What they mean when they say….

Adam Smith, Karl Marx and John Maynard Keynes had three things in common – they all wrote extraordinarily well; they all went beyond pure economics and wove various insights from other areas into their work; and, they all share the problem that both their most fervent supporters and opponents constantly misrepresent what they said.

These facts – and the paradox – are captured well in John Lanchester’s How to Speak Money. The book is a lexicon – supplemented by a general introduction and conclusion – which explains what economists, finance people and finance journalists actually mean when they use various words and phrases.

To take just three well-known examples of the supporter/opponent paradox: Smith has been the alleged intellectual foundation for the neo-liberalism of the last 30 years even though he was pretty scathing about business, corporations and opposed their formation. As Lanchester says, limited liability is a subsidy as subtle as the too big to fail guarantee to banks or the massive sums Australian governments give to multinational mining and energy companies.  Smith would not have been surprised by the recent great recession and would have excoriated the businesses and bankers involved. Much of Marx’s Communist Manifesto demands are now commonplace in modern democracies just as all but annual parliaments have now been adopted from the Chartists’ demands. And Keynes was a great believer in austerity – when times were good and in preparation for when times were bad – something neo-liberals in Australia have been rather poor at (eg John Howard and Peter Costello).

Lanchester is also good on the whole intellectual foundations of macroeconomics echoing Queen Elizabeth II’s question: “Why didn’t anyone predict this?”  In Lanchester’s case, at a panel at a literary festival alongside two economists, he suggested that economics was the one field human enquiry which could be summed up in one word – wrong. Lanchester is rather more forgiving of microeconomics and the advances in behavioural economics most of which undermine the assumptions of the rational actor model.

Lanchester also has an interesting take on Marx’s theory of surplus value suggesting that while it was not valid when he formulated it, and for long after, it is surprisingly useful as a concept today. Take Facebook as an example: “The perception that Facebook is hygienic is sustained by tens of thousands of badly paid labour on the part of people in the developing world who work for companies hired to scan for offensive images and who are ….paid a dollar an hour for doing so,” he says. Interestingly he also postulates that all of us contribute surplus value to companies through “deliberately engineered waiting-on-line…..Every time you interact with a phone menu or interactive voicemail service you’re donating surplus value” In this case it is the customer or the client rather than Marx’s proletariat generating that value.

The book contains some very useful definitions of the differences between bullsh.t and nonsense – bullsh.t being exaggeration and hype and nonsense being both evidence-free assertions and outright lying. It is also very good on the euphemisms the PR industry has created to justify sackings, takeovers, austerity and other things characteristic of the economy. The section on the Nobel Prize winning economist Gary Becker is a delight as are the entries on rational expectations and the Royal Bank of Scotland.

The author also wrote a book about the global financial crisis Whoops!; and, a wonderful novel, Capital, about a London Street and its residents.

The Abbott defenestration

In the next 48 hours we will see either the first or the final act of the Abbott defenestration. But looking at events through the prism of Anthony Tregoning’s critique of Abbott government communications (see the last blog) three things struck the blog over the past few days. First, Tony Abbott will never learn about communications and persuasion. Faced with termination, rather than giving some reflective views of major issues, he reverts to type with banal photo opportunities even including a visit to a factory to promote the benefits of the carbon tax repeal and a ham-fisted attempt to wedge Labor on national security and megadata which Bill Shorten managed to bat away with an ease as ridiculous as Abbott’s ploy. Second, Julie Bishop, who is after all allegedly not running for the leadership, managed to just come across some cameras as she left a Melbourne restaurant with her partner and his two daughters producing a touching family shot which must have warmed the heart of Bill Heffernan and others in the Liberal Party room. And, third, Malcolm Turnbull demonstrated the capacity to deliver a devastating message with the sort of subtlety which always manages to elude Abbott. In a brief comment on the decision to move the party meeting a day forward Turnbull merely said that it was “a captain’s call”.