Stumbling and Mumbling

Savers, capitalism & self-interest

Do people vote in their own material interests? I ask because of the decision last week by NS&I to cut interest rates to almost nothing.

In doing so, it is only bringing its rates into line with market rates. Which tells us two big things.

One is tha the pandemic has exacerbated a long-term downtrend in interest rates.

The second is that from the point of view of savers (let alone anybody else) the government is not borrowing enough. One reason for NS&I’s decision is that it was raising more cash than the government needed – in part because the same pandemic that has raised government borrowing has also made forced savers of many of us and so raised the savings to pay for that borrowing.

From all this, savers should infer two things. One is that capitalism is serving them badly. Economists disagree upon exactly why rates have trended down. Some blame an ageing (pdf) population, others a savings glut or shortage of safe assets, whilst others blame a falling global rate of profit. What’s more, low rates reflect lower trend growth, which itself might be due to not just lower profits but declining R&D efficiency, a fear that future innovations will make today’s ones unprofitable, lower innovative possibilities, a general difficulty in monetizing the benefits of innovation, or simply an end of the things that caused growth in the first place. Whatever the explanation, the fact is that there are forces within capitalism that have clobbered savers.

 Secondly, from this perspective, “fiscal discipline” and austerity is a menace. In depressing growth (or not raising it enough) it exacerbates the pressures for lower rates. Ten years of Tory government have thus added to savers’ pain.

And who are these savers? Moderately wealthy retired people. That’s who. It is these, therefore, that should be critical of capitalism and the Tory party.

Which, of course, most are not: instead they are the stereotypical Tory voter.

Hence my question: in supporting Tories, are older savers acting in their own material interests?

Possibly. The same low rates that destroy their incomes also push up house prices and help support shares.

But I’m not sure this is sufficient answer to my question. For one thing, unless you downsize (which many older people are loath to do) a higher house price is little use: equity release schemes are not great value. And even for landlords, years of weak growth have held down rents. And for another, many of the factors that lay behind lower interest rates have also weighed down share prices, such as secular stagnation and the falling rate of profit. Shareholders, more than most, should be alive to the shortcomings of capitalism. 

So why aren’t we seeing more discontent with capitalism and the Tories from older folk?

Part of the answer lies in a paper by David Leiser and Zeev Kril. They show that non-economists are terrible at making causal connections between economic phenomena*. They therefore just don’t connect fiscal austerity and long-term trends within capitalism to the fact that they’re incomes have disappeared.

In this, they are not helped by the media. The problem here is NOT that it has a rightist bias. Rather, it is that the news by definition under-reports slow-moving changes such as the downtrend in interest rates and the causes thereof. And the media’s concern for human interest stories means it under-reports emergent phenomena which arise without any individual’s intent. The media does not report social science.  

Which creates a vacuum to be filled by something else, as described by Phil. Retired people, he says:

are dependent on impersonal forces beyond their control for prosperity or misfortune. This antagonises the general unease underpinning the pensioner position and turns them, politically speaking, into nervous wrecks. These anxieties and fears sublimate into lashing out against things exemplifying uncertainty and change, like young people, the socially liberal trajectory of popular culture, and people traditionally positioned as outside the mainstream and used as scapegoats: sexual minorities, travellers, and immigrants. The flip side of anxiety is a longing for surety, and what provides this better than the smack of firm government?

In this way, what should be an economic debate becomes a front in the culture war. During my adulthood the Tories have performed an amazing transformation. Whereas Thatcher could credibly appeal to voters’ material self-interest, Johnson’s Tories don’t even try to do so. They have figured out – perhaps by accident – that the best response to capitalism's failures is not to talk about economics.

* This isn’t to say they are irrational or stupid. I know nothing about plumbing, so why should I expect a plumber to know about economics?

Blaming the voters

In the Times, Matthew Parris wrote: "this Prime Minister is ultimately our [the electorate's] fault." I tweeted that this was absolutely right, but got a little pushback. I should therefore elaborate.

