I had the great pleasure last night of speaking to the Economic Research Council on the subject of Political Economy and the Crisis. I argued that:
- Economics should become political economy, embracing the problem of knowledge in the social sciences, morality (think Adam Smith’s Theory of Moral Sentiments) and public choice theory, in particular.
- Classical liberalism is the most robust political economy.
- The Austrian School offers important insights, particularly into business cycles and capital theory.
- The Austrian School predicted and intellectually survived the crisis.
- That reality is, or should be, a challenge to the contemporary paradigm.
- The implications for financial reform are profound.
We had a lively Q&A covering subjects from the Chinese socio-economic model to the residual role of the state. We agreed that we must not seek a rational reconstruction of society and we left outstanding the key challenge: to determine how to reform the financial system to deliver a free-market monetary regime.