Tuesday, 1 September 2015

The Biggest Nail In The Coffin Of Corbynomics

Last week you probably saw the article doing the rounds trying to claim that 35 economists nutters support Corbynonics, and other articles by economists vociferously disassociating themselves from all things connected with Corbynomics. Going through all the pros and cons of each policy would be very time-consuming - so I won't do that. Instead I'll tell you one simple, over-arching reason why, even if the intentions are noble, Corbynomics fails. It fails because it has fatally unrealistic expectations about what an economy actually is. Here's why.

There are two main reasons that an economy is impossible to command efficiently from on high. The first reason is that the entire nexus of economic activity is just too complex and too diverse for any politician to get a handle on. The second reason is that human beings, even when acting rationally, are still very difficult to map to a final theory of predictable behaviour. Without having full knowledge of the entirety of society and every detail, even a world in which every human acted rationally for the majority of the time would still leave us unable to arrive at a gland slam model on which to base any kind of sovereignty.

Humans are often selfish but they will also act selflessly, particularly when there are selfish gains, but also for sporadic acts of kindness at a cost to themselves. They often have strong moral convictions in one area of life (it is wrong to avoid taxes) but relax their moral convictions in other areas of life (like being willing to cheat on a partner). They will often behave one way when caught up in a group collective, but depart considerably from such behaviour at an individual or familial level. They will be quite prudent in spending money on things they need, but in times when status-mongering or social gain is in front of them they will spend quite recklessly. The upshot is, let humans loose in society and they become a mess of contradictions and opposites.

Society isn't a giant piece of clay that can be moulded exactly as a potter wants it to be - it is a multi-faceted network of activity in which millions of people, including business owners (who themselves have a family and staff to think about), have to make local decisions most conducive to their own survival and well-being.

Consequently, then, the kind of Corbynomics that looks to favour some citizens in the free market against the free choices of other citizens in the free market only usually occurs by harming the latter group - most of whom are individuals trying to make the decisions they can to secure the solvency of their business and the jobs of that business's employees.

Here's what I think the real problem is - one that leads to most people having a far more idealised idea of the free market than is actually the case - it is that few people understand quite how we got to the stage we're at in terms of global development, and the varying degrees of it. Think about some of the diversity of things you could buy if you went to London tomorrow for a day trip. You could buy a crucifix necklace, a funk CD, some candy floss, a can of coke, a place in an eat all you can Chinese buffet, polyester trousers, a pack of post-it notes, a bunch of roses, antique spoons, and so on.

Now think about it, why do those things exist on sale and not some other variants of them? Why a funk CD and not some other musical genre that never took off? Why candy floss and not some other sweet treat that no one has ever heard of? Why do we tend to buy a bunch of roses as a gift and not some daisies or blossom flowers? There are easy explanations for all those questions, but the point I'm making is that you can only see these outcomes retrospectively - you could not possibly plan all this in advance.

The socialist or (heaven forbid) communist plans were flawed not just because of their disregard for economic liberty, but because they failed and continue to fail to understand just how complex and unpredictable the market is - because the market is the aggregation of billions of exchanges every day. No over-arching economic system of control would ever have produced the rich diversity of goods, services and jobs we currently see, and that's not just because we cannot plan or predict what we are going to value, it is also because there is no rhyme or reason to how much of our economic activity has panned out. Who in 1850 could ever explain why we would go on to value party poppers, rock music, pierced tongues or candlestick ornaments instead of other alternatives that never made it onto the market?

And now you have to extend that to the entire market of goods, services, labour to see how ludicrous the idea of such idealistic top-down micromanagement actually is. Human beings simply don't have the apposite knowledge or necessary timescales to govern an economy in a detailed manner, because every human being only has the immediacy of the local perspectives from which to derive his evaluations. As my above explanation of the free market will have hopefully made clear, a model of the economy that gathered the requisite data to enable us to run it would need to be as big as the economy itself. That is, we'd need the economy to model the economy, and thus we can do no modelling.