Important question here – is Willy Hutton right?

No, don’t go with the important and obvious answer – you fuckin’ kiddin’ me that Willy might have got something right?

Let us examine the contention:

We live in a world of corporate goliaths and the trend to gigantism is accelerating. The new era of hi-tech data capitalism has an embedded proclivity to monopoly. The bigger the network, whether Facebook or Google, the more valuable it is to be connected. Big is good in the digital universe, while even bigger is better.

Meanwhile, analogue capitalism, confronted by the challenge of the new, is reacting by consolidating and merging into ever larger entities. Unless they do, comes the reply to any challenge from national competition authorities, they won’t have the heft and scale to meet the new competition. Increasingly, we are surrounded by the most awesome concentration of corporate power in the history of capitalism.

Well, that’s an interesting thought. Do we actually have an increasing concentration in the economy? Say that Google’s turnover is $100 billion. Not far off at least. Global economy (for it is a global company) is $100 trillion, not far off. Google is 0.1% of the global economy therefore.

Is this more or less of a concentration than the past? I don’t know myself although I would think it unlikely. More or less than, say, Standard Oil? Less, I think I insist. For it’s half the turnover of Shell today. (Yes, I know, turnover isn’t quite the right measure here but this is very rough indeed).

Then there’s this:

Last week came another small milestone, in Britain. Hammerson, a property company few will have heard of, swooped on its rival, Intu, even less well known, in a £3.2bn bid. Yet the outcome will affect us all. Many major shopping malls – London’s Brent Cross, Birmingham’s Bullring, Manchester’s Trafford Park, Oxfordshire’s Bicester Village – will be owned by the same company. Hammerson will be the arbiter of how we shop: what stores are positioned where, in what mall and at what rent; it can even determine the restrictions on forms of permissible public activity in its private spaces.

That’s the value of the property/land. The ONS just reported that this is, in the UK, worth £5 trillion (can’t recall if that’s land only or land plus property upon it). 0.064% is evidence of an increased concentration?

Can’t see it really, can you?

In every industry, reported the Obama administration last year, the market power of the biggest companies has been growing and mark-ups and profit margins with them. America’s era of the robber barons in the late 19th century had nothing on this.

Anyone looked at retail just recently? With Amazon steaming in that’s not really how it’s working out, is it? And I really am pretty sure I reject the idea that margins are like those of the robber barons. Observers here (and The Observer) are being fooled by IP. More of the value of production is in that IP these days, making those gross margins look larger simply because of the way in which we account for IP. After cost of sales that is, as part of gross profits, instead of part of the cost of sales.

Hammerson will argue that it had no choice. So much shopping is online that the mall is looking increasingly like a late 20th-century phenomenon, outdated and outmoded. E-shopping is booming and, with the advent of virtual reality, you can go beyond browsing online to “handling” the goods you plan to buy. Hammerson’s only option is to buy up its competitors and try to hold the digital invaders at bay. You can see its point, but its monopolistic grip on the market will be such that it is better empowered to resist declines in rent and will take any opportunity to lift them. Our competition authorities stand idly by, helpless onlookers rather than proactive interveners.

And isn’t that sweet? His proof of increased concentration and market power is the increased competition being faced?

Sheesh.

This is also entirely wrong:

Meanwhile, the digital invaders are getting bigger. One of the laws of economics, itself an analogue discipline teaching doctrines far removed from the realities of today’s markets, used to be that as companies grow they start to lose control of their capacity to be efficient and unit costs rise. This is called decreasing returns to scale. In this way, or so the theory went, we could trust a free market not to produce corporate goliaths because they become inefficient, the ideology that Brexiters so blindly believe. But one of the features of data capitalism is exactly the opposite: increasing returns to scale.

It’s not a law of economics that there are decreasing returns to scale. It’s an observation that returns to scale vary dependent upon scale. Sometimes they increase, sometimes they reduce, the correct answer being “it depends.” Sure there are network effects these days. But then so have there been in things like lorry repair. Those who have a network to repair lorries across the world (and the manufacturers do indeed run something very much better than the AA for their own lorries) can sell lorries into the long distance lorry market. Those that don’t cannot. Rolls Royce’s global jet engine repair network is the – yes *the* – major come on for buyers. Equally there have been diseconomies to scale – the cancerous mestastasizing of bureaucracy in large organisations for example. And as the gender wibble has shown at Google, the new firms aren’t immune to HR taking over now, are they?

