Engineering, politics, Labour and reality

As I sit here on the train, reading a book on ethics, I am mindful of being an engineer in politics.

Engineers are quintessentially pragmatic. We get things done, in the circumstances we face, with the resources we have. We may accept falling short of perfection, but we deliver things which work and improve them.

However, we don’t flounder around uninformed. Aeroplanes do not fly thanks to fairy dust and software does not write itself. Aerospace engineering requires the application of correct ideas. Software engineering is little more than ideas implemented.

However, as anyone who has engineered aircraft or software will know, engineering is compromise.  No vehicle travels faster than light and no computer program has found the second Meerten’s Number1 The former is fantasy. The latter, a practical impossibility.

That is, if you wish to achieve something in the real world, it is important to understand how the real world works, even if you cannot perfectly apply your ideas.

And so we turn to the attitude of the opposition benches yesterday.

Labour’s jeering, self-righteous indignation and lack of remorse over the public finances seems to suggest two premises. The first is that the government has an inexhaustible horn of plenty.  The second is that the financial crisis was an automatic feature of the economy which could not have been avoided.

The Government does not have an inexhaustible horn of plenty. Government funds itself by taking today, promising to take a greater sum tomorrow and debasing the currency. We have reached the limits of all three and the consequence is an entirely predictable crisis.

Thanks to something called the Laffer Curve, it now seems likely that increasing taxes will reduce government revenues.

We are at the limits of government borrowing. As one commentator put it, Gordon Brown’s borrowing was “reckless in the extreme”.  Furthermore, as was argued yesterday in the Commons, government borrowing last year was facilitated by buying from the market with new money government bonds of a value broadly the same as that which the government needed to sell.

Rulers have always debased the currency to pay for their escapades. When they clipped coins of intrinsic value, the immorality of it was obvious. Now that effect is achieved by something which sounds terribly technical (“quantitative easing“) and by the nature of the banking system (private banking with a fractional reserve, controlled by a central bank) the immorality of it is less obvious. However, as Toby Baxendale explains, the pound has lost around 99.5% of its value over the last century. Debasement is a stealth tax, one which redistributes wealth towards those who receive the new money first: it is primarily a tax on those with low and fixed incomes. At its extremes, currency debasement ends in a Crack Up Boom which finally destroys the currency.

As I have explained before, the banking crisis and the wider economic and fiscal consequences are not attributable to the free market. It was all horribly predictable.

Labour’s premises are wrong. There is no inexhaustible horn of plenty from which a benevolent government can dispense unlimited gifts. This crisis is not an automatic result of the operation of the free market, but a result of bad banking law and government intervention.

It is no good the opposition jeering and pointing as they oppose cuts to unaffordable Government spending. If we are serious about human well-being, prosperity and social progress for everyone, then we need to face the world as it really is and find a way through. Neither fantasy nor insistence on defeating practical impossibilities will do.

This begs the question, “How does society work?”. It turns out, of course, that our generation is not the first to ask. The first systematic treatises on the nature of society and social cooperation were written by the Thomist Scholastics of Salamanca in the 15th and 16th centuries. Their ideas resurfaced with scholars including Menger, Bohm-Bawerk and Mises. Their system of thinking may or may not be complete, but it appears to have the greatest explanatory power for our circumstances today.

Where to begin? Mises’ Human Action is perhaps the definitive treatise, though it has been extended and refined over the years. However, if you only have time for a pamphlet, I recommend Eamonn Butler’s primer on Mises, available to download or buy from the Institute of Economic Affairs.

We may not like reality, but we do have to deal with it. Pragmatic we must be, but let’s at least grasp some good ideas.

  1. A Meerten’s Number is an integer which is its own Gödel Number: given a sequence x1x2x3xn of positive integers, the Gödel encoding of the sequence is the product of the first n primes raised to their corresponding values in the sequence. That is, the problem of Meerten’s Numbers is one simply of arithmetic, albeit of large numbers and large primes. There is at least one Meerten’s Number but if you have found the second or subsequent number in the series, please let me know. []

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