What I and Matthew meant was that Johnson is not doing anything unexpected. He is merely living down to what everybody knew about him. As Matthew wrote:

There was never any reason for confidence in Boris Johnson’s diligence, his honesty, his directness, his mastery of debate, his people-skills with colleagues, his executive ability or his policy grip. We’d seen no early demonstration of any of these qualities but we just blanked that out.

Voters, then, are getting what they voted for. Those who voted Labour in 2001 could say of the Iraq war “I never voted for that”. Those who voted Lib Dem in 2010 could say of the tripling of tuition fees “I never voted for that.” Those who voted Tory last year, however, cannot say the same. They got what they wanted. They should own it.

There are some objections to this, most of which I find inadequate.

The first is that voters were deceived by our dishonest grifter media. There’s some truth in this. The media does have some influence, if less than its critics claim.

But people have agency. They are responsible for believing the media’s lies: the victims of conmen are not always wholly deserving of our sympathy. And voters are quite capable of being wrong without the media’s help. They are systematically mistaken about many social facts, such as how many immigrants there are. They don’t understand economics (or, I suspect, the social sciences generally). Some of their preferences – for benefit cuts and a hostile environment for immigrants - are plain vicious. And they have cognitive biases which support inequality. The media amplify these failings. But to believe they are the sole cause of them is to regard voters as childlike noble savages who are corrupted by a few billionaires. That’s just romantic twaddle.

You don’t need to believe in Marxian ideas of false consciousness (a phrase Marx never used) to accept this. Bryan Caplan and Jason Brennan have said similar things from a non-Marxian point of view.

Another objection to Parris’s claim is that the Tories got only a minority of the vote and so it is our electoral system to blame rather than the voters.

Let’s leave aside the fact that the electorate support this system: they rejected mild reform in the 2011 referendum. And let’s also leave aside the fact that it’s not just Tory voters to blame. Those who abstained or voted Lib Dem thereby allowing a Tory candidate to win in their constituency are also guilty.

And let’s also leave aside the fact those using this argument must be careful – because it will undoubtedly be weaponized by the right to delegitimize even a mildly social democratic government.

Instead, there’s another problem. If voters do have vicious, biased and ill-informed preferences – whether caused by the media or anything else – then the last thing we should want is for parliament to better reflect these. (Of course, some Labour supporters might have such bad preferences too.)

Our problem is not how to get a more representative parliament but rather how to filter voters’ preferences so they reflect the wisdom rather than stupidity of crowds.

 Traditionally, small-c conservatives have been alive to this question. It is why Edmund Burke thought that MPs’ judgment should over-ride the “hasty opinion” of their constituents. And it’s why they have prized an independent civil service and judiciary, as these too restrain hasty, silly and nasty preferences: it is no accident that populists everywhere attack such institutions.

But there is a more radical alternative – to use devices of deliberative (pdf) democracy such as citizens juries to increase our chances of getting the best rather than worst of public opinion. It is these we need more than electoral reform.

You might object here that it is futile to complain about the electorate as we must work with the world as it is, not as we’d like it.

Public opinion, however, is malleable – a fact our most successful recent Prime Ministers have recognised. Thatcher sought to change it not just by persuasion but by introducing a property-owning democracy to incentivize people to vote Tory. And Blair’s expansion of higher education has (inadvertently?) created a large cohort of liberal-minded youngsters: there’s a reason why Tories are attacking universities.

 There’s a further objection to Parris’s claim. Some of us (not enough!) voted Labour. Surely we’re not to blame?

There’s an irony here. Many people using this to exculpate themselves also believe in the idea of collective guilt – that, for example, Britons collectively were responsible for the slave trade and imperialism. But if our ancestors, many of whom never owned slaves or participated in imperialism, were collectively guilty of these crimes, mightn’t we too be collectively responsible for the Tory government?

Mightn’t even we Labour supporters be partly to blame by for example not campaigning sufficiently or sufficiently well or for making bad political choices ourselves – be they choosing a Labour leader who didn’t appeal sufficiently to voters or not accepting the Brexit referendum result?