“Profits as a share of GDP in advanced industrial economies are rising and”

We need proof of this Willy, proof. And it’s not something I’ve seen much of to be honest. The labour share has fallen, certainly, but it’s not necessarily true that that means an increasing profit share. In the US economy domestic profits are a percentage point or two around where they’ve long been, in the UK similarly after that 70’s slump. We really do nee proof of this contention before we accept it.

International trade is not a game of cricket between equally matched teams, only disturbed by Brussels Eurocrats, as Jacob Rees-Mogg, Boris Johnson et al imagine, waiting for a Britain, energised by leaving the EU, to further stimulate it. It is a dog-eat-dog world in which the choice for a medium-size country is to make common cause with one of the three economic blocs capable of challenging the new monopolists and cartels – China, the US or the EU – or roll over and be plundered. Britain alone has no chance of challenging the West Coast tech giants over their policies on anything from tax to data or challenge any of the analogue goliaths over their stance, say, on diesel emissions or plastic packaging.

We’ve always been at war with EastAsia, haven’t we?

This is an interesting contention

When Ted Heath signed up to the EEC, Britain was out of step with France, Germany, Holland and even Italy. The UK was a low-cost, low-wage economy when its neighbours operated behind high tariffs to protect high-cost, high-wage economies.

It’s not immediately obvious from Google whether this was true. Were British wages low compared to those other countries in the early 70s? I don’t in fat know but I don’t think it likely. So, where does the contention come from?

Then this is wondrous, isn’t it?

On the right it is favoured by free-market Brexiters like the economist Patrick Minford, who see the EU as a barrier to efforts at driving down the cost of living through access to cheap food (such as US chicken and beef), cheap energy and striking out almost every rule that protects workers’ rights.

Such a bastard, eh? Trying to raise real wages by reducing the costs of the things people buy.

Because it’s a declining industry

Rosmann, an Iowa farmer, is a psychologist and one of the nation’s leading farmer behavioral health experts. He often answers phone calls from those in crisis. And for 40 years, he has worked to understand why farmers take their lives at such alarming rates – currently, higher rates than any other occupation in the United States.

That industries decline in importance is simply a truth about our universe. As productivity rises we need fewer people to perform that task. Thus some of them must leave said production. We’re simply not going to get the world getting richer without this happening.

This doesn’t mean that it’s easy of course. People tend not to change their lives until forced to do so. And that forcing will indeed often enough include a great deal of economic pain.

There is no specific solution to this. There’s a general one, sure. The process of transition from one mode of life to another could be made easier. I’ve a great affinity for the Danish view of these things. Good unemployment pay, good training opportunities. Losing a job really isn’t all that much of a stress or a strain. Obviously, losing a business will still be stressful but it’s still not an economic wipe out.

The other part of the system is that after some period of time (maybe 2 years for Denmark?) support ceases to near nothing. Labour is made liquid – not perhaps le mot juste as it’s a bit close to Soylent – which is economically efficient. The Danish unions simply don’t whine and strike and obstruct about job losses as a result.

There’s thus a general solution available, a support net for those who must transition. But there isn’t a specific one for farmers nor any other particular industry or line of work. Simply because we do want sectors where productivity is rising fast to have fewer people doing the stuff, assuming that there’s a limit to the demand or the actual product itself. That’s rather what economic advance is.

Worstall’s Fallacy in the wild

America’s homeless population has risen this year for the first time since the Great Recession, propelled by the housing crisis afflicting the west coast, according to a new federal study.

The study has found that 553,742 people were homeless on a single night this year, a 0.7% increase over last year.

No, really, no.

The bottom 10% of the US does about as well as the bottom 10% of certain generous European welfare states. The bottom 5% does rather worse (20 to 30% perhaps). Yes ,this is a reflection of that US welfare state, for that’s going to be a major determinant of the living standards of those at the bottom. And as it happens single able bodied people get very little help indeed. Well, you know, their gaff, their rules. They do very much better in pulling up children above their own rather different idea of a poverty line. Shrug.

