By Tony Weekes on May 18, 2010
Two items catch my eye from browsing the internet this morning (18 May). One from the Guardian: Graeme Wearden, in an article entitled Inflation hits 3.7% in April, quotes an economist with a City finance house, who argues that “ … recent fiscal and monetary policy means it is inevitable that the UK will suffer much higher inflation rates than it has enjoyed over recent years. The perfect recipe for high inflation is spend more than you earn for a few years, ramp up public sector debt and increase money supply faster than the economy is growing – and that’s exactly what the UK has done … However, there is often a lag. The UK economy is like Wile E. Coyote from the Road Runner cartoons who runs off the edge of a cliff and is suspended in mid air, only plummeting to earth when he finally realises his predicament.”
Is this – pure sound bite, off-the-cuff, trivia – the best we can hope for from those who have such a powerful (and undeserved, in my opinion) influence on “public thinking”?
Contrast this with a thoughtful contribution from James Galbraith (the son, I think, of the late Kenneth Galbraith): just a few words: “ …I write to you from a disgraced profession. Economic theory, as widely taught since the 1980s, failed miserably to understand the forces behind the financial crisis. Concepts including “rational expectations,” “market discipline,” and the “efficient markets hypothesis” led economists to argue that speculation would stabilize prices, that sellers would act to protect their reputations, that caveat emptor could be relied on, and that widespread fraud therefore could not occur. Not all economists believed this – but most did.”
Read more at http://rwer.wordpress.com:80/2010/05/18/i-write-to-you-from-a-disgraced-profession/.
We need more of this thoughtful analysis of what went wrong and what caused it … and more systematic examination of the alternatives.
That is why – to repeat myself yet again! – Quakernomics (or something like it) needs to prosper if we are to play our part as citizens rather than pawns!