Which brings me to another irony. Part of Johnson’s appeal is like Trump’s: it’s a backlash against metropolitan elites who think they know better than “the people”. And yet those of us who claim that (some) voters are ill-informed and vicious are making the same mistake Hillary Clinton made when she called Trump supporters “deplorables”: we’re inviting a backlash against us arrogant know-alls.

This is a dilemma. The solution to it – if there is one – is to try to separate talk about outcomes from talk about process. We must ask: what sort of processes and institutions are likely to best deliver policies that are both good (by whatever lights you want) and democratic? Few people, however, want such a debate.

Conceptions of politics

There is a great and overlooked political division today – between those who think policy matters, and those who think it doesn’t.

Here are some examples of what I mean.

First, Ed Miliband’s speech on the Internal Market Bill was that of a man who thinks a consistent policy would be a good thing. He is exercised by the fact that a man who greeted the signing of the Withdrawal Agreement as a “fantastic moment” now regards it as “contradictory”. Johnson, however, seems to attach no importance to the need for a consistent policy.

Secondly, Rishi Sunak has the highest approval rating of all cabinet ministers among Tory members, even though employment is slumping: the ONS reported today that payrolls have dropped by 629,000 in the last 12 months, a trend economists expect to continue. A massive policy failure is no handicap to popularity.

 Not that indifference to the need for coherent policy is confined to Tories. Bridget Phillipson said recently that Labour must listen to voters, whilst telling us little about her own policies or philosophy other than the need for “disciplined” spending promises. To use Tony Benn’s distinction, she is a weathervane, blowing in the wind, rather than a signpost.

Which raises the question: if politics isn’t about policy, what is it about?

One conception – which Ms Phillipson is using – sees it as a form of marketing. It consists in giving voters what they want, even if their preferences are ill-informed, contradictory and endogenous.

A second conception regards it as a debased form of theatre, a form of play-acting in which appearance and presentation are everything: Sunak’s popularity owes much more to his plausibility at a podium than it does to his material achievements.

Closely related to this is the tendency to see it as a game. I don’t have to tell you that, too often, this is the media’s conception. There’s jockeying for position, gossip and backbiting in which confidence, fluency and “credibility” are prized more than actual mastery of policy or managerial skill. Although its players, and the media, like to see this as a vicious sport, it is in fact often a matey process among jolly good chaps in which the worst that can happen is to conduct a “car crash interview” and where the losers retire to overpriced sheds or sinecures with investment banks. As for the fact that politics actually costs thousands of people their lives, well who cares? They are only the little people. 

But there’s another conception, which has grown in recent years. This regards politics not as a matter of solving (or at least ameliorating) social problems with coherent policy, but rather as unifying your tribe – for example by inventing culture wars. This serves the Tory party well. Labour has always been an awkward alliance between metropolitan liberals and the working class (a point clear in, for example, Orwell’s writing), and a culture war can drive a wedge between the two.

This, I think, explains Johnson’s otherwise incoherent attitude to his own Withdrawal Agreement. He hopes that voters will see this not as a breach of international law nor as an admission that his own negotiation and commendation of that Agreement were faulty, but rather as him “standing up” to the EU.

And given that we have a media which devalues intellect, coherence and prosperity and instead celebrates posturing, he might get away with this.

The Hayek question

Thatcher was right. This is my reaction to reports that Dominic Cummings regards Brexit as a way of getting out of limits on state aid and so enabling the government to funnel cash towards the UK’s own future big tech companies.

The problem with this is that, as Thatcher said, the state cannot pick winners. Corporate growth is largely unpredictable. “The stochastic element is predominant” concluded Alex Coad in one survey. “Corporate growth rates are random” found Paul Geroski in another (pdf). “There is low predictability [of corporate earnings growth] even with a wide variety of predictor variables” found (pdf) Louis Chan, Josef Lakonishok and Jason Karceski in a third.

This fact explains why fund managers don’t beat the market. David Blake has concluded: "the vast majority of fund managers in our data set were not simply unlucky, they were genuinely unskilled." It's also why the performance of venture capital trusts has been very variable. In the last five years, one fund trebled investors’ money but two others lost half of it. A big reason for this is that, as Charlie Cai has shown, it is prodigiously difficult for companies to grow and investors often under-estimate all the obstacles to growth.

