I confess that I find the speeches of Adair Turner, chairman of the Financial Services Authority, interesting.
Turner appeared in the public imagination in 2009 when, during a roundtable discussion chaired by the liberal Prospectmagazine, he floated the idea of a Toibin tax on the ‘socially useless’ transactions of investment banks.
The howls of anguish this prompted led then Chancellor of the Exchequor, Alastair Darling, to slap down his mouthy regulator for voicing publicly, what amounted to a mere reform.
According to Turner we got into an economic mess becasuse the Masters of the Universe got the theory wrong... because they vulgarized. The problem is not with neo-liberal economic theory itself, but with the second rank minds who's job it was to apply asset price nous to concrete trading floor activity. Their failure being mirrored by the equally mediocre minds regulatng this activity.
In a speech at the Institute for New Economic Thinking during 2010 he quoted Keynes to illustrate this point:
‘Keynes, of course, famously wrote that “the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than commonly understood. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.”
But I suspect the greater danger lies not with entirely practical men or women exempt from any intellectual influence, but with the reasonably intellectual men and women who are employed in the policy making functions of central banks, regulators and governments and in the risk management departments of banks, who are aware of intellectual influences, but who tend to gravitate to simplified versions of the dominant beliefs of economists who are not yet defunct but still very much alive.[i]’There is much of interest to consider in this quote: the conditions of knowing that an argument is 'wrong', whether the assumed criteria of 'wrongness' employed by Turner is useful at all (might it not be possible for an argument to remain a good argument, regardless of how things turn out?)
Turner is an exponent of the ‘shit sandwich’ approach to berating financial capitalism. You can tell he is about to say horrid things in the prefatory moment of his speeches. It’s a routine most liberal economists perform effectively (it reminds me of the ‘I’m not a racist but…’ prefatory so beloved of the bigot). For example in a 2010 Mansion House speech, Turner said:
'…it is important to understand, amid the public suspicion of traders and trading rooms, that market making and liquidity provision in key markets is an important economic function, delivering important indirect economic benefits – even when the traders involved are focused day by day simply on making money, even though their activities look to some people like pure speculation, even though they do indeed entail position taking for speculative gain. Adam Smith’s insight that good economic results can flow from the private pursuit of profit remains valid and vital.’[ii]Generalised selfishness repackaged as 'englightened self-interest'.
Turner thinks that recent applied economic wisdom is based on a vulgar mis-understanding of economic theory and applied as ideology. This again from his speech to the Institute for New Economic Thinking.
‘…while academic economics included many strains, in the translation of ideas into ideology, andideology into policy and business practice, it was one oversimplified strain which dominated in the pre-crisis years…’For someone apparently so intellectually curious it appears, to me at least, an act of repression to stop here, to fail to enquire any further. It’s all the more disappointing since Turner qua economist is actually on to something interesting although he eventually ends up getting into a confused muddle. His speech to the Institute for New Economic Thinking continues…
‘…Market efficiency and market completion theories can help reassure the top executives of major financial institutions that they must in some subtle way be doing God’s work even when it looks at first sight as if some of their trading is simply speculation. Regulators need to hire industry experts to regulate effectively; but industry experts are almost bound to share the industry’s implicit assumptions. Understanding these social and cultural processes which straddle the interest to ideology divide could itself be an important focus of new research. But we should also not underplay the importance of an ideology in itself – of a set of ideas complex and internally consistent enough to haveintellectual credibility, but simple enough to provide a workable basis for day to day decision-making. Complex human institutions – such as those which together form the policymaking and regulatory system – are difficult to manage without guiding philosophies – and guidingphilosophies are most compelling when they provide clear answers. And a philosophy which asserts that financial innovation, market completion and increased market liquidity are always and axiomatically beneficial, provides a clearer basis for the decentralisation of regulatory decision, making one which teaches that innovation is sometimes valuable and sometimes not, depending on the market and depending on the circumstances.’In Turner’s mind, ‘economics’ mutates into ‘philosophy’ and philosophy into ‘ideology’ as if ideology and philosophy were synonymous. As if philosophy and economics were invovled in the same business. How frail the human mind which seeks reassurance that it is doing superstitious ‘God’s work’. How philosophy works best when distilled for fools.
Capitalists used to justify their grind via the general good of englightened self-interest (legitimated general selfishness). Apparently they lost their way and needed an ideology to justify their 'god's work' whatever that means.
I don’t know Adair. I understand philosophy as being about good arguments. Have you considered that perhaps the ‘philosophy’
‘which asserts that financial innovation, market completion and increased market liquidity are always and axiomatically beneficial’Might not be a philosophy at all?
[ii] Turner, A, Mansion House Speech, Sep 2009, http://www.fsa.gov.uk/pages/Library/Communication/Speeches/2009/0922_at.shtml