I love it when people start off with “I don’t know anything about X, but what I do know is ….”

Here is an FT letter than annoyed me.

As a non-economist, I look to the FT for enlightenment as well as information …

Oh good.  And on a thorny topic: foreign ownership of companies.  Because we hate it but bringing up the barriers prevents competition and innovation flowing over borders.  A tricky one.   But no:

Does it not matter that Britain, unlike its neighbour France, is reduced to an industrial colony? Perhaps, with our tick-box education system that no longer tries to develop the ability to criticise, analyse and think independently, we are intended only to service the lower levels of foreign-owned industries and businesses. It should not surprise us if talented young people vote with their feet and leave the colony behind.

Oh.  Even as a non-economist, the letter-writer is able to discern the full cause and distant effect of, um, equity ownership shifting from one bunch of capitalists to another. She has worked the WHOLE thing out.

Some facts.  Young people flock TO the UK, including many French.   We have a competitive manufacturing industry and world-leading services.  We do not just do the ‘lower levels’ but participate in that grand division-of-labour by which activities move around the world according to skills and dispositions.  Globalisation.  And our education system still attracts a massive influx of foreign students.

Next non-expert: Muggle Janice Turner has read a book about finance:

Strangely, what I have learnt from my baby steps into financial waters is — aha! — I was right all along. My instincts, my natural suspicion of something for nothing, meant that I’d have spotted this would all go tits-up. Dubai’s new money always looked funny to me, as did Ireland’s. I was long concerned about young people maxing out credit cards; indeed, when invited to Downing Street three years ago, I ranted about personal debt to a startled Gordon Brown.

So it turns out she didn’t need to read anything.   That ‘you don’t get something for nothing’ feeling would have done the trick.

I disagree.  Every great endeavour of the past 200 years has needed that magic levitation that capitalism seems to achieve; of building it and then the capital coming.  How were railways built?  Amazon?  The Empire State Building?  The Second World War?  90% of the houses in this country?  Mortgages, debt, finance, bringing forward the spending/investment and trusting the thing itself to pay it back.   Yes, it seems weird, outrageous even, but it works.

At every stage of every expansion there have been people calling its end 5, 10 years too early.  Even the great Krugman apparently has called eight of the last three recessions.  Roubini saw it coming – but in 2003, his calls would have cost you a lot of money.  Roger Bootle was calling the housing crash from 2003 as well.   The instinctive ‘feeling’ of “this debt-fuelled asset strength and ongoing prosperity will have to end soon” is an ever-present.

Janice Turner is assuming something bad: that it is obvious, that it could have all be predicted ‘, and that all the knowledge (which she gained in a weekend) was some sort of dressing up conartist obfuscation.   The only point to which is to inform the righteous anger of the journalist.   I don’t think systemic crises work like that.  They occur when everyone thinks they are doing the right thing, but the sum of what they are doing adds up to instability.

Those sums are actually quite difficult: popping the bubble in housing in 2003 (when prices were 25% lower than now), precipitating a recession, would have been a dreadful mistake, ruining the lives of many people to no good end.

I think there is still a lot to learn.


2 thoughts on “Two ‘non-economists’ show their omniscience

  1. I once heard Dianne Abbot MP tell a room of people that she didn’t know anything about economics – but that’s OK neither do any economists.

    Thing is, there were nefs present, so she actually sounded sensible.

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