Investors cannot, then, pick winners. Success is unpredictable. And not just in the corporate sector. It’s true in films: United Artists and Universal both rejected Star Wars. It’s true in publishing: J.K Rowling and C.S Lewis saw their manuscripts rejected many times. And in music: Elvis Presley was told to go back to truck-driving and Decca famously rejected the Beatles on the grounds that "guitar groups are on the way out."

 As William Goldman said, nobody knows anything.” In particular - as my examples show - extreme success seems unpredictable.

This isn’t to say that Thatcher’s laisser-faire approach to industrial policy was right. There’s much that governments can do: fund and promote basic research; ensure that start-ups and small firms aren’t held back by a lack of finance or by the wrong intellectual property regime; ensure a good supply of skilled workers, some from overseas; and so on.

What they cannot do, though, is spot winners.

This is because Thatcher’s mentor Friedrich Hayek was right. Markets are complex processes, knowledge of which is dispersed, fragmented, tacit and not collectable by a single mind:

In the study of such complex phenomena as the market, which depend on the actions of many individuals, all the circumstances which will determine the outcome of a process…will hardly ever be fully known or measurable…[We] cannot acquire the full knowledge which would make mastery of the events possible.

The issue here is a fundamental one - what can governments know? - that should be behind many issues in economic policy. For example:

 - How can we run counter-cyclical policy, given that nobody can reliably predict recessions? For me, this is an argument for stronger automatic stabilizers such as better welfare benefits. It’s also a case for having the right policy infrastructure in place, so that (for example) the Bank of England can quickly write us all a cheque.

 - Do local authorities really have sufficient knowledge of what worthwhile things need doing, and the ability to scale these up and down, to make a job guarantee feasible? For me it is this question, rather than macroeconomic considerations, that is key to the desirability of scheme.

 - Can governments know enough about low-income families to target support to them? Many, of example, move in and out of work often and see their hours fluctuate. Can we design a benefit system that responds to such variation, or is a high citizens income a simpler alternative?

 - How best should banks be regulated? The trend has been towards increased complexity. But Andy Haldane has argued:

As you do not fight fire with fire, you do not fight complexity with complexity. Because complexity generates uncertainty, not risk, it requires a regulatory response grounded in simplicity, not complexity.

It might be that high capital requirements, or even nationalization, are simpler alternatives.

 - Can bosses know enough to control large organizations? If, on the other hand, knowledge of the organization is also fragmented, there’s a case for greater workers’ say.

Hayek’s question – what can governments know? – should then be a fundamental, ubiquitous one.

But it’s not. This, I fear, is due partly to a selection effect. Politics and opinion-mongering selects in favour of bumptious prats who over-estimate their knowledge. Which is an obstacle to good policy.

Cummings is, I think, wrong to think the state can pick winners. His error is not an idiosyncratic one, however, but rather the product of systemic dysfunction.

On press freedom

In The Enigma of Reason Hugo Mercier and Dan Sperber argue that the main use of reason is to justify and explain conclusions that we have arrived at sub-rationally. Some reactions to Extinction Rebellion’s blockading of newspaper distribution centres seem to me to illustrate their point.

For example, Culture Secretary Oliver Dowden said their action “damage[s] our democracy”. Johnson said: “A free press is vital in holding the government and other powerful institutions to account.” And Ian Murray, executive director of the Society of Editors, said that “shutting down free speech and an independent media is the first action of totalitarian regimes and dictators.”

Such fancy talk attributes to the press a sanctity it does not merit. And it’s not needed. If XR had blockaded a Cheesy Wotsits factory you might reasonably object that it was interrupting people’s right to earn a living: you wouldn’t need to argue for the gustatory merits of the Wotsit. Equally, you don’t need to attribute virtues of the press in order to defend its freedom. To do so is to seek an unwarranted justification for your priors.

