I went to a couple of days of alumni reunion at LSE.
There were some good things, especially a long discussion
with a researcher in macroeconomics. It was somewhat funny, in the presentation
he gave, to see him go to great length to avoid disclosing the actual result of
his research, lest it be seen as a political statement (although when I then
privately asked him that the way he did not answer made me think he had found a
fiscal multiplier much greater than one, he finally admitted it). The political
economic discourse has been so twisted that merely quoting empirical evidence
is seen as intensely political –since most parties reject it (yes, in the EU,
very much including the UK, even parties nominally on the left side push for
austerity).
He shared many of my impressions about regrettable characteristics
of the field of macro (for instance, he himself seemed a lot more interested in
empirical validation than micro-foundations), but was far more optimistic –or
less cynical- than me on the causes for many of them, in particular the way in
which theories that promote the interests of the rich and powerful ended up
gaining far more traction than their successes (or lack of them) should have
granted. I would not say I am entirely convinced, but I shall at least take his
views on board. He did suggest, though, that at best current academic work
could inform better future generations of students, but that people in
positions of power seemed to have very strong priors on major issues of policy,
and that evidence did not seem to change such priors.
There was some less good moments. A round-table about
Government ended almost as a discussions of two points only: “Who will win the
next UK General Election?” and (admittedly rephrasing) “This trend seems to go
against the chances of the Conservatives, which is worrying. Please tell me how
they will keep winning elections”. Some went as far as expressing total lack of
comprehension of the reasons why strongly disadvantaged minorities hardly voted
for a party that is, well, dedicated to furthering the interest of the very
wealthy. One wonders indeed.
Just by the end, someone asked why the young voted so little
when they did not seem disengaged at all about issues. The facilitator said
that this was the ultimate paradox to which no one had the beginning of an
answer. I suggested that I could give the beginning of an answer: all three
main parties are significantly to the right of the median voter in a system
where only main parties can win (first past the post). And on top of that, when
a party runs as left of centre, he is ignored by the media, as shown by the
Greens in the European elections, who got ridiculously little airtime despite
beating the Liberal Democrats.
He first acknowledged that they were to the right of median
and that this could be something. Yet he quickly retorted that in the past
election, 90% of the expressed votes had gone to one of the main parties, so
that people must have felt rather well represented. Er… no. A minute ago, you
were lamenting that people did not vote, so judging by those who do will tell
you little. And people must vote for parties that run, and know that (except in
some very rare constituencies) a vote for another party will have no bearing on
the final result. So most of those who vote do so for a main party. That proves
nothing. Still, leaving the room he told me “fair point, fair point”, so this
was not too bad.
No, the pit was to come. And it came in the lecture that I
had expected to be the best.
We met to listen to one of the most prestigious professors
of LSE, who sat on the board at the Bank of England, who would talk about
economic prospects for the UK (well, at least that was the title of the
conference).
He started by showing GDP growth over centuries, which of
course suddenly takes off 200 years ago. His conclusion was that once the
relevant institutions are in place, economies grow at about 2% per year. I
happened to be sitting in the middle of alumni from the MSc Development and
Environment and several were already looking incredulous, as of course they
could see that this chart was that of a Petri dish. The past 200 years had a
conjunction of factors favouring growth and no major constraint had been hit.
Quite the opposite of where we are today, so extrapolate at your peril. But
leave that aside for a moment.
His conclusion was that one should just look at the very
long run (he would later express his frustration at economic discussions of how
to exit the slump, since that was too short-run for him, and wished for the
debate to move to the long run. It was hard not to think of Keynes’
exasperation at this kind of intellectual cop-out), and that what mattered was
avoiding major mistakes. He then added that he believed that Governments made
all the big mistakes, and markets pretty much never. It was now clear that this
was religion, and we were presented with a chief priest.
Having stated his credo, he asked what made some societies
grow faster. There was a page with several potential explanations of why the
industrial revolution started in the UK (a different proposition from long-term
faster growth, but never mind), and at the bottom, “institutions and culture”.
He stated that we now knew institutions and culture were the most important
factors (something that is quite plausible, by the way), because when you tried
to explain growth differential with the other factors, there remained more
unexplained variation than any of the factors could explain. This way of doing “science”
must be great, when you get to conclude that your pet explanation is the one
anytime the data is noisy enough or simply not amenable to predictive
quantitative models. It’s not that far from claiming the abstention votes when
you did not run for election.
And it went on. He sang the praise of Thatcherism as having
reversed the tendency of Germany and France GDP per capita to grow faster than
the UK, totally ignoring the myriad of factors that were bound to make this
happen (namely France and Germany were, up to the mid-70s, largely catching-up
and rebuilding after the war; North-sea oil went into major production in 1979;
the financialisation of the world economy was bound to benefit a country
specialised in the field; the asset-debt position of the UK greatly worsened in
the period, giving money to the private sector; continental Europe decided to
work fewer hours and use some of the productivity gains for more time off work –
that, like North-sea oil, would be enough alone to explain the growth
differential, so it’s rather an indictment of Thatcherism that the combined
effect should end up so small). The ability to fire people easily just had to
be what kept the UK from mass unemployment during the crisis (not the
productivity collapse or the drop in participation rates, not 500 000
people registering as self-employed despite not having any business whatsoever…).
Think about that. You can make a case for ease of firing making someone less
hesitant to hire during a period of growth. But to claim that it would boost
employment when hardly anybody is hiring yet a lot of people are firing? You’d
need incredibly solid evidence for such an extraordinary claim.
And the solution to pretty much everything had to be
privatisation, even if it contradicted his own data. He did note that, despite
the alleged wonders of Thatcherism, there was no credible energy policy in the
UK, and its infrastructure was deteriorating rapidly. There was a chart showing
the UK and US, dropping fast relative to France, Germany and Japan, since 1980
(when UK and US embarked in the cult of the private sector, remember). His
answer? We need to take it out of the hands of governments, they have kept
failing for so long that we must draw the conclusion, governing is too
important to be left to the Government.
I kid you not. His conclusion from seeing the countries that
had decided to let the private sector run their infrastructure dropping
relative to those who kept the state in charge was that to catch up, they
needed to privatise some more. I suppose that it’s a logical conclusion to the
belief that governments make all the mistakes (and here I could not help but
think of Krugman’s quote: A society committed to the idea that Government is
always bad will get bad Government. And it does not have to be that way). By
then, I was banging my head on the table, and later discussions with the people
from the Environment MSc showed that I was not the only one to be appalled.
The problem, though, was that he was such a nice speaker. So
later discussions showed that many people in the room had found it a very
interesting and convincing presentation (few were even aware of the implicit
assumptions). Some of them had a very impressive academic background, with
firsts aplenty. And then I remembered Laurie Penny explaining that exams did
not test understanding but compliance. Challenging the dogma is not the
likeliest path to a first. Top students are not always the most natural
critical thinkers.
But I had until then been under the impression (and I still
think there is quite a lot of truth to it) that LSE had not been too bad during
this crisis, that they had been a lot more willing than most to consider
evidence, and to pay some interest to market failures, which really are the
norm rather than the exception. So I was appalled to see one of the most senior
figures being in fact a high priest of the crudest neo-liberal cult. Whatever
data he presented was just a part of the rite, since he frequently concluded
the opposite of what the data said. And I had to find myself worried that he
could have been left with his paws so near major macro-economic buttons.
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