Today's letter to the FT from 55 economists supposedly attacking Corbynomics is amusing for three reasons.
The first is is drafting, which is so bad Tony Yates has had to apologise for it on his blog: he has to admit that it is incomprehensible.
Second, there is the obvious logic failure within it, including that nationalisation must not be tried in case it works.
But third, is something more significant. It is the obvious agreement of those writing the letter with three of the first four arguments I made on the success of Corbynomics last weekend. Those writing appear to agree that the case for infrastructure investment is clear: their only argument is that it should be financed by conventional debt and not a form of QE. They add their names in the process to those from Chris Giles to Larry Elliott in saying this.
Is that a coup? I'd say so: 55 conventional economists appear to have agreed that the case for investment is made because interest rates are so low at present that not making that investment would be an error of judgement. They don't go on, of course, to ask why that investment is not being made as a result. Nor do they consider issues such as the framing of the debate or the austerity narrative to which some signatories may have contributed: they just say this investment should take place with conventional funding. And since that investment is not happening and the demand for it is a core part of Corbynomics the truth is that these signatories have tried to oppose Corbynomics by agreeing with one of its core objectives.
Importantly, such a statement was not published from this source until Corbynomics appeared on the scene. I am not saying they're right on the funding, of course. I have argued with good reason that there is a role for PQE and that as pressure on the economy grows PQE will be very important when the capacity to use borrowing will be needed for other purposes. But I am pleased that the rise of so-called Corbynomics has succeeded in getting this point agreed.
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Another example of economists being bound by political, sociological and professional concerns, while managing to spectacularly misunderstand/ misread the politics and fail to recognise what the best chance for a hearing of their arguments is. Grist to my mill? I think so.
I think so APB
Can I recommend that anyone interested checks out Harry Vimes, comment on Tony Yate’s blog. I was going to leave a comment there too, but he’s already put my thoughts about it perfectly.
It is excellent – som may get some publicity here
If the PQE argument results in a broad agreement that there should be investment now but that should be done by conventional borrowing and that agreement filters through to the wider public I would take that. It’s better than no investment.
The main argument the 55 put against Corbyn is that he is not ‘mainstream’-but that’s the whole point-look where mainstream has got us! Clearly they are bond market worshippers and are happy to keep the vested interests going. If there ever was an illustration of the intellectual poverty of mainstream economics this is it.
35 years ago most of Corbyn’s policies would have been perfectly mainstream, but the ‘Overton window’ has shifted sharply to the right in that period.
That’s why part f what I am saying is deliberate reframing
I think you are entitled to a more serious discussion on the Corbynomics proposals by economics professors than that letter which looks like it has been drafted after four pints in a pub.
I said so as well to Tony Yates on his blog, I will repeat it here:
quote…
Tony,
you will probably agree that all these professors would have failed an exam asking to discuss benefits and drawbacks of the Corbyn proposals, set out alternatives, and discuss their potential political acceptability, if your letter is all what they had written.
Also, if you start entering the debate, please do so professionally.
That is what we pay you guys for, from the public purse, to be “experts”, So let us have some detailed analysis, which can stand up to scrutiny, based on theories or experience.
So if you have a view, a DETAILED view, let us hear it. Please write a dissertation each on the subject and publish it.
If you just want to tell us you do not agree with some policies and you do not consider these policies mainstream, we are not really that interested, as the general public.
In fact, worse than that, you all come across as a bunch of over-privileged moaning minnies making a minor point, instead of entering a serious debate WITH ACADEMIC RIGOUR about the feasability of some of the ideas discussed by a potential leader of the opposition.
unquote….
let us know the response -Tony Yates seems to be another ‘inflationistaphile’ that anything done for public purpose without the bond market involved will cause us to become Weimar.
The main issue here is of course “Lerners Law”, on why there is no need to issue public debt.
“A kind of timidity makes them shrink from saying anything that might shock the respectable upholders of traditional doctrine and tempts them to disguise the new doctrine so that it might be easily mistaken for the old. This does not help much, for they are soon found out, and it hinders them because, in endeavoring to make the new doctrine appear harmless in the eyes of the upholders of tradition, they often damage their case. Thus instead of saying that the size of the national debt is of no great concern … [and] … that the budget may have to be unbalanced and that this is insignificant when compared with the attainment of prosperity, it is proposed to disguise an unbalanced budget (and therefore the size of the national debt) by having an elaborate system of annual, cyclical, capital, and other special budgets.”
It is time to be bold and say quite clearly that Gilts will not be issued. The matter of term contracts will be left with the Bank of England. There is no economically justifiable reason for government to pay people a higher interest rate, or a term premium.
The fear here is the same fear as nationalisation. That it will work and the world will trundle along quite nicely without a load of middlemen getting paid for doing absolutely nothing of value.
Neil
And how is that framed?
Richard
Gilts benefit foreigners and middlemen. Want a good saving account?
Axe the bond market quango!
Maybe?
Yes, the fear here is that it will work. It is a fear of redundancy on the part of some serious vested interests. Absolutely.
PQE will be sovereign money, much like cash which is simply printed up and interest free. Unfortunately, cash only makes up around 3% of the money supply.
PQE will be issued interest-free or at very low interest, so investment into the real economy on housing, infrastructure and investment in manufacturing can be done almost without cost.
This would essentially be money (the vast majority at least) the government owes itself so, if the worst happens and there is an unlikely scenario of a large debt, this debt can simply be written off with little or no problem.
A debt owed to yourself is not really a debt. It is time government’s funded their own borrowing. It is only the propaganda of the last 300 or so years that has stopped them doing so.