Instead, this issue raises some interesting questions. One is: do we actually have a free press? Rightists say we do. Which is true in the sense of there being little state control, except for onerous libel laws (and guess who they benefit). Leftists say we don’t, as a handful of billionaires control most of it. This split reflects a general divide about the nature of freedom. The right has traditionally identified this with an absence of state intervention. The left has replied that freedom in this sense often permits too much private sector inequality – for example, in working conditions. As Corey Robin argued in The Reactionary Mind, Conservatives’ talk of freedom often disguises what is really a love of hierarchy. The issue here is what type of freedom we value rather than the nature of the press itself.

If we accept, arguendo, the rightist conception of freedom here, another question arises. How much good or harm does the exercise of this freedom do?

You might think here that I’ll object to its Tory bias. In this context, I won’t. Yes, there is some evidence that the media does boost (pdf) the Tory and UKIP (pdf) vote. But people have a right to advocate voting Tory, And the media is not the only source of ideas I believe to be mistaken. Pro-capitalist ideology can arise without the aid of the press.

Instead, there are other costs.

One is that far from embodying a diversity of opinion, the media actually narrows it down. Market forces tell us this. Since it became technologically possible, we’ve seen an explosion of blogs, podcasts and alternative online publications. This would not have happened if people had been satisfied with the range of opinion they were getting from the old media. If the media were truly diverse, you’d not be reading this.

Another is that the media systematically fosters false ideas. Simon Wren-Lewis has accused it, rightly, of promoting a false picture of economics. And the admirable Mic Wright documents many other shortcomings. These are not always matters of left-right bias. The media is also biased against the social sciences. It under-reports slow but important changes, ignores the countless unseen mechanisms that create our world; and looks too much for human agency where in fact there is emergence.

Surveys show that the public is woefully ill-informed about many social facts – albeit no more so in the UK than elsewhere. This is surely a clue that the media isn’t doing the job that its advocates claim.

There’s a further problem. Contrary to Johnson’s claim, the press does not adequately hold the government to account. This is not a new phenomenon. 25 years ago Patrick Dunleavy wrote (pdf) that:

Britain now stands out amongst comparable European countries, and perhaps amongst liberal democracies as a whole, as a state unusually prone to make large-scale, avoidable policy mistakes.

This was corroborated by Ivor Crewe and Anthony King in The Blunders of our Governments.

Which points to a longstanding failure of the press to improve the standard of government – perhaps because forensic policy analysis does not shift units.

I suspect that our democracy would work better if the mass media did not exist. In such a world, people would vote more on the basis of their local knowledge and one source of correlated opinion would disappear. The conditions required for there to be wisdom in crowds would therefore be closer to being fulfilled.

Which leads to a further problem: should anything be done about this?

One strong answer is nothing, at least legally.

Breaking up the Murdoch empire would not shift the press to the left: there are lots more right-wing billionaires who might buy up his papers.

Also, there are trade-offs between values. Perhaps we must sacrifice some good governance in order to have free speech, just as with Brexit we sacrifice some prosperity for democracy. This is especially true because it is woefully naïve to think restrictions on the press will impinge only upon the Sun and Telegraph. The law is often a weapon against the weak and marginalized. Restricting free speech would mean silencing bloggers, not the Sun.

Why not instead just let market forces and demographics do their job? Newspaper circulation is dropping, and is low among the young. They are losing relevance.

Which raises another possibility. Could we use countervailing power?

We know this can work. Capitalism was much more successful – even by its own lights – when trades unions restrained management. Might a similar thing be true of the press?

I’m not thinking here merely of XR blockades, nor even of the growing influence of new media. For me, one priority for a future Labour government would be the creation of institutions of deliberative (pdf) democracy such as citizens juries. These would provide space for people to consider policy issues on the basis of evidence provided by expert witnesses. Policy formation would then become insulated from press pressure, similar to how judges strive to ensure newspapers have no influence upon criminal trials. The press would then lose its political relevance.

Libertarian Marxists have traditionally looked forward to the state withering away. With some effort we might, more justifiably, look forward to the press doing so.

On Marxist Tories

In one respect, the right-wing conspiracy loons are right: Marxists have captured some of our major institutions – the institutions being the government and Tory party.

