A gentle suggestion to the Prime Minister of Japan about Will Hutton

Your inviting Our Wullie over to advise you on how to get out of your economic mess is amusing to say the least. For the Japanese economy is the end state of Huttonism.

Hutton thinks that if clever people like Wee Willy Hutton tell everyone else to do then the economy will grow off into the indefinite future. This is pretty much what Japan did for decades when all the clever people were in MITI.

But there comes a point when this does not work. As explained by a real economist (ie, not either Wee Woolly or myself). Essentially, when playing catch up growth the clever people telling the proles to get educated, stick the women into the workforce, mechanise agriculture, this all works, to a point. When you get to the technological frontier this works no longer.

For a very simple reason: uncertainty.

No, not risk, but uncertainty.

When we\’re trying to grow at that frontier we face the fact that we just simply do not know, among all of the possibilities, what it is that people will value. Thus, given that GDP is a measure of value added, if we don\’t know what it is that people will value then we cannot know what it is that will increase value created.

It does not matter how clever people are. Doesn\’t matter whether those clever people are in academia, the bureaucracy, politics, big business or small. No one knows and no one can know.

If you can point me to any of the above who predicted Angry Birds, pet rocks, consumer use of SMS or the popularity of Strictly Come Big Brother Darts Playing on Ice then I might be persuaded otherwise.

At this limit of what we know how to do we have no alternative to a pure market system. Not because we don\’t have clever people but because being clever ain\’t the point. Being lucky is. We need the tens of thousands of experiments, the 9,999 snds of failures, before anyone clever or not can work out what is adding value and thus is growing the economy.

And this is what I insist is wrong with Huttonism, that he just doesn\’t get this basic point. He\’s living in a country, he\’s advising one, where the problem is not insufficient guidance by the clever, it is the impossibility of guidance by the clever.  So advocating such guidance just isn\’t going to work.

In Japan, …… toilet seats are electronically warmed and cleaned;

Willy\’s elderly British Bottom was thus presented with a warm and clean seat from which to crap his advice to you. So that\’s OK then.

 

6 comments on “A gentle suggestion to the Prime Minister of Japan about Will Hutton

  1. And the results of the markets are constantly changing so making it impossible to predict. You might get it right on time, but the next day something else becomes the market’s favourite.

    Strictly Come Big Brother Darts Playing on Ice one day, Ice Darts in Big Brother Strictly Playing for Come the next.

  2. Not because we don’t have clever people but because being clever ain’t the point. Being lucky is.

    I agree that luck is a very large part of it, but it’s also about people putting their money on the line and the effect that has on their thinking. If the treasury had told Tony Benn that Concorde could proceed, but that he’d have to put his fortune into a share in the project, would he have proceeded, or taken a much harder look at whether it would succeed?

  3. Aha, but all the clever clogs like Wullie can not only tell us what to produce, they can tell us that we will value it too. And how highly we will value it. Just imagine the economic growth that will have occurred when the government has paid €1000 each to buy rather a lot of toilet seats – indeed 25 toilet seats per household, and gives those 25 toilet seats for free to every household in the land. We will be rich beyond our wildest dreams!

  4. Also, market diversity. In a relatively primitive economy you can make better guesses, especially as development is slow so the bleeding edge is less dynamic. Ancient Rome; mostly commodities like grain and olive oil and roof tiles, and people wear much the same clothes from one century to the next (there is some fashion change, but basically you can “dress Roman” and be any time from the 4th century BC to the 4th century AD (the toga did actually go gradually out of style though)). Oh, and military gear of course, which was mostly nationalised anyway.

    That’s why the Statist are always trying to drag us back into the past and reduce the diversity of the economy, often overtly with anti-brandism (“why do you need more than one brand of X”). They’d desperately like to reduce us to a non-developing, non-expanding simple economy of a few commodities, because then they might have a hope of “running” it.

  5. Would not having a large to huge population , all rather disciplined and rather racist and nationalist help a bit.
    And maybe a big army.

  6. The old “What us, pick winners argument?”Why is it that it is impossible for the State to pick winners when the State can rig the market?
    The point is surely not to push wodges of credit behind possible winners but to prevent credit going into markets where an excess does great harm.In the case of Japan and the West,this would be the housing market and land.In 2007 66% of British bank credit creation went to other banks and the property market.There must be some way to stop this happening,land value tax,State control over credit creation etc.It is not a matter of picking winners but of preventing over-investment in losers which the dear little flopsy bunnies who run Britian are irrestibly drawn to.

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