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.

Web
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).