However:

The government mandates that cities and regions perform a homeless street count every two years, when volunteers fan out everywhere from frozen parks in Anchorage to palm-lined streets in Beverly Hills and enumerate people by hand. Those numbers are combined with the total staying in shelters and temporary housing.

What this is is a measure of those who would be without shelter if it were not for what that welfare state does to reduce the number of people without shelter. Which is Worstall’s Fallacy of course. In deciding what we should be doing we must look at the effects of what we’re already doing – so that we can decide if we should be doing more, doing something different. What we should not be doing is measuring the original size of the problem then deciding that more must be done – without evaluating the effects of what we already do.

As it happens I think the US could and should be doing rather more. Like, abolish very large parts of the zoning laws so that it’s possible to build cheap housing. But that’s still different from the facts about these numbers being presented.

Paul Krugman is a card, isn’t he?

Here.

As foreigners have invested in the Czech Republic the gap between GNP and GDP has risen. That is, the amount the foreigners take out of the Czech Republic has risen as a portion of the Czech economy.

Hmm.

Therefore a burst of foreign investment does do all that well for the people:

You can see what this has meant for the Czech Republic in the figure. For what it’s worth, the lag of GNP behind GDP shown there is several times as large as most predictions of extra growth from U.S. tax cuts.

Now, I don’t believe this tax “reform” will produce anything like the capital inflow its defenders claim. But even if it does, Americans won’t see much of the benefits.

Back when Czechs got 100% of the local economy. Today they get 93%. That’s the complaint.

Hmm. Over the same period of time the Czech economy has doubled in real terms.

Czechs used to get 100% of X, they now get 186% of 2X.

This is a bad deal is it Professor?

Economist gets the efficient markets hypothesis wrong

At any rate, the durability and magnitude of the Bitcoin phenomenon, running for nearly 10 years and with a putative value of nearly $US 100 billion, provides us with a very sharp test of the Efficient (financial) Markets Hypothesis. If Bitcoin eventually becomes a currency, the EMH and its supporters will be vindicated, and I (along with quite a few other economists) will have a lot of egg on my face. If the bubble bursts, the roles will be reversed.

Well, no, not really. Not at all in fact.

We face uncertainty. It might succeed and it probably won’t. There’s an option value to the thought that it might succeed. That it doesn’t will not change the point that while we face uncertainty there’s an option value.

The new Christmas food according to The Guardian

No, not turkey kebab, turkey taro nor millet and turkey, despite our new national vibrancy:

One Christmas my mother gave me Helen Forrester’s memoir Twopence to Cross the Mersey. What timing! I was warm, overfed on mince peas…..

Hmm, maybe the subs have been at one of those booze advent calendars?

Looking at the actual complaint though:

Forrester was born in 1919 to socialites who built a glittering life on the tick. Then her father went bankrupt in the Great Depression, leaving his family of seven children with only the clothes they stood up in. They decamped to Liverpool, across the Mersey from Forrester’s grandmother, but could never summon up twopence for the ferry. The book is a calm, sad account of a childhood of bitter cold and near-starvation. Her mother numbed her misery with aspirin; her father sought out parish handouts. They lived in a single room. Forrester left school to care for the children, waking at dawn to creep along the street skimming half an inch from the milk bottles on the doorsteps, so that her baby brother would survive.

I never forgot it. It comes to mind when I see the remains of Grenfell Tower, or read about food banks, or people dying with empty cupboards and half-completed government paperwork on the table. It made me realise that poverty isn’t a natural law, nor is it symptomatic of lack of moral fibre. It is a monstrous and an avoidable evil and, so long as society harbours vast inequality, it will always be lying in wait.

There’s something that the dim bint is missing. Missing very badly.

Leave aside the level of whatever welfare state there was at the time (it wasn’t that bad actually, not by the standards of the time etc). Think instead of average incomes. £165 a year for the nation as a whole. Upgrade that to current day incomes and its some £44,000. Upgrade it by goods and services inflation instead, to give us actual living standards and it’s more like £19,000. That’s the average income for the nation.

