The purpose of morality is to teach you,
not to suffer and die, but
to enjoy yourself and live.

Steve Baker (Wycombe) (Con): When I came to the House today, I expected to hear a great deal of Keynesian argument and I have not been disappointed. I am sorry that the hon. Member for Great Grimsby (Austin Mitchell) is no longer in the Chamber, as I wanted to congratulate him on his comprehensive grasp of Keynesian arguments. Unfortunately, it was also excruciating.

I am told that Keynes thought that the safe upper limit for the size of the state was 25% of national income. He might have halved the size of Government, so we can applaud the Budget as extremely moderate and thoughtful.

I have to tell those who propose deficit spending that it is inherently unsustainable. When Governments spend with a deficit they are bound to inject funds in a particular location in the economy and that is bound to create a pattern of economic activity that can be sustained only with deficit spending. We all accept that deficit spending cannot go on for ever. As one of my hon. Friends explained earlier this week, last year we were able to borrow only because we created a hole in the market for bonds using quantitative easing. That is so dangerous. In the past the world has seen the effects of printing money to pay off Government deficits, and I would dread to think that this country should live through such a circumstance.

I am reminded of some words published in 1945:

“I see now more clearly than ever before that even our greatest troubles spring from something that is as admirable and sound as it is dangerous-from our impatience to better the lot of our fellows.”

That is a quotation from Karl Popper, who is an interesting philosopher because, like his contemporary, Friedrich Hayek, he was a socialist until he understood where that philosophy went.

I am interested in the general well-being, particularly as Wycombe has not only great wealth but significant poverty and income levels everywhere in between. We must take seriously the realities that we face. I am glad that the Budget has included an announcement that there will be a review of pensions, and I should like to speak on that. I am grateful to my hon. Friend the Member for Stourbridge (Margot James) for having brought up the subject.

Read the rest of the speech here.

Via www.zerohedge.com and econstories.tv, the choice in economics explained through the medium of music:

See also

• Banks, economic interventionism and the cause of the credit crisis
• Now it’s looking like V for victory over recession

A couple of quotes from De Soto, pp 456-474.

From “Effects the business cycle exerts on the banking sector”:

Hence we can conclude that an inherent trend in the privileged exercise of fractional-reserve banking leads to bank consolidation and encourages bankers to develop and maintain close relations with the central bank as the only institution capable of guaranteeing banks’ survival in moments of crisis, situations banks themselves create regularly. Furthermore the central bank directs, orchestrates, and organizes credit expansion, making sure that banks expand more or less in unison and that none stray far from the established pace.

Eerily familiar… and for fun, from “Marx, Hayek and the view that economic crises are intrinsic to market economies”:

To contend that an economy of real socialism offers the advantage of eliminating economic crises is tantamount to affirming that the advantage of being dead is immunity to disease.

De Soto goes on to provide a clear and detailed solution which he claims could provide stable and gently growing constant prosperity.

It seems everyone is talking about swine flu and the financial crisis, but they seem to be most persistently interested in what has gone wrong with the economy. After I explained the key points of this Nobel Prize Lecture by F A Hayek to my hairdresser this morning, she had confirmed in her mind what she always knew: that economists cannot discover all they need to make accurate predictions.

This is something we all need to understand.

What follows is a precis of that 1974 lecture (sometimes quoted verbatim). It explains why and how the economic policies of the time contributed to inflation and unemployment and it points the way out of our present and coming difficulties.

This is its message:

• Physical scientists can observe and measure the things that drive the sytems they are studying.
• Society, and therefore the economy, is not like a physical system: many of the most important factors cannot be seen or measured. Consider the thoughts and intended actions of millions of people at different times, for example.
• Economists and other social scientists, in their attempt to be scientific, ignore what they cannot measure.
• Therefore, many of the most important factors affecting the economy are not considered, while some of those factors which can be measured are deliberately controlled.
• The results are incorrect predictions and actions which positively harm society.

In a sentence: society is not a machine to be controlled, but a garden to be cultivated.

By the way, the remark about making astrologers look good is attributable to the Keynesian economist J K Galbraith:

The only function of economic forecasting is to make astrology look respectable.

The precis:

A Precis of “The Pretence of Knowledge”

The topic of this lecture is the chief practical problem of economists, who must now explain how to stop the accelerating inflation they have caused. In imitating the techniques of the physical sciences, economists have made grave errors of economic policy.

The assertion guided policy that there exists a positive correlation between total employment and the aggregate demand for goods and services. It implies we can permanently ensure full employment by maintaining total expenditure. This is fundamentally false and very harmful.
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An interesting, if out-there, read from Hayek in 1977:

When a little over two years ago, at the second Lausanne Conference of this group, I threw out, almost as a sort of bitter joke, that there was no hope of ever again having decent money, unless we took from government the monopoly of issuing money and handed it over to private industry, I took it only half seriously. But the suggestion proved extraordinarily fertile. Following it up I discovered that I had opened a possibility which in two thousand years no single economist had ever studied. There were quite a number of people who have since taken it up and we have devoted a great deal of study and analysis to this possibility.

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I just discovered that a long-lost friend is a Marxist.

We agree that we are engaged in a fight for freedom, and so we return to the point on which the debate still turns: should we have a big state and trust the few or a small state and trust the many? State control or free competition?

This debate is an old one, but few actually participate, never mind after researching both sides.

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