Here's a think piece on just what the relevant domain of analysis economics should consider. Importantly for UL students, it deals with Keynesian economics. You're learning a type of Keynesian economics with me right now, so it pays to know the limits of this particular theoretical technology.
"Keynesians make much too much of the fact that people's levels of optimism or pessimism about the future can change spontaneously. Nevertheless, it's undoubtedly true that investors' and consumers' and entrepreneurs' expectations about what each other will do -- and about what voters and government will do -- are not determined by a fixed mathematical formula."
Stephen,
I listened to the Arts program RTE radio debate last night by podcast, on which Pete Lunn offered some of his views - in relation to the problem that economists not understanding transactions. Like the Matt Ridley podcast at Econtalk, I quickly scribbled down some thoughts which I hope to return to when time resources allow me.
But certainly, this issue of limits to economics is a very crucial point to bring up. I also noticed on the Arts Tonight discussion, how Anglo board member, Alan Dukes neatly reversed the argument on how markets dictate politics - to state that in the mid 20th century in Ireland - we had politics dictating to markets an awful lot. The point, Mr. Dukes was making is that we never have a pefect market, or perfect politics - where one is entirely divorced from the other.
My general with concern with markets in the present time is: (A) You feed the markets, often with rubbish in the form of securitised residential/commercial mortgages. Or, (B) the markets end up feeding you, with rubbish like sovereign debt and nose bleed interest rates.
It literally seems to be a race between private entreprise and public finances, at this stage. To see if private entreprise can shovel as much rubbish out its departure area as fast as possible, on to the markets. Before the markets can deliver, loans to you through your arrival doors, at exorbitant interest rates.
It is a classic supply chain management problem. The kind I got very accustomed to, while spending long nights at Dell factory in Raheen trying to handle orders or two and three thousand units in a shift. The relationship between markets as (A) consumers of what we produce, and (B) suppliers of our raw material, needs careful consideration. We need to negotiate a better deal. For instance, Michael Dell would not pay a cent for his raw materials, until they were successfully integrated into one of his products. Even though the material may have existed on his factory space for a number of hours before hand - or had been transported from far afield via ship or air.
In the same sense, what credit we consumer here in Ireland, should not be 'owned' by Ireland, until it finds its way into some other product, that we can ship out our door at the other end of the system. We need a meaningful distribution of risk to be honest. At the moment, Ireland is just being used as a waste bin to throw all of the risk, that nobody else in the market wants to accomodate in their part of the system.
It is the mirror image of what Alan Greenspan described in the over-appetite for risk during the credit bubble. Nowadays, nobody wants to own up to storing any risk at all, in their domain. And places such as Ireland and Greece have to be found, which are convenient dumping grounds for everyone elses. It has nothing to do with Ireland per se.
We have to query some people who understand supply chain management, in order to allow us to come up with a convincing theory in terms of economics, for what Ireland is experiencing at the moment.