Two adults and 7 children on £19,000 a year? Yup, that’s poverty by modern standards, isn’t it? It’s also not an evil, it’s not something to do with inequality even. It’s just that the past was poor, poorer than any of us ever realise. The point being that it’s this very capitalism and free markets which have risen us up out of that shit.

No, really. Note that by using the average we’re not addressing distribution of incomes at all. That structural inequality and all that shit are being entirely ignored. The difference between 19 and 44 has been provided by economic growth, nowt else.

Well, yes, OK

We know that money buys freedom but we cannot simply maximise freedom by giving people more money. The only result would be inflation. Better is to maximise disposable income for everyone—net income minus essential spend on basic subsistence, housing and energy (rents that act as a drag on productive activity).

Increasing disposable income for the whole of society opens up choices—including ones that GDP cannot measure, for example to do more in the community or spend more time with the kids. Disposable income changes the focus towards productive economic activity rather than wealth extraction. Investment in housing, sustainable energy, and transport infrastructure provide the foundation for a freer society where we are enabled to pursue a productive life.

A second key ingredient in choosing the right metric is to use median measures rather than a crude average (or mean). To see the difference, imagine a football team where one player is earning one million pounds per week and the other ten earn one hundred. The average salary is close to half a million whereas the median income is only one hundred. If the pay of the star player is increased to two million then average income doubles while median incomes remains almost the same. By optimising median income we optimise the distribution such that everyone can be maximally economically active. The importance of using the median measure is discussed on Jonathan Andreas’ medianism blog.

If political-economy is to be of any use, it should not just try to understand the world but also try to improve it. Progress implies that something should be optimised. The GDP money-metric is a crude goal for life, better to maximise median disposable income, first by addressing the optimal distribution and second by provision of universal basic services (health, education, housing, and transport). By switching away from GDP to median disposable income we get closer to maximising freedom, and that matters.

However, given the way that real world economies work we find that higher GDP does translate through into higher median disposable incomes. Perhaps not at the margins, the 5 or 10% differences between two economies, but most certainly over time and relating to any large differences in GDP. Median disposable income is higher in 2017 Britain than 1950 Britain? In 2017 Britain that 2017 DRC Congo? GDP tracking that really quite well, even if not exactly.

Well, yes, obviously, work is a cost

Yet many women, and some men – particularly those in low-paid and unsatisfying jobs – go out to work only reluctantly

This always amuses. Work is a cost, not a benefit. The income derived from it is the benefit, the work itself the cost that must be carried to gain the income. People are entirely rational in not particularly wanting to go to work. The lower the income resulting from it the more this is so.

It’s a nice example of how people are economically rational in fact…..and the general political discourse about economics is not. For how many politicians do stand up and insist that their plans will create many more jobs? When that’s not what we want at all, is it, the creation of more costs?

Scandal! Scandal!

Large numbers of employers are it seems now in the habit of shortchanging their staff as a deliberate strategy to increase profits. At least 2 million workers a year in the UK are being cheated of pay they are owed. This estimate of the scale of wages theft comes from a new report from researchers at Middlesex University, which puts the value of the lost pay at over £3bn a year.

Clearly, this should not happen. But, as ever, how important is it?

There’re some 30 million in work, average wage is £25,000 (both rough estimates). Total UK wages are some £750 billion a year. £3 billion is fiddled.

0.4% then.

Is this higher or lower than the rate of benefits fiddles which we must not, under any circumstances, worry about?

This often isn’t a notably successful strategy

British theatres push up ticket prices to pay for audiences dropping by more than 168,000 last year

Or, as the actual facts seem to be:

British theatres have increased ticket prices as audience figures dropped by more than 168,000 last year, latest figures show.

Pushing prices up because custom has fallen is one of those things which can work – depends upon elasticity of demand – but isn’t known as a great strategy normally.

The second statement, that rising prices has curbed demand, is bog obvious normal. That the Telegraph’s subs seem to think the two are the same is something of a problem.

Economics lesson of the day

Independent Bookstores Stage a Comeback. While pressure from Amazon forced Borders out of business in 2011, indie bookstores staged an unexpected comeback. Between 2009 and 2015, the American Bookseller Association reported a 35% growth in the number of independent booksellers, from 1,651 stores to 2,227.

