CEQLS Lecture: Tim Evans: The Relevance of Classical Liberal Political Economy in Today´s World

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



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



1. The Challenge and Opportunity of theEconomic Crisis



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



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.



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.



Historic Challenge



2. The Parlous State of Modern

Economics



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)



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



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.´



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.´



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.



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



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



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



3. State Failure ± Banking,

Money and the problem of

Corporatism



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



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



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



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



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



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



4. Conclusion: The Way Forward



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



Thank you.

[email protected]

CEQLS Lecture: Tim Evans: The Relevance of Classical Liberal Political Economy in Today´s World

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