily politicians, and it needs to be read with a degree of skepticism, though they do occasionally admit to mistakes. They do seem to give a bit of an overly-rosy picture of their great achievements.

Overall, the picture is of a harder job than it looks. They point out the high uncertainties of the statistics they have to base their decision on. Inflation may seem to be rising by one measure, static by another, falling by a third. Well worth a read.

Some extracts.

Denis Healey:

The real problem, I discovered, was economics. I didn't study economics at Oxford, but I discovered very soon that economics is not a science, it is a branch of social psychology. People try to make generalizations from situations described by their teachers when they were students which had actually occurred twenty years earlier. So economic theory tended to be based far too much on what had happened two generations earlier.

Keynes described economics very well when he said, in 1937, something like: 'practical men who believe themselves to be quite exempt from any intellectual influences are usually the slaves of some defunct economist.' I fear this may still be true; it was certainly the case in my time.

Geoffrey Howe (asked whether he pushed for central bank independence):
I don't think we were pressing for revolutionary change beyond that at that stage. I don't remember discussing it as a serious option, and it is extraordinary that interest rate changes were regularly a matter for discussion between myself, the Governor and the Prime Minister, and questions such as the date of the next by-election often were billed as important as other monetary considerations, which is why chancellors like to get it out of Number 10
(Note: most of the chancellors here say that various Prime Ministers prevented central bank independence more than they did)
In retrospect the plague of public ownership landed us in a whole range of fool's paradises. It is fascinating that one of the huge burdens that I faced in the Treasury was the wholly unpredictable impact of nationalized industry deficits. They were out of one's control, one found oneself facing a billion pound bill for coal, half a billion pounds for steel. One of the great advantages of liberation in that respect has been to take those chunks off the chancellor's table.
Nigel Lawson:
I would add that monetarists do themselves no favours by moving from the correct judgement that inflation is caused by the excessive printing of money to the false assumption that monetary authorities engage in this out of stupidity, venality, or just for the hell of it, rather than in response to pressures in the real world.
But if I had to choose between the two achievements of Geoffrey Howe's time and mine -- getting inflation down and reforming the supply side of the economy, both of which were of course essential -- I would say that the second was the more difficult and thus the greater of the two. I do so on the basis of a simple test. Throughout most of Europe, the 1970s were a worryingly inflationary decade. Yet although the details varied from country to country, every established member of the European Union has succeeded in getting inflation down.

The 1970s also saw the European economy become increasingly sclerotic and underperforming. Yet though our partners on the Continent gradually reached the same conclusion as we had done, or at least paid lip-service to it, namely that the essential remedy was a full-blooded programme of supply-side reform, to remove rigidities and enable the market to work better, for the most part they have failed to get very far, finding it unpalatable or else too difficult.

Economists, at least since Marshall, have mistakenly sought to dignify their calling by describing it as a science, and have increasingly chosen to add verisimilitude to this pretence by clothing their propositions in the language of science, that is to say, mathematics. Despite being a one-time mathematician myself, I doubt if any chancellor of the Exchequer has ever been assisted in the slightest by a mathematical equation. For 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, while undoubtedly a serious subject, is more like foreign policy than it is a science, consisting as it does in seeking a rational course of action in a world of endemic uncertainty.

Norman Lamont:
My second budget was on the eve of the 1992 election, which put one in an impossible position. It was the most political of all my budgets, and it completely wrong-footed Labour, who were not sure whether to oppose or support a low rate band because of its appearance of help for the lower paid. Looking back on it, it was not a very good budget. But it did help us to win the 1992 election. My next budget, the third budget, helped to lose the 1997 election for the Conservatives, but it was definitely my best budget.
On Black Wednesday:
I expected 16 September to be a very difficult day and indeed it was. By 8.40 that morning we had lost £1 billion out of the reserves. The story of the rest of that day is well known. At 10 a.m. I put interest rates up to 12 per cent. I remember sitting in the Treasury watching the screens, waiting for the news of the interest rate decision to come through. Sterling was flat, just outside the bottom of its band. The screen just did not move when interest rates went up. I felt rather like a doctor watching a heart machine and having to conclude that the patient was dead. Unfortunately I had a lot of difficulty in persuading my fellow ministers in the Cabinet that the patient was clinically dead. I recommended to John Major that we should leave the ERM immediately. He wanted to consult other ministers. We spent a long time discussing this. I and the Governor recommended several times that we leave the ERP, but ministers wanted us to put rates up further, in a final attempt, to 15 per cent, which had no effect. The decision to put rates up to 15 per cent was the worst decision of the day, and it meant that the haemorrhaging of the reserves went on and on...

