Thursday, 13 August 2009

Desai: No such thing as an end to boom and bust

Lord Desai has ridiculed his leader's pretentious claims to have ended boom and bust in the absence of external economic shocks. In a letter to the Economist Desai writes:
SIR – When I was a student we studied business cycles, but the topic disappeared with the rise of mathematical equilibrium theorising. The idea that capitalism is an equilibrium system is common among Keynesian and neoclassical economists; they only differ as to whether the equilibrium is at full employment or under employment. The grand synthesis being taught makes the equilibrium stochastic and dynamic, but that is all.

Capitalism is, however, a disequilibrium dynamic stochastic system as Marx, Wicksell, Schumpeter and Hayek have told us over the past two centuries. Richard Goodwin tried his best to present a mathematical theory of such a disequilibrium system. After this crisis we need to revive that tradition if we are not to be surprised by another crisis.
In other words, boom and bust IS the equilibrium economic state, even in the absence of external shocks, and all Gordon Brown's self-delusion will never change that. What a damned useless fool that man is.

6 comments:

electro-kevin said...

The mistake ALL economists and therefore politicians make is that they think graphs presage what is to come.

They don't. They simply track history. Albeit very recent history.

Great business and political leaders all have one thing in common...

great intuition.

Letters From A Tory said...

Well said. The mystical notion of long-term calm in international markets is as laughable as it is unlikely to ever happen.

Anonymous said...

Following on from electro-kevin...

Sadly our nation has lost its great political and industrial leaders. "Short term-ism" has been the order of things for 12 or more years.

Laying down the foundations of excellence that will outlive the founder - think I.K. Brunell - is now unheard of. Who, these days, thinks that what he is about to build (build, in its broadest context) will outlive him for generations and will benefit the nation or world for centuries?

Who?

Coney Island

Anonymous said...

"disequilibrium dynamic stochastic system" - circumlocution of a high order!

It's a mess - there, that's better - a financial bubble perpetrated by British politicians, bureaucrats and bankers colluding to raid the public purse.

Cycles are a natural result of animal activity, the ebb and flow of production and consumption. Bubbles aren't - they're a man made contrivances.

Boom and bust - hmmm... does that include the use of public funds to bail out greedy halfwits who bet on the wrong nag?

They used other peoples money to gamble on tortuously contrived and bizarre financial instruments (or couldn't do 'rithmetick)- screwed up - and they are now demanding bonuses again - again from public funds FFS!


This sounds like more smokescreening by the establishment - after all look at Professor Desai's connections!


Brown is a deluded fool and a lying self righteous prick who'll say anything he's told to - to keep at the top of the greasy pole.

The Labour party, bureaucrats and bankers are out to stick the blame anywhere but on themselves - they must not be allowed to get away with it.

Is it too much to ask that Fred the Shred of RBS and Adam Applegarth of Northern Rock get to enjoy social housing for their folly ? Nope - we're allowing them to walk away - what kind of message does that send out eh?

Anonymous said...

There have always been agricultural price fluctuations due to weather but the business cycle in its modern form, if Hayek's account is correct, is relatively recent as it's an instability based on the widespread adoption of fractional reserve banking and the mismatch between borrowing short and lending long. Hayek won a Nobel for his theory although it was really due to von Mises.

hatfield girl said...

Waves sadly to Anon at 14.44. Goodness have the taxpayers, motivated by the idea of the benefits of the social consumption of wealth, and of personal morality expressed as the efficient offering of help to others less fortunate, been crucified by a combination of socialist stupidity allied with personal greed. Greed for power and the more normal kind.