Jesse Norman’s maiden speech

We welcome Jesse Norman’s maiden speech in the House of Commons. The final section is the most relevant to our readers:

Now, the idea of revolution is never dear to a conservative, but even Edmund Burke would agree that we need a revolution in how we think about economics in Government. Over the past two decades the British Government have become steeped in a 1970s textbook caricature — a view in which markets are always efficient, prices reflect perfect information, and institutions are nowhere to be found. One would be tempted to call such a view neo-liberal, were we not in a time of coalition government.

Worse than that, the deep assumption remains that human beings are purely economic, rather than social, animals. This dismal gospel regards the human world as static, not dynamic — as a world of fixed social engineering, not one of creation, discovery and competition. In policy terms, this textbook economics takes power away from local people. It encourages centralisation and top-down meddling. It pushes us towards an inefficient, inhumane and factory-style view of public services. It is absurdly risk averse. In its apparent inevitability, it stifles public debate about other, more thoughtful approaches. Above all, it actively undermines the ideas of public service, public vocation and public duty — ideas which, I know, lie close to the heart of every Member of this House.

Now is the moment to re-examine these assumptions. Politics is not a subset of economics, and economics is not a subset of the financial sector. GDP growth is important-goodness knows that is true now — but so are flexibility, resilience and, above all, entrepreneurship in our economy. We need a new economics in our Government, not the desiccated economic atomism of the old textbooks, and we need to see people for what they really are, as bundles of human capability, creative, dynamic and fizzing with imagination and potential.

If we do this, and only if we do this, we can revive our economy on a huge billow of human energy, one that is barely conceivable within our current conventional economic models, and we can help to restore the trust and the mutual respect that our society so badly requires. It was that great — and rather conservative — economist, John Maynard Keynes, who once warned politicians not to be the slaves of some defunct economist. So let us all cry freedom and move on.

It is interesting to hear Keynes called a conservative when in fact he was very radical in his policy proposals. The irony is that we are all slaves to his current thinking even though we thought the 70’s had killed Keynesianism off once and for all.

Norman makes good comment that we need to move away from the foolish perfect competition, Theory of the Firm understanding of the economy. Although he makes no reference to it, I suspect he is familiar with the Austrian School. He may well be aware that this is the only School of thought where the entrepreneur is the creative discoverer and allocator of capital in the economy. Without this acknowledgement all we can study is the past. His very creativity to express his work often created ex novo is what the capitalistic process is all about. The homo oeconomicus of the neo-classicals is anathema to the Austrian School as his very creativity is taken away from him, it is assumed away. With efficient marginal cost pricing, the computers of today could conduct robotically all the processes that go on in the capitalistic economy, such is the bareness of the neo-classicals.

Jesse Norman’s views on the ethics of capitalism bear a striking similarity to my own, and I look forward to reading his book, “Compassionate Economics“, which is available free online (PDF), or in traditional bound form through Amazon.  Matthew Elliot’s review is here.

2 Comments

  • Current says:

    These are classic ways of slagging-off and mis-representing mainstream economics and new classicism in particular.

    This viewpoint, and I’ve heard it many times, is completely contrary to Austrian economics. These days its held by the Behavioural Economicists, in times past it was pioneered by the German Historical School and the Old Institutionalists.

    When these folks mean that markets actors have imperfect information they aren’t arguing for Hayek’s evolutionary view of markets, they are arguing for Stiglitz’s view that imperfect information means that there is “no invisible hand” and that all markets should be tightly regulated.

    When these folks argue against homo economicus they aren’t arguing for something like Mises’ or Hayek’s view they are arguing for something like Nietzche’s.

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