ceqls lecture: tim evans: the relevance of classical liberal political economy in today´s world
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8/8/2019 CEQLS Lecture: Tim Evans: The Relevance of Classical Liberal Political Economy in Today´s World
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The Relevance of
Classical LiberalPolitical Economy in
Today¶s WorldConservative Institute of M. R. tefánik
Dr. Tim Evans
8/8/2019 CEQLS Lecture: Tim Evans: The Relevance of Classical Liberal Political Economy in Today´s World
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Introduction
1. The Challenge and Opportunity of the Economic Crisis
2.The Parlous State of Modern Economics
3. State Failure ± Banking, Money and the problem of
Corporatism
4. Conclusion: The Way Forward
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1. The Challenge and Opportunity of theEconomic Crisis
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The Challenge
y He who controls the past, controls the future
y Ideas matter: the pen is mightier than the sword
y 1929 and µMarket Failure¶
y Massive state intervention
y Rise of Nationalism
y Rise of Protectionism
y Today, we are at a pivotal moment
y We need a correct diagnosis
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The Challenge
y Understand the roots of this economic crisis
y To get opinion formers (journalists, academics, and
policy makers) to understand that this crisis is not theresult of market failure but massive state failure.
y The key challenge is to explain that the entire
infrastructural architecture of our so called free market
economy is riven with a wide range of often unseenstate interventions all too often go unquestioned.
8/8/2019 CEQLS Lecture: Tim Evans: The Relevance of Classical Liberal Political Economy in Today´s World
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The Opportunity
y To explain that this crisis has been the consequence of
state intervention ± it is about state failure.
y That this crisis has not been the result of greedy bankers,immoral privateers or market failure.
y The key opportunity is for us to change the terms of
economic debate and in doing so capture more moral and
intellectual high ground for the principles of life, liberty andproperty.
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Historic Challenge
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2. The Parlous State of Modern
Economics
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Against Mathematicsy I recently interviewed a student with a degree in the
History of Economics«
y He had never heard of the the Socialist Calculation
Debate (Ludwig von Mises)
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Against Mathematics
y There are three key schools in Economics:
y Keynesian
y Monetarist
y Austrian
y I am in the Austrian tradition
y Good Economics is not about Mathematics
y
Economics is a Praxeological Discipline rooted in Human Action and Free Will
y Mathematics is a parallel universe. Examples of:
y Perfect Competition
y Perfect information
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The Austrian School of
Economicsy ³For the µ Austrian economist¶ the free market and the language of price are
the very sources and mechanisms of wealth, the diversity of goods
produced by many individuals is richer and more useful, ensuring greater
and more widespread diversity than any system which attempts to control
from the centre. A diversity of different attempts to predict future needs iswhat guarantees innovation. The role of market pricing is partly that of
allocating resources to the preferred use. Its more important role however,
is that of transmitting information about preferences and about relative
scarcities. Only markets can effectively utilise information dispersed
throughout millions of economic agents. Profit is a signal which
demonstrates that the entrepreneur is doing the right thing for people hecannot know. Price is therefore the language of the complex or extended
order of modern societies. The knowledge utilised in this extended order is
greater than that which any single agent such as a government
department can possibly acquire.´
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Friedrich Hayek
y ³[It is] a procedure which has greatly improved the
chances of all to have their wants satisfied.It is the onlyprocedure yet discovered in which information widely
dispersed among millions of men can be effectively
utilised for the benefit of all ± and used by assuring to
all an individual liberty desirable on ethical grounds.´
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Against Mathematics
y Ronald Coase: Social Costs, Externalities, and the
Importance of Private Property.
y Public Goods (non-rivalrous and non-excludable)
y Coase on Light Houses.
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State Failure
y Free Markets, Discovery and Invention (Telephones)
y Free Markets and Regulation
y The Importance of Standards, Reputations and Brands
y Thinking about Healthcare
y The Private Sector
yThe State Sector
y Nationalised Monopoly Professions
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State Failurey ³«the market is, generally speaking, the best set of institutions
we know of for producing and distributing things. The more
important the good is, the stronger the argument for having it
produced by the market. Both barbers and physicians are
licensed; both professions have for decades used licensing to
keep their numbers down and their salaries up. Governmentregulation of barbers makes haircuts more expensive; one
result, presumably, is that we have fewer haircuts and longer
hair. Government regulation of physicians makes medical care
more expensive; one result, presumably, is that we have less
medical care and shorter lives. Given the choice of deregulatingone profession or the other, I would choose the physicians.´
David Friedman
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State Failure
y You live in a world of Water Socialism
(Walter Block)
yInternational Law of the Sea
y Problems of State Failure
y Less wealth creation
y Less invention
y More damaging externalities
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3. State Failure ± Banking,
Money and the problem of
Corporatism
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Money and Banking
y Debate about the Koruna, the Pound and the Euro
y Nationalised Central Banks
y Nationalised, monopoly, fiat currencies
y Bank of England: Monetary and Policy Committee
y Inflation Targeting
y Mid-nineteenth century Banks have had Statutory
Monopoly Privilege to create Credit
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Adam Smith
y It was Adam Smith who said:
y ³People of the same profession or trade seldom gather
together, even for merriment or diversion, but soon theconversation turns to a conspiracy against the public
interest.´
y What the people don¶t know about banking
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British Public Opiniony
The general population is highly uninformed about thebanking system, misunderstanding the legal status of their deposits and unaware of what banks do with them.According to our survey:
y
74% of people think that they are the legal owner of themoney in their current account, as opposed to the bank
y 66% of respondents answered ³dont know´ whenasked what proportion of their current account was
used in various ways by their banky Only 33% of the general public favour the existing
policy of government backed deposits and a lender of last resort
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y The History of Diagnosis
yFreddie Mac and Fannie Mae
y Not enough state regulation
y Greed and Bankers Bonuses
y The Euro, Koruna and the Pound
y We can talk about state budgets, reducing state welfare
and taxation.
Diagnosing the Cause of the
Crisis
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The Problem is State Failure
y For me, the cancer at the heart of the system is
widespread state failure.
y This crisis is not about market failure because we have
not had a market to fail!
y Central Banks
y Monopoly Currencies
y Legislative Favour
y Top down State Regulation
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Statist Boom Bust Cycle
y Hayek
y Competing Currencies
y Free Banking
y Government Deficit Financing
y Inflation as a Hidden Tax
y It is the poorest who suffer
y Only Austrian Economists Predicted this Crisis
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4. Conclusion: The Way Forward
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Conclusion
y The Importance of Ideas
y We have to explain what has happened to be able to
successfully campaign for genuine market solutions
y How the world changes
y Change the Terms of Debate
y www.CobdenCentre.org
y www.Mises.org
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Thank you.