Something worse than financial instability afflicts the West. It is a crisis of the intellect and morality. People who should know better behave in ways that implicitly reveal their contempt for the rest of us. They are rewarded professionally, but at the expense of people who are made to pay for the dishonesty that surfaces as bad governance. If we don’t wake up, we will stay on the treadmill forever.
On May 2, Phillip Inman in The Guardian complained strenuously about the failure of governments to employ the one tool that would re-balance the economy. He wrote: “There is little mention of the most powerful lever the government could pull to generate growth, which involves a switch from taxing income to taxing wealth”.
He highlights the importance of land value taxation (LVT). This, it is agreed by 95% of professional economists, is the most efficient way to raise revenue to pay for public services and cut or abolish income taxes. Inman’s article is worth reading:
He concludes: “Despite all these advantages, there are many powerful forces ready to dismiss LVT as fanciful”. Ours is not a rational society committed to human rights on the basis of justice and efficiency. The guardians of knowledge are failing in their duty of care to the rest of us. One such person is Robert J. Shiller.
“The Right Questions”?
Robert Shiller is famous: his name is linked to the Case-Shiller House Price Index, which is the most carefully scrutinised tracker of prices in the US. He is also professor of economics and finance at Yale University. So he knows more than most about the technique for “Making crises more predictable” – the subject of his essay in the International Herald Tribune on May 1.
Reading his analysis you would think that there was a mystery about predicting crises like the one that caused western banks to implode in 2008. Such crises, he says, could be more predictable “if the right questions are asked and we use new and better data”. From this, should we conclude that the existing data is deficient? Have people like Shiller been asking the wrong questions? If so – why?
Shiller wants huge sums of money to be spent on accumulating yet more statistics, as if that would improve the ability to forecast turning points in the business cycle. And yet, Shiller himself has been associated with the one index – on house prices – which is all I needed to forecast the current crisis a decade before it happened.
So why does he now appeal for a long process of data compilation and yet more consultancies (he is co-founder of Macro-Markets)? Like most of his profession, Professor Shiller’s problem is not with the deficiency in the data. We have more than enough of statistics. Our problem is the unwillingness to confront the harsh truth – the problem is with the way some of us make a lot of money out of the housing market. And that’s the one statistic which the professional economists don’t want governments to face up to.