I say this because of the campaign to stop us working from home and to get us back into offices. Such a demand is justifiable only if you take a very dark opinion of capitalism.

Those who have faith in capitalism see upside in home-working. Andrew Sentance tweeted:

Why are so many people focussing on the negatives of working from home? It is a great opportunity to reduce transport emissions, stop spread of disease through commuting and mingling at work/in city centres, and provides a more flexible and family-friendly working environment.

To this we should add that whilst WFH does depress demand for retail businesses close to offices, it should boost it in those near where we live, and revive local high streets. The money that home-workers save on commuting and on Pret’s sandwiches can be spent nearer home.

Better still, we have quasi-experimental evidence from Nick Bloom and colleagues that WFH can boost productivity (pdf) a lot as workers face fewer distractions than in offices. Granted, not all firms who have tried WFH during the pandemic have enjoyed such gains, but it’s possible that as firms and workers learn, and if they get the right policy support, productivity will improve as these teething troubles are cured.

How then can one regard WFH as a bad thing? You can only do so if you are very pessimistic about capitalism.

For example, you’ll oppose WFH if you believe that capitalists are so lacking in entrepreneurial nous that they cannot spot new business opportunities created by home-workers. Alternatively, you might believe  they are constrained from exploiting these by financial constraints or by the inability of capital and labour to shift to new uses – even if those shifts are small (for example if sandwich-makers move from city centres to outlying areas which might well be closer to where they live).

If you believe this, they you must believe that capitalism has become stagnant and sclerotic - that capitalistic relations of production have become "fetters" on the development of our productive potential.  

You might also oppose WFH if you fear that the collapse in demand for city centre offices will crater the commercial property market and in doing so create bad loans. This requires one to accept that financialized capitalism is unstable and crisis-prone.

You’ll also oppose it if you think Kalecki was right (pdf) – that “'discipline in the factories' and 'political stability' are more appreciated than profits by business leaders.” If bosses want the sense of security and power that comes from directly overseeing their workers they’ll want people back in harness. This is perhaps what Jeremy Hunt had in mind when he said people might come to miss the “fizz and excitement you get in a good workplace.” His own employees never experienced such fizz, but perhaps egomaniacs who want to oversee an empire of minions do.

And let’s remember something else. Sarah O’Connor is right. The pre-pandemic economy was not working for millions of people. It trapped many into cramped over-priced homes and forced others into long and stressful commutes. The belief that capitalism requires such discomfort is one we Marxists can readily accept. I’m surprised, though, to see the Tory party adopt it.

There’s a devastating implication here. If you think this is what capitalism requires, then you are saying that capitalism must force people to be in places they don’t want to be. Which vindicates a point made by Peter Doyle about slavery – that capitalism denies people economic agency (pdf). As Marx put it, capitalism turns a “free” man into a mere factor of production, “one who is bringing his own hide to market and has nothing to expect but — a hiding.”  

And then, of course, there is the brute fact that dragooning people back into offices endangers their health. Which of course, vindicates Marx again:

Capital is reckless of the health or length of life of the labourer, unless under compulsion from society.

Not only do the Tories seem to believe Marx’s ideas, but they are actively striving to make them even truer.

As a Marxist myself, I find all this weird. Even I am not this pessimistic about capitalism. I suspect the economy can adjust to meet the new demands of home-workers and I’ve been pleasantly surprised by how many big employers have adopted home-working.

Now, the sight of some people being more Marxist than me is a familiar one. When I was university, several of my fellow students were. I just never suspected that Boris Johnson was one of them. But perhaps this is to give him far too much credit, and to impute to him a coherent idea where in fact there is no such thing.

Clarity - who needs it?

Tim Pitt calls on the government to set out “a renewed Conservative economic philosophy.” I’m not sure this is wise. Having a clear philosophy requires you to think, which is not a self-evidently good thing in life or in politics. Worse still, it gives people something to disagree with, and so invites party disunity. Constructive ambiguity can be a good thing.

I say this because a new Conservative economic philosophy requires the party to answer loads of tricky questions. Here are a few.

