“The first thing we do, let’s kill all the lawyers,” says Dick the Butcher in Shakespeare’s Henry IV, Part II.
My oldest son is a lawyer, so that’s no longer a phrase that carries much currency in the Gibbons household. But I do know what the Bard of Avon was on about when it comes to economists.
For the past few years, we have been treated to a daily – nay, hourly – series of comments, diagnoses, prognoses and analyses from all manner of learned economists about Greece and this thing called ‘Grexit’ – a possible, even likely, exit of Greece from the Eurozone. Many of these highly informed and opinionated folk have Nobel Economics Prizes to their names, others have that august award in their future.
With names like Stiglitz and Krugman, Rogoff and Draghi, Piketty and Roubini, they have declared that Greece should certainly repay its debts. Or that it shouldn’t, it’s out of the question. That austerity is just the medicine. Or it isn’t. That Greece will certainly leave the Eurozone, which will collapse as a result. Or it won’t.
The only thing they agree on is that this day, this meeting, this summit, this weekend, represents deadline time, the absolutely final chance of a deal being done. Except it never seems to.
Is it fair to wonder if any of these esteemed sages actually knows what’s going on?
Come to think of, there’s a similar problem right now in China, where the Shanghai stock market is in the process of collapsing. It’s down 30% in a matter of weeks, but depending on which economist you read, this is either quite normal or the beginning of Armageddon.
In fact we went through much of this before in 2008, when the likes of Bear Stearns and Lehman Brothers were in the process of imploding. When I read former US Treasury Secretary Tim Geithner’s masterful account of those dark days, Stress Test, I was left with the indelible impression that not one of the US government’s economic advisors had the faintest idea what was unfolding. Nor, when it had happened, did they immediately know what to do. The night before the collapse of Lehman Brothers, Geithner tells us that he was informed by a Very Senior Banking Supervisor that everything was perfectly fine!
Physicist Mark Buchanan, in his book, Forecast, makes the point that despite the best efforts of the economics community, we have no real clue as to what caused various stock market crashes. We may think that we have the answer, but as he so eloquently puts it:
…the problem is not that contemporary economists have failed to understand economic systems – an exceedingly difficult task, as everyone should admit – but they have not been honest about their failure. We’ve all been brainwashed into thinking that economists know more than they actually do.
In looking into the basis of economic theory, I fully expected to find a body of thought and mathematical theory that had been developed with the same commitment to scientific honesty as you find in, say, physics, aeronautical engineering, neuroscience, or social psychology.
The truth is disturbingly different…
Disturbingly different indeed! If the aeronautical engineer gets it wrong, planes fall out of the sky and passengers die. If the average economist gets it wrong, well, we’ll just move on to the next forecast or remedy. Should China’s Central Bank intervene in the Shanghai market or not? Some say yes, others recommend no, but hang the fact that China’s shiny new economy is likely to be affected by all of this for years to come, leave alone economies like our own, which sell vast quantities of raw material to China.
So here’s my suggestion.
Let’s gather up the world’s economists and pack them all off to Greece. There’s at least 100 000 of them stashed away in various banks, brokerages, consultancies, government departments and universities around the world. If nothing else, that would provide an immediate boost to the Greek tourist industry.
But once in Greece, they would not be allowed to leave and would be forced to exist on the €60 per day or less – whatever a penurious Greek pensioner lives on, say – until they had a) agreed on a real, workable solution for Greece’s economic problems, b) put the solution into practice and c) lived there for a while until they could see for certain that it was doing what it was supposed to.
In the meantime, the rest of us could get on with running our businesses and countries using an equally useful decision-making tool, just as accurate over time as the economists.
We would make every decision by the toss of a coin.