Borders was a direct competitor to the Indie bookstore. Amazon is a substitute for.

The removal of some 700 (approx, Borders plus other brands) direct competitors has a different effect than the continued expansion of a substitute.

Gee, ya think?

Ford and GM sell cars in Austin TX (only they two). Austin builds a metro. GM remained bankrupt. Does Ford sell more or fewer cars in Austin TX?

Agreed, could go either way but we’d not be surprised if more, would we?

Interesting definition of monopoly

Then they can process data into intelligence, which can be packaged and sold to third parties for large profits, akin to monopoly rents.

Selling intelligence is akin to a monopoly?

Another key rule these corporations are seeking would allow digital services corporations to operate and profit within a country without having to maintain any type of physical or legal presence. But if a financial services firm goes bankrupt, how can depositors seek redress? If a worker (or contractor) for the company’s rights are violated, or a consumer is defrauded, how can they get justice? And if the company does not have a domestic presence, how can it be properly taxed, so that it is on a level playing field with domestic businesses? Most countries require foreign services suppliers to maintain a commercial, physical presence in the country to operate for just these reasons

Well, no, no they don’t.

How excellent this is

At first glance the photos vaguely resemble a painting. On closer inspection it might be a giant sculpture or some other art project. But in reality it is a mangled pile of bicycles covering an area roughly the size of a football pitch, and so high that cranes are need to reach the top; cast-offs from the boom and bust of China’s bike sharing industry.

Just two days after China’s number three bike sharing company went bankrupt, a photographer in the south-eastern city of Xiamen captured a bicycle graveyard where thousands have been laid to rest. The pile clearly contains thousands of bikes from each of the top three companies, Mobike, Ofo and the now-defunct Bluegogo.

No, really, it is wondrous. And it’s the Commie Chinese that have done it too.

We want, irrespective of anything else about the economy, a method of testing ideas to see if they work. Does the application of these scarce resources meet some human need or desire? Does it do so more than an alternative use, is it even adding value at all?

Bike shares, are they a good idea or not? The underlying problem being that expressed and revealed preferences aren’t the same. There’s only so far market research can take you, at some point someone, somewhere, has to go out and do it and see.

Excellent, the Commie Chinese have done so. Vast amounts of capital thrown into this, competing bike share companies, hire costs pennies. And no fucker seems very interested. That is, no, large scale bike share schemes don’t meet any discernible human need or desire, they don’t add value, spending the money on something else will increase human joy and happiness better.

And this is excellent, we’ve tried the idea and it don’t work. Now we can abandon it and go off and do something else therefore.

Which is the great joy of market based systems. They’re the best method we’ve got of finding out which ideas are fuck ups.

Long live markets.

Nonsense twatty stupidity over stamp duty

Helping first-time buyers is noble, but movers need a stamp duty cut too, says SIMON LAMBERT… and perhaps the seller should pay

Incidence, incidence!

However, the general whining over on the left is that this won’t reduce house prices. So,? And?

Transactions taxes gum up a market, make it less liquid. That’s why they’re such bad taxes. Their deadweights are hugely high as compared to income, consumption or land taxes. They’re actually even worse than capital and corporate taxes in this manner.

So, get rid of bad transaction taxes, raise other less bad ones for a neutral overall stance and we’re better off just be changing how we tax, not the level of taxation.

Interesting factoid – the IFS has an old paper out there pointing out that stamp duty on shares, total revenue will rise upon its abolition such are the deadweights of transactions taxes. Another factoid – the EU insisted that a financial transactions tax would lower total revenues, such are the deadweights. I wouldn’t want to insist that this would be true of stamp duty on houses but it wouldn’t surprise me if that were the outcome as well.

Transactions taxes are bad taxes, we shouldn’t have them.

Ain’t this great?

From AJPS, the flagship political science journal:

The American Journal of Political Science published a correction this year saying that the 2012 paper has “an error” — and that liberal political beliefs, not conservative ones, are actually linked to psychoticism.

“The interpretation of the coding of the political attitude items in the descriptive and preliminary analyses portion of the manuscript was exactly reversed,” the journal said in the startling correction.

