Madsen Pirie

It’s part of the Austrian School explanation of the financial crisis that easy money and loose credit by governments and central banks led people to make wrong decisions.  It sent false signals about future demand that caused mis-investment.

In addition, because money and credit were so cheap, people took risks with it.  On the ASI site I’m pointing to yet another consequence.  All those depressed interest rates prevented fund managers from making worthwhile returns on things like bonds.  They were forced into riskier asset classes because the artificially low interest rates denied them decent returns on the safer stuff they usually invested in.

So in addition to sending out false signals, governments also prodded them into taking more risks.  Bad policy, and look what happened.

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The meeting I’m really looking forward to next Tuesday is the annual Adam Smith Lecture which this year is being given by Matt Ridley.  It’s on Tues 13th in St Stephen’s Club, Westminster.  Matt Ridley is the author of “The Rational Optimist” in addition to being well-known as a science writer, and provides a healthy antidote to the dark forces of gloom-mongering. The blurb for his book points out that:

We are wealthier, healthier, happier, kinder, cleaner, more peaceful, more equal and longer-lived than any previous generation. Thanks to the unique human habits of exchange and specialization, our species has found innovative solutions to every obstacle it has faced so far.

I greatly enjoyed it, and often recommend others to read it.

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Barack Obama has been re-elected.  Had there been no superstorm Sandy, he might not have been, but there was and he now has four more years.  He didn’t do very much to deserve re-election, showing more concern with his notion of ‘fairness’ than with the need to get the US economy going on with its main task of creating wealth and jobs.

In the UK, too, there is almost an obsession with taxes. The media, especially the BBC and the Times, focus on the big firms that locate their activities in low-tax jurisdictions, as they are entitled to.  The use of the rules provided by governments to lower tax exposure is called tax avoidance and is within the law.  It is being deliberately conflated with illegal non-declaration of income and profits, which is evasion and is illegal.

Those who support these campaigns seem to think that our problems require more taxes to be paid, and that if government can only spend more of our money that we are currently spending ourselves, then somehow everything will improve.

I disagree.  Improvement will come through lower taxes and lighter regulations that make enterprise a worthwhile and rewarding activity.  Alas, I see no signs in the US with its re-elected president, or in the UK with its hamstrung coalition government, that anyone in positions of authority is about to undertake the measures that are required.  I hope I am wrong.

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I recently completed a series on the Adam Smith Institute website of “Ten Reasons to be Cheerful,” listing areas in which humankind has cause for optimism that things will be better than they were.  I previously completed “Ten Very Good Things,” picking out some things which come in for disapproval from some quarters, but which are in fact beneficial.

Sometimes when speaking to schools I used to cover “Ten Things That Almost Everyone Gets Wrong,” and more recently I have dealt with a list of “Economic Misconceptions.”

Doing things in lists is a good way to put a point across.  It is easy for students to take notes from, and it can convey a general philosophical outlook through a series of discrete examples.  I have always done this.  At university I wrote a series that started with “Nine Lies About Capitalism,” then covered “Nine Truths About Socialism,” and “Nine Facts About Freedom.”  Early on in the privatization drive I used to list the various different methods that could be used to privatize state operations.

Even when I give debate speeches I will typically list and number the points I intend to make, and write them on a few small cards.  I think my preference for lists might derive from the fact that I tend to be analytical about things, picking out the points I think are important.  A major advantage is that it’s quite user-friendly.

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On Wednesday Nov. 7th the IEA is hosting a book launch for my colleague Eamonn Butler’s book on Friedrich Hayek, subtitled “The Ideas and Influence of the Libertarian Economist.”  It starts at 6.30 pm in the IEA’s rooms at 2 Lord North Street in Westminster. As the IEA’s announcement points out:

“Hayek was the 20th Century’s leading critic of Keynes – correctly forecasting that Keynes’s policies would lead to inflation, unemployment and debt. He explained how booms and busts occur, placing much more of the blame on governments and regulators, rather than bankers. He showed why booms built on cheap credit would inevitably dissolve into deep recessions – and why the best policy is to let the process work out rather than try to keep propping up failing banks and industries.”

Eamonn’s book is excellent.  It’s his second one on Hayek and is a first class primer in the life and ideas of the great man.

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I do quite a lot of public speaking.  If I accepted every invitation, I suppose I might spend most of my time doing that, especially if travel time were included. My formula for deciding which ones to accept is a simple one.  I say yes to nearly all the schools because I think it’s a good use of my time.  I often try to counter received opinions by pointing out other ways of looking at things, trying to inculcate critical thinking rather than passive acceptance of conventional wisdom.

I accept about half the university invitations, favouring ones I can return home from on the same day, though I do include a few that require me to stay overnight in a nearby hotel.  I especially like speaking to student libertarian groups or freedom societies, and I do a fair amount of formal debates.

I don’t usually speak to business groups, though I will if they offer a reasonable fee or offer an equivalent donation to ASI funds.  My other speaking is largely confined to a few media appearances, though I try to have younger members of the ASI team do this wherever possible.

Doing public speaking is rewarding, though it does cut into the time I have available for writing.  I note in passing that many of my contemporaries regard sixth form audiences with trepidation.  They are challenging, it is true, but you do get to see how the world looks through seventeen or eighteen year old eyes.

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On Tuesday November 6th, which is US election day, I’ll be attending the ASI’s reception for The Next Generation (TNG).  It’s in the ASI offices from 6.0pm and will feature a ten-minute speech covering the issues that emerged during the campaign, how the contest played out, and what might be the consequences of a win by either of the two main party candidates. There won’t be any results, of course, until early next morning.  The US news networks do not release exit poll results until after the polling has closed, which means on the West coast, 8 hours behind us. I’m sure that many of those who attend the TNG reception will go on to bars or parties that feature live TV coverage into the early hours, but I’ll probably not know how it went until I wake up next day.

Until then I’ll be in the South of France hoping to catch a few days of late sunshine before winter sets in.

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I gave a talk to a group of sixth-formers at Harrow School and chose “Economic Misconceptions” as my theme.  These included some of the things that emerged from my ‘reasons to be cheerful’ series.  In my view, I said, the world is not running out of scarce resources because our ability to tap new sources is expanding faster than our use of existing reserves.

The world will not drown under a sea of people because the birth rate tends to level off as countries become richer.  Furthermore, the second green revolution of genetically modified crops will easily give us enough food.

I covered pollution, getting the rich to pay more by lowering, not increasing, their tax rates, and aiding poorer countries by opening our markets to their goods, rather than feeding them crumbs of development aid.

It was all counter-intuitive stuff, running directly against what is conventionally taken to be true in the media.  The questions afterwards were lively and intelligent, and there was a dinner afterwards with some of the students and their teacher, where the talk extended to cover universities and future careers.

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I took the line that in saying that in the long run we’re all dead is tantamount to saying we don’t care about the future and shouldn’t plan for it.  Those who want us to use big government to ‘stimulate’ the economy by massive spending are sending us up a blind alley.  Growth comes from investment designed to meet real anticipated demand in future.

Investment happens when we forego present consumption, using resources instead to generate future returns. When government pours money into the economy it sends false signals about real demand and the cost of credit.  Investment goes into the wrong areas and “surge is followed by slump.” I was on the winning side again, and the motion was defeated by a narrow margin.

I did get to see something of Dublin, including a trip to the Guinness Storehouse where the stuff is brewed, and I tried a sample in the seventh floor Gravity Bar…

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I’m headed to Dublin today to debate at Trinity College. The motion is that “This House thinks that in the long run we are all dead.” It’s from Keynes and of course I will be speaking in opposition…

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