The greatest part of the loss of reserves did not come from discretionary decisions, futile attempts to support the pound. We were not chucking money around trying to support the pound. But under the system of the ERM, once the currency is outside its bands, people could buy sterling, come to the Bank of England and demand to be paid at the official parity. It was a licence to print money at that moment between 10 o'clock when we refused to get out and early evening when we finally did.

Kenneth Clark on allowing the minutes of interest rate meetings to be published:
The thing that irritated me most was that, when we first produced them, nobody took any notice of the minutes. I do not often moan about the media and the press in this country, I think we get the media we deserve and that politicians get the media they deserve. The financial and business press are probably the most distinguished section of the media: there are some extreme valuable commentators. But of course they all thought this was a fix, this was just a Treasury press release, and it did not represent what anybody actually said at any real meeting. This was all part of the spin, as it would now be called, so I could not get anybody to take any notice of it.

The one mistake I made at a meeting of the Treasury Select Committee was to start complaining, saying, "I do wish people would have a look at the minutes and realize that they are genuine minutes of genuine meetings, and not just regard it as the 'Ken and Eddie show'. Of course, far from having the effect I intended, all I did was get the thing christened the 'Ken and Eddie show' forever thereafter.

On a question about the sell-off of the gold reserves:
I always wanted to sell the gold reserves. I never could understand why our reserves had gold in them. You do need to have some reserves, and in my opinion they should be held in a basket of currencies from those nations with which you do most of your trade. That's the obvious basis of reserves, and I couldn't understand why we had gold. It is very good for jewellery, otherwise it only has mystique dating back to the pharaohs...

Over the years it has been a declining non-performative asset and in my opinion is only held in the reserves of national banks for mystical, out-of-date reasons.

Brains. MRI shows impaired communication in autistics. Electrode implants treat depression, no sign of tasp yet.

Licking. Heals wounds. Hippo licks croc video.

Video: Man loses cigarettes in diner crash.

Via Dinosaur comics, Herostratus.

Cake wrecks

London knife crime down.

(Credits: Thanks to the Doctor for telling me about the eurekalert feeds).

< ``At least with all the rain, the crickets will shut the hell up!'' | Cause at 5 o'clock >
It is my belief, brother, that your misogyny is largely theoretical | 26 comments (26 topical, 0 hidden) | Trackback
Chancellor being a hard job by jump the ladder (4.00 / 3) #1 Wed Jul 23, 2008 at 11:36:37 PM EST
Well it seems at least for some former chancellors being Prime Minister is even harder :)

Well by R Mutt (4.00 / 1) #2 Thu Jul 24, 2008 at 01:19:07 AM EST
Someone or other was saying that Gordon Brown's biggest problem as PM was that he doesn't have a strong chancellor to hold back spending, reassure the markets etc...

[ Parent ]
Ands I thought his biggest problem by jump the ladder (4.00 / 2) #6 Thu Jul 24, 2008 at 01:53:58 AM EST
Was he was a dour, uninspring geek with no clear ideas of what direction he wants to take the country now he's been overpromoted. Silly me :)

[ Parent ]
Write in by idiot boy (4.00 / 1) #3 Thu Jul 24, 2008 at 01:26:50 AM EST
Let the blind forces of free market liberalism take us where they will.

No by jump the ladder (4.00 / 2) #11 Thu Jul 24, 2008 at 02:25:26 AM EST
I think a Soviet Stalinist style five year plan is the only answer. Off to the gulag for you slackers and a T34 in every driveway.

