Here is Ritchie telling us all what is wrong with the current world economic order.
Which is great. But I presume he knows this means abandoning just about everything that is taught in undergraduate economics as a result, which underpins the flawed logic of Anglo-Saxon capitalism as a whole – not just banking?
Let’s start with what goes:
- Profit maximisation. This is a complete nonsense. Economists think it discounted future cash flow, accountants a measure of the past, and no one can measure either.
- The idea of markets being efficient. This requires profit maximisation to be true. But we don’t profit maximise and those who seek to do so just abuse others by extracting monopoly rents, which is inefficient. It also requires us all to be clairvoyant, and there is some evidence we are not.
- Ignoring externalities – the fact the market assumes we can abuse the planet as a ‘free gift of nature’.
- The idea that wealth is created by markets. Wring, wealth is created by people – the means of ownership of the structure in which they work has little to do with the value of what they do – but efficient management has. there’s no evidence that efficient management is the exclusive preserve of the private sector – although there’s ample evidence of bad management in all sectors.
So Lord Myners, I agree – but let’s sweep away the whole destructive nature of neo-conservative economics and move on. Let’s not tinker at the edges. And let’s be clear about what we’re doing. Nothing else will do.
As an exercise in collaborative crowdsourcing new internetthingummybob can we, in the comments section, see how many fallacies and displays of ignorance we can find in that series of statements?
I\’ll start with the easy one: externalities. These are taught at GCSE level and at every level of economic education above that. So far from ignoring them they\’re central to the entire subject. They first really get examined in Alfred Marshall\’s work of the 1890s (and do please note that Marshall was pretty much the founder of the neo-classical school and also the writer of the basic textbook used for decades). Arthur Pigou (the man who first hired Ritchie\’s beloved Keynes as an economist) developed the idea and what we might do about externalities and had it cracked by the 1920s. There have even been Nobel Prizes awarded for their study (Coase won his in part for this).
Ooooh, yes, another one, wealth not being created by markets. That would be news to Adam Smith now, wouldn\’t it? David Ricardo would also raise an eyebrow. The division of labour and specialisation of it then leads to voluntary exchange of the production stemming from it. Voluntary exchange, by its very definition, creates wealth for both parties involved: no one would make such an exchange if it impoverished them. What is the word we use to describe where voluntary exchange takes place? A market.
And, umm, what in hell has the method of ownership got to do with markets anyway? You can have markets and capitalism, markets and socialism…..
Please do carry on…..