How rich are economists? Yeovil’s public library and the Art of War

by ammophila

It is often said that history is written by the victors, and this must be a factor encouraging many to believe that right wins in the end.  While no expert in such matters, I would incline to think that on the contrary in military matters there is no very strong link between moral standing and success, and insofar as one exists it is likely to be in favour of the scoundrel rather than the white knight, if only because the former will resort to ‘dirty tricks’ which the latter would eschew.  However, my point here is to pose the question whether a similar principle may operate in the economics we see in the media.  I am not thinking of the many pieces which are deliberately biassed for one reason or another, but rather of those that purport to be, and may in all honesty set out to be, careful and balanced assessments of this or that economic issue.  There is a saying to a man with a hammer every problem looks like a nail and in economics (as in politics) we face a sophisticated version of a rather similar skewing of judgement.  For with an infinitesimal number of exceptions the views that receive widespread coverage are written by those who have done well out of the economy, with salaries soaring in some cases far into six figures of pounds or dollars, not to mention ancillary sources of income.  This will apply whichever side of a given issue they support, and however hard they try to avoid ideological bias.  No matter how wide the field of data at their disposal, how can they not base their interpretations on their own experience, and the experience of their friends and associates, who will very largely share the same background?  Even before that, their own experience will influence the data they choose to use.  But the proportion of humanity with salaries in six figures is tiny.  With the best will in the world these analysts cannot notice all the factors and understand wholly the situations that confront the vast mass of humanity.  And so the most recent issue of the Economist argues firmly for action by governments to raise prices.  It says that deflation (prices dropping) has been deeply damaging to Japan.  This may be true if by ‘Japan’ you mean the rich corporations, but it is highly questionable if you are speaking about the standard of living of nearly all Japanese.  ‘Since loans are fixed in nominal terms, falling wages and prices increase the burden of paying them’.  Some unclarity here.  If prices drop that will help the vast majority of the population to pay off loans.  As for wages dropping, that will be a factor but it depends how ruthlessly businesses try to hold on to their profits by cutting wages, how soon they cut and by how much.  There have been plenty of examples in recent years, notably in Germany, of wages being reduced only by moderate amounts and with the employing business doing its share by accepting a loss of income.  (Incidentally, should we be hearing any talk about cuts in management salaries?  That may be a small fraction of the total costs of most – but not  all – businesses, but it would make a vast difference to the willingness of everybody else in the mix to tighten belts and compromise.  But is that how senior layers of management view the issue?)  ‘Low inflation…tends to go with a weaker economy and higher-than-necessary joblessness’.  This is loose.  The Economist gives three countries’ jobless rates, but even if the inflation rates were added, this would remain only a claim of correlation, and in a plainly complex relationship, more would be needed to count as evidence for a useful causal connexion.  ‘Nominal incomes grow more slowly than they would if prices were rising faster.’  This sounds alarmingly close to a truism, but no figures are given, even as examples, and in any case what matters crucially is the relative speeds of the increases in incomes and prices.  ‘Low inflation makes it tougher for uncompetitive countries within a single currency to adjust their relative wages,’  True enough (and it is pleasing to see some explicit recognition here of what we might perhaps call the social factor).  But as with the linkage between low inflation and unemployment (above) this is a moderately complex relationship, and there is more than one way out, the most drastic, single-track exit being (notoriously) to stop sharing the same currency.  ‘Too little inflation will undermine central bankers’ ability to combat another recession.’  Fair enough, up to a point, but beyond that point a very important question is how severe the recession might be (and what combination of factors caused it).  It is understandable that those who look at economies from the point of view of large companies and the significantly wealthy will see any recession with its reduction in profits and ‘growth’ as a failure, and for those committed to an ideological version of capitalism it will count as ‘deeply damaging’.  But whether it can be so described for the population affected, with for instance massive loss of jobs and really substantial disappearance of income and assets, is another matter.  (Let me refer you to the Japanese case again.)  And that, incidentally, depends on how far those who control the levers of commerce and economic power are determined to look after their own interests rather than those of the nation at large.

Ernesto Keynes



I was able to help Ollie B with her enquiry about Sun-Tzü, personally, because she goes to the same college as me in Yeovil, and she showed me the letter she had on this website.  (By the way, the editor said I could only put this letter in if I gave her real name, which is actually Auliffe Baratsch, but Ollie said that was okay.)  It’s pretty well true that Sun-Tzü did come close to saying that the best way to win in war was to make the enemy not want to fight, even if he didn’t use exactly those words (in Chinese, anyway).  That sort of angle is big in his third part (which you aren’t supposed to call chapter apparently).

Seeing as I am writing on this site anyway, I wonder if I can set a puzzle for the readers?  Which leader of a nation now is a reincarnation of Syngman Rhee?   Clue 1) look up about him, especially what the newspapers said about him (in English) in the time of the Korean War.  Clue 2) for the answer look around the countries in the Middle East today.

Veronica Mallinckrodt


Editorial note: You appear to have been spending a lot of time in the East Asian reading room of the Yeovil public library, if that town has a public library.  A much better way for a young lady to spend her time is to get out of doors and play some healthy outdoor game; I would suggest tennis or hockey or lacrosse perhaps.