Are you pro-business or pro-markets? Pro-market policies would promote competition by for example relaxing intellectual property laws, reducing planning restrictions, simplifying regulations,  expanding the British Business Bank to encourage start-ups and imposing tougher rules against mergers and monopolies.  All of these, however, would threaten the profits of incumbents.

Which leads to another issue. What should be the rules on state aid, procurement and outsourcing? These can in theory be used to promote competition by encouraging contracts from outside the usual suspects of Serco, Capita and G4S or by favouring start-ups. Or they can entrench power by giving handouts to the powerful and well-connected, as when the government spent millions on worthless PPE provided by an advisor to Liz Truss. Which is it to be?

And then there’s the question of competition versus community. We learned in the 80s that when industries collapse workers do not easily move to other jobs: as Duflo and Banerjee show in Good Economics for Hard Times, economies are stickier than Thatcherites assumed. Instead, we see the decline of whole areas. Should today’s Conservatives do more therefore to protect jobs, or to help people move jobs? What sort of regional and training policies does this require?

But there’s not just a divide between start-ups and incumbents. There’s also a conflict between landlords and businesses. More working from home and decline in the high street require that many rents be cut. Should the government facilitate this by outlawing upward-only rent reviews? Which side are the Tories on?

 Which leads to another question: what should be the tax base? There is a case for shifting tax from profits to land, because the latter cannot move. But of course, this hits landlords whilst benefiting other businesses.

Then there is the fiscal policy issue. How much should policy be tightened and how soon? If we need an early tightening, why? Why are bond markets wrong to lend to the government at favourable rates?

If you favour such a tightening, other question arise. What should be the mix of tax rises and spending cuts.  If the latter, where might the cuts fall given that local government in particular has already been stripped back so much? If the former, how much can be raised from the wealthy alone, or do we need to tax the middlingly rich whose numbers and inability to move mean they might generate more revenue? And then there’s the question: what form should the offsetting monetary loosening take? Is conventional QE sufficient? Or dual interest rates? Or do you support helicopter drops? And if you don’t favour an early fiscal tightening, what has changed since the austerity of 2010-17 that many Tories supported?

The questions don’t stop there. Another is: why has productivity stagnated since the mid-00s? We lefties can blame inequality, or fiscal austerity, or the effects of the banking crisis which itself was caused by lax regulation. It’s not so clear what a Conservative answer would be.

And yet the productivity stagnation undermines a central plank of the Conservative thinking of the 80s – a plank which New Labour inherited to a large extent. They believed that the economy would grow nicely if the state stepped back, and provided only the right framework of rules. It now looks as if this isn’t true. Kickstarting productivity might well require greater state intervention. But what would a distinctively Conservative approach to this look like?

A Conservative economic philosophy must answer other questions. One is: are we in a wage-led regime (pdf) – in which fuller employment and greater equality are necessary for growth – or are we instead in a profit-led regime, wherein growth requires the restoration of profit margins? Separately from this, where do we draw the trade-off between legitimation and accumulation? Some policies (such as Brexit?) are justifiable not because they promote growth but because they buy off discontent, or at least channel it away from capitalism. How many such policies are needed?

And then there’s the question: what role should public opinion play in this? It favours leftist policies such as more nationalization and taxes on the rich. Should Conservatism accommodate these views or argue against them. If so, how?

All of us have answers to these questions – though many of them should be tentative. But do you have answers that are coherent, evidence-based, and distinctively Conservative? That’s a much tougher one.  

The point here is that a Conservative economic philosophy requires a lot of issues to be addressed which in turn provides lots of potential to anger and alienate lots of voters and indeed Tory supporters.

And they face a massive handicap in developing such answers. There are pretty much no distinguished Conservative economists, at least in academia: Patrick Minford’s views lost their relevance at about the same time that Haysi Fantayzee split up. Whereas Thatcher could and did call upon Nobel Laureates such as Freidman and Hayek, Johnson can call upon…well, who?

If I were a Tory, I would reject Tim’s call. The party won an 80-seat majority without having to think about economics. Why jeopardize things now? Intellectual coherence is not always necessary for political success.