[ Parent ]
Will look for that book by Breaker (4.00 / 1) #4 Thu Jul 24, 2008 at 01:33:19 AM EST
I do wonder though; out of all those who wrote for it and claimed that being an economist was not necessary to run the economy; would they expect the same lack of qualification from their heart surgeon?

Economics by jump the ladder (4.00 / 1) #5 Thu Jul 24, 2008 at 01:51:30 AM EST
It's not a proper science to same extent as medicine is. You can easily find out who's a crap surgeon from their deathrate. You can't find out a crap economist so quickly or decisively.

So having an economist "running" the UK economy may not be any better than a reasonably intelliegent layman with good advice. Greenspan was a economist but he was partly responsible for the current credit crisis.

[ Parent ]
Sadly ego seems to take over by Breaker (4.00 / 1) #7 Thu Jul 24, 2008 at 01:59:54 AM EST
There does seem to be a bit of "I am THA MAN!" mentality that creeps into Chancellors heads after a year or two of not fucking things up.

[ Parent ]
Erm by jump the ladder (4.00 / 1) #8 Thu Jul 24, 2008 at 02:02:15 AM EST
So you wouldn't get that with an economist in the same position with the added difficulty that he thinks his theory is now proved and works in all circumstances?

[ Parent ]
Of course not! by Breaker (4.00 / 1) #10 Thu Jul 24, 2008 at 02:23:52 AM EST
For different values of not, of course.

So what background would you consider good for the Chancellor of the Exchequer to have?

[ Parent ]
Intelliegent with some academic background by jump the ladder (4.00 / 2) #13 Thu Jul 24, 2008 at 02:31:26 AM EST
But with some real life experience of business not necessarily running one or working in the City. Some of the better Labour Chancellors have had a trade union background in industry as opposed to in the public sector.

[ Parent ]
Well, no by DullTrev (4.00 / 2) #9 Thu Jul 24, 2008 at 02:08:11 AM EST

Because, you see, one is a difficult job made more difficult by the lack of scientific rigour and dependable information, and the other is a strawman.

[ Parent ]
Why is it so hard? by Breaker (4.00 / 1) #12 Thu Jul 24, 2008 at 02:27:24 AM EST
Possibly because incumbents have had no experience with anything like it before?

[ Parent ]
It's hard to say whether they're right by R Mutt (4.00 / 3) #14 Thu Jul 24, 2008 at 02:43:14 AM EST
On the one hand, when they get into specifics of where they disagreed with economists, I tend to agree with the economists. For instance, Geoffrey Howe cutting spending in the middle of a recession, making the recession worse. Also I think Nigel Lawson could have had a less inflationary policy in the late Eighties boom.

On the other hand, it seems to me that the more technical bits of the job are relatively easy to delegate, but the political aspects are not. A chancellor can easily ask one of the boffins "what will the happen to unemployment if I raise interest rates 2%?" without having to understand the mathematics or the model himself. But when it comes to sitting in a cabinet meeting and saying "Look you can only have your aircraft carrier if you give up your hospitals", the Chancellor needs to possess the political skills himself.

[ Parent ]
I don't really follow the UK economy . . . by slozo (4.00 / 1) #15 Thu Jul 24, 2008 at 03:21:09 AM EST
. . . but this phrase jumped out at me as an outright lie and deception on the question of gold reserves:

"That's the obvious basis of reserves [basket of currencies with nations one does trade with], and I couldn't understand why we had gold." and even better, "Over the years it has been a declining non-performative asset and in my opinion is only held in the reserves of national banks for mystical, out-of-date reasons."

The English gold selling started in the summer of '99 or thereabouts, when gold was around $250 USD an ounce. Now it's well over 900 an ounce and the sky's the limit. I guess making money has become out-of-date! And any exchequer is well versed on why gold is/was held in reserves and the history of fractional banking, thus, one can only assume the statement is only meant to be misleading and duplicitous.

I think he's thinking in the longer term than that by R Mutt (2.00 / 0) #17 Thu Jul 24, 2008 at 03:33:55 AM EST
And it doesn't really make sense to hold your reserves in something whose price oscillates wildly. The purpose of reserves isn't to speculate on the markets.