“The descriptive analyses report that those higher in Eysenck’s psychoticism are more conservative, but they are actually more liberal; and where the original manuscript reports those higher in neuroticism and social desirability are more liberal, they are, in fact, more conservative.”

Stefan Stern swings and whiffs

DIY economics
The (genuine) economist John Kay has a term for all this: DIY economics. These are the things that we sort of think we know even if they have no basis in theory, or indeed practice. Like a dodgy shelf, DIY economics will come crashing down at your feet sooner or later.

OK, so, on his list of things which are DIY economics (what I refer to as folk economics) are the following:

Expansionary fiscal contraction
This is the theory, popularised by Ken Rogoff and Carmen Reinhart, which holds that public debt levels of over 90% of GDP will lead to slower growth, and that therefore significant cuts to public spending – aka austerity – are needed before growth can resume. George Osborne built a political programme and reputation on it.

Embarrassingly, the distinguished academics had to concede later on that there had been an error in their spreadsheet calculations, and that the theory was not quite as robust as had been asserted. Voters are now taking a similar, but less nuanced, view on the benefits of austerity. So on second thoughts, wannabe chancellors might not want to trumpet this one too loudly.

No. It’s the idea that you can indeed have fiscal contraction but if you offset it with an even bigger dose of monetary expansion then you will get growth. It did actually work in 1932 as well, whatever we might think about it having done so more recently. That is, properly stated, it’s an entirely fine idea although whether it works in all and every circumstance is another matter.

Zero lower bound

Years of ultra-low interest rates produce this phenomenon, whereby the central bank (the Bank of England in our case) can no longer stimulate the economy as rates are at rock bottom. The recent tweak up to 0.5% is the first move away from the floor that had been established. But the fact that rates will probably remain low for many months to come is a sign of economic weakness, not strength.

No. Zero lower bound insists that monetary policy is ineffective if you cannot reduce interest rates again, as they are zero. QE has rather proven that that is wrong. Still entirely possible that fiscal policy would have worked better etc but the insistence that monetary cannot is proven to be wrong.

Laffer curve

This is a remarkable piece of economic wishful thinking, drawn up on a restaurant napkin, which states that cutting taxes for the rich will always and inevitably lead to economic growth, wealth trickling down and the reduction of government deficits. Ronald Reagan tried it in the 1980s. The deficit soared.

No, it’s simply the (true) observation that at times lower tax rates can increase revenue collection.

Forward guidance
This was the idea touted by Bank of England governor Mark Carney, that by indicating where interest rates and the economy were generally heading, more influence could be exercised without the need for market interventions. But markets and economic data have defied the guidance. We don’t hear much about this any more.

Expectations – if the BoE says interest rates are going to rise then market ones rise immediately. This works.

Stefan Stern is the co-author of Myths of Management, and a visiting professor at Cass Business School

Oh, he works with the Senior Lecturer…..

Dani Rodrik trips over language

Odd really, for like many non-native speakers he often sees the little bits that others don’t.

As even its harshest critics concede, neoliberalism is hard to pin down. In broad terms, it denotes a preference for markets over government, economic incentives over cultural norms, and private entrepreneurship over collective action. It has been used to describe a wide range of phenomena – from Augusto Pinochet to Margaret Thatcher and Ronald Reagan, from the Clinton Democrats and the UK’s New Labour to the economic opening in China and the reform of the welfare state in Sweden.

The term is used as a catchall for anything that smacks of deregulation, liberalisation, privatisation or fiscal austerity. Today it is routinely reviled as a shorthand for the ideas and practices that have produced growing economic insecurity and inequality, led to the loss of our political values and ideals, and even precipitated our current populist backlash.

We live in the age of neoliberalism, apparently. But who are neoliberalism’s adherents and disseminators – the neoliberals themselves? Oddly, you have to go back a long time to find anyone explicitly embracing neoliberalism. In 1982, Charles Peters, the longtime editor of the political magazine Washington Monthly, published an essay titled A Neo-Liberal’s Manifesto. It makes for interesting reading 35 years later, since the neoliberalism it describes bears little resemblance to today’s target of derision. The politicians Peters names as exemplifying the movement are not the likes of Thatcher and Reagan, but rather liberals – in the US sense of the word – who have become disillusioned with unions and big government and dropped their prejudices against markets and the military.

