Iain Dale's Diary: We Have to Cut Spending & Cut it Now has a long discussion of the current Tory idea to just cut government expenditure.
My Take
What economic theory would recommend cutting spending in a recession?
In a lot of bloggers' commentary there seems to a belief that money is something real.
I think it is equally fair to see money as purely symbolic notation of value whose purpose is to manage not just the exchange of goods, but to introduce incentives into an economy.
What government policy is trying to do is to utilise this symbolic notation to bring about specific economic ends.
Actual academic economics is spectacularly unable to deal with the chaotic aspects of money, and actual political discourse is dominated by people who seem not to realise money is a system of symbols at all.
I would expect that within less than 10 years we will have the computing ability to make effective economic planning possible and ditch the drang und sturm of imaginary "rational markets."
9 comments:
Re computation and ec. planning: GIGO. Rich people and governments will have lots of motivation to lie.
What is GIGO?
"What economic theory would recommend cutting spending in a recession?"
The Austrian school, and its theory of the business cycle.
"I think it is equally fair to see money as purely symbolic notation of value whose purpose is to manage not just the exchange of goods, but to introduce incentives into an economy" etc...
If you are going to question someone else for non-conformance with mainstream economic thought, I wouldn't follow it with this guff, which has little relation either to mainstream economics or to critical analysis. Try Mises, The Theory of Money and Credit, or, if you want something more modern, Jesus Huerta de Soto's Money, Bank Credit and Economic Cycles, for a real exploration of what money is. Not mainstream, but right.
"I would expect that within less than 10 years we will have the computing ability to make effective economic planning possible and ditch the drang und sturm of imaginary 'rational markets.'"
This IT system will have the ability to read people's minds and predict the changes to their preferences, will it? And to predict the impact of innovation (always picking the right winners) and to know, without the benefit of markets, which innovations people will value and by how much?
With reference to the twentieth-century debate about the possibility (or otherwise) of economic calculation in a socialist system, the socialist economist Robert Heilbroner admitted that the events of 1989 proved that "it turns out Mises was right". Time to bring yourself up-to-date with reality?
Try Mises' Economic Calculation in the Socialist Commonwealth (1920) (http://mises.org/econcalc.asp) and Socialism (1922) (http://mises.org/books/socialism/contents.aspx).
The point is I don't think mainstream economics can be in any way correct. It's a false science in which predictions can only be made, if at all, by assuming unassumable "all other things being equal" clauses.
I was interested to see if Iain would be willing to openly adopt Austrian economics.
Mises? You Jest.
This IT system will have the ability to read people's minds and predict the changes to their preferences, will it? And to predict the impact of innovation (always picking the right winners) and to know, without the benefit of markets, which innovations people will value and by how much?
I think IT systems will be able to at least this. People are not rational actors, but that does not mean IT cannot pick up changes in preferences much faster than old central planning did.
I agree with you about mainstream economics, although there are snippets of insight amongst the dross.
You don't appear to provide any reason to disregard Austrian economics, or to dismiss Mises. This, and the suggestion that IT systems will be able to read people's minds and predict the impact of innovation within 10 years sufficiently accurately and frequently that they will enable effective economic planning and the ditching of markets, indicates that you put dogma ahead of reason.
I'll tell you what. 10 years is soon enough that there's a decent chance both of us will still be alive. What shall we wager that IT systems with those capabilities are ubiquitous within that period?
Of course, we will need to come up with some tests by which this can be judged. Something like the Turing test, but demonstrating mind-reading and predictive capabilities rather than the ability to convince a human of the respondent's humanity?
By the way, as Steve isn't responding, GIGO = Garbage In Garbage Out. You don't seem to be well-versed in computer lingo for someone so confident about their capabilities. Steve's point about motivations and the capabilities of computers is well-made.
Paul old son, you've been reading too much science fiction, specifically Azimov's Foundation series. It won't work. Human beings are far to perfidious - thank God. Or rather thank you God - for free will. Sure you can have 'socialism' as a centralising, bureaucratic and coercive state but who in their right minds wants that?
I am with bgprior. Just let us do. We, the people, aka the markets, can sort all this out and yes, we will compromise and agree to subcontract/outsource some stuff to 'the state'. Fr'instance I will agree to some income re-dsitribution in the form of education vouchers, and I might be content to tolerate the same for health and pensions, but as to giving away freedom to a set of silicone chips running a program designed by usually witless social scientists (in which I include economists in love with the planned political economy), nope.
I suppose I once did like Azimov. But ST:TNG is just as post-capitalist.
All I'm saying is that capitalism is a phase we will get through.
In the meantime, good people should oppose it as immoral.
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