[ Parent ]
But the market has been manipulated . . . by slozo (2.00 / 0) #18 Thu Jul 24, 2008 at 03:43:13 AM EST
. . . by the governments selling it off. Gold has only oscillated wildly as you say (I'd love my investment to oscillate wildly upwards by 400% in 9 years, btw) when governments and large investors have meddled - and it is always for a purpose (making more money). Left to it's own devices, gold rises pretty steadily . . . it is a long term investment.

[ Parent ]
Hmm by R Mutt (2.00 / 0) #19 Thu Jul 24, 2008 at 03:50:20 AM EST
Didn't we have the same discussion a couple of years back on how US housing was always going to keep rising?

Look at this graph for instance. If you bought at the $850 high in 1980, you'd have been screwed for the next 20 years, especially when you account for inflation.

[ Parent ]
Well, it might not have been me . . . by slozo (4.00 / 1) #20 Thu Jul 24, 2008 at 04:09:27 AM EST
. . . but you do have a point - there are peaks and valleys. What you point to, however, is a gold high that was artificially manipulated by federal reserve banks themselves, in order to sell high. When they actually did sell (after they pushed the price up with rumours to sell, coupled with an artificially constructed oil price spike), of course the price was put back down to earth.

Without getting into a long discussion on it, in the end, the fractional reserve banking system is a humanity dooming practice. Reserve banks are a for profit venture, can create money from thin air, pay no taxes (they receive some, though) and can charge you interest on imaginary money loaned that you have to pay back with real labour and produce. Unless it goes back to a reality-based gold reserve (or some other precious reserve commodoity), eventually it will lead to indentured (and real) slavery.

[ Parent ]
VOTE RON PAUL! by garlic (4.00 / 1) #21 Thu Jul 24, 2008 at 06:36:09 AM EST

[ Parent ]
LOOK AT ME! LOOK AT ME . . . by slozo (2.00 / 0) #23 Thu Jul 24, 2008 at 11:08:46 AM EST

[ Parent ]
I'm confused. by garlic (2.00 / 0) #25 Thu Jul 24, 2008 at 12:03:13 PM EST
Why would you ask me to explain my joke, when you're complaint only makes sense if you understand my joke? That's crazy talk, that is.

[ Parent ]
Well by TheophileEscargot (4.00 / 1) #22 Thu Jul 24, 2008 at 08:56:56 AM EST
I'm fairly familiar for the arguments against both gold standard and fractional reserve banking... several people have been pushing them on Metafilter. But I strongly disagree with both.

Here's a good description of the advantages of fiat currencies over the gold standard.

Fractional reserve banking has been with us for hundreds of years, and seems to have worked quite a lot better than its predecessors. It would be a real drag to get rid of it. For instance, if you wanted to buy a house, without that supply of credit, instead of getting a mortgage you'd have to rent somewhere else until you'd saved up the full purchase price.

Rather than credit availability leading to indentured servitude and slavery, I would argue that it was the lack of credit that helped keep pre-modern peasants subservient to the existing landowners. When it's harder to borrow money, the only people who can make money are those that have it already.
It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
Isn't this the whole theory behind by garlic (2.00 / 0) #24 Thu Jul 24, 2008 at 12:00:59 PM EST
microlending social change organizations?

[ Parent ]
Half of it by ucblockhead (2.00 / 0) #26 Thu Jul 24, 2008 at 07:17:07 PM EST
The other half is that if you loan out $100 to change some poor peasant's life, you eventually get the $100 back and can do it all over again.
[ucblockhead is] useless and subhuman
[ Parent ]
I once found the complete Aubrey/Maturin by Clipper Ship (2.00 / 0) #16 Thu Jul 24, 2008 at 03:27:15 AM EST
novels at a Goodwill in brand new condition for 50 cents each. I promptly bought all 20 and sold them to a used bookstore for well over $100 in trade for other books.

That was all kinds of win, that day. Win for nerds!


Destroy All Planets

It is my belief, brother, that your misogyny is largely theoretical | 26 comments (26 topical, 0 hidden) | Trackback