“Neoliberal” has an English meaning and an American one. Thus much of the confusion here.

An American neoliberal is indeed that American liberal who thinks that markets are perhaps better than unions and regulation at achieving the standard American liberal goals. Brad Delong would be a good example. Hmm, perhaps we should revise that to sometimes markets are the better method of achieving those goals.

In English the meaning is much closer to something like a classical liberal with libertarian tones or influences. Not full on Randite but definitely different from that American meaning. I might be an example of a neoliberal in this English sense.

At which point Rodrik is correct all the same:

But the looseness of the term neoliberalism also means that criticism of it often misses the mark. There is nothing wrong with markets, private entrepreneurship or incentives – when deployed appropriately. Their creative use lies behind the most significant economic achievements of our time. As we heap scorn on neoliberalism, we risk throwing out some of neoliberalism’s useful ideas.

The argument is about “appropriate” nothing more. Very few indeed are going to argue that we should organise the military on private entrepreneur lines. We tried that with the Wars of the Roses and didn’t like it. There are actually those who argue that all housing should be state, not market, provided. Something, in my view at least, equally inappropriate.

Good economists know that the correct answer to any question in economics is: it depends.

Yep.

By the time the economist stops, it appears as if he has laid out a fully fledged neoliberal agenda. A critic in the audience will have heard all the code words: efficiency, incentives, property rights, sound money, fiscal prudence. And yet the universal principles that the economist describes are in fact quite open-ended. They presume a capitalist economy – one in which investment decisions are made by private individuals and firms – but not much beyond that. They allow for – indeed, they require – a surprising variety of institutional arrangements.

So has the economist just delivered a neoliberal screed? We would be mistaken to think so, and our mistake would consist of associating each abstract term – incentives, property rights, sound money – with a particular institutional counterpart. And therein lies the central conceit, and the fatal flaw, of neoliberalism: the belief that first-order economic principles map on to a unique set of policies, approximated by a Thatcher/Reagan-style agenda.

Entirely true. It’s the results there we want, not the particular method of getting there.

Still, these principles are not entirely content-free. China, and indeed all countries that managed to develop rapidly, demonstrate the utility of those principles once they are properly adapted to local context. Conversely, too many economies have been driven to ruin courtesy of political leaders who chose to violate them. We need look no further than Latin American populists or eastern European communist regimes to appreciate the practical significance of sound money, fiscal sustainability and private incentives.

Quite so.

And there’s an explanation for this:

This, too, can be illustrated with a parable. A journalist calls an economics professor for his view on whether free trade is a good idea. The professor responds enthusiastically in the affirmative. The journalist then goes undercover as a student in the professor’s advanced graduate seminar on international trade. He poses the same question: is free trade good? This time the professor is stymied. “What do you mean by ‘good’?” he responds. “And good for whom?” The professor then launches into an extensive exegesis that will ultimately culminate in a heavily hedged statement: “So if the long list of conditions I have just described are satisfied, and assuming we can tax the beneficiaries to compensate the losers, freer trade has the potential to increase everyone’s wellbeing.” If he is in an expansive mood, the professor might add that the effect of free trade on an economy’s longterm growth rate is not clear either, and would depend on an altogether different set of requirements.

This professor is rather different from the one the journalist encountered previously. On the record, he exudes self-confidence, not reticence, about the appropriate policy. There is one and only one model, at least as far as the public conversation is concerned, and there is a single correct answer, regardless of context. Strangely, the professor deems the knowledge that he imparts to his advanced students to be inappropriate (or dangerous) for the general public. Why?

Terry Pratchett called this “lies to children.” Feed people the information appropriate to their understanding of the matter at hand. For the 99% of people who don’t really think very much about economic policy a general assumption that free trade is good is a very decent starting point. There are indeed caveats – not quite as many as Rodrik says but some – but they’re not what needs to be generally known. It isn’t necessary for everyone to know Einstein’s equations, that the apple falls downwards from the tree is enough.

The nuance is only important when it matters.