If economists were only those with doctorates, we would have to ignore both the market’s wisdom and many of its most perceptive critics
Here’s an article I didn’t think I would write. Gary Stevenson is correct about something. Even worse, I am going to defend him against Rory Stewart (not that I hold the latter in any sort of grace).
On The Rest is Politics, the Jim Cramer of midwits interviewed politics’ most gullible figure, Zack Polanski. During the interview, the pertinent question was asked about which economists Zack listened to, to which he listed: the perfectly lovely but misguided Grace Blakely (who I had the pleasure of fervently disagreeing with on Moral Maze), Richard Murphy (who is less pleasant and generally a laughing stock in the sector), James Meadway (who is perfectly amenable and leading Zack’s new think tank), and then Gary Stevenson. It was on this podcast that Rory claimed that economists required PhDs to be considered economists.
Gary is a Times bestselling author. His book has come under immense criticism, especially in a large, critical piece by FT Alphaville, over his claim that he was the best trader in the world. He is one of the most notable devotees of wealth taxes, and a mainstream and influential critic of the economy as it is currently structured. This article is not a defence of Stevenson’s thought — I think he is wrong, indeed, dangerously so. But I do not doubt his intentions or sincerity (he’s even attended Adam Smith Institute events). I just disagree with his analysis and conclusions.
Gary was criticised by The (Open) Border Walker for not having, in his eyes, the professional qualifications necessary to opine on economics. Gary has a Masters Degree in economics, and has worked as a trader in the City. This is not enough to the discerning Stewart. An economist, to Rory, is an upstanding post-doctorate possessing professor who can, with the sweep of their authoritative hand, dictate what economic policy should and should not be. This is wrong.
In November 2008, the late Queen Elizabeth visited my alma mater, the London School of Economics to open a new building. She asked the gathered gatekeepers of economic thought, “Why did nobody notice [the financial crash]?”. Twenty years earlier, Long Term Capital Management infamously collapsed into a heap, despite their leadership making up Nobel Prize Economists Robert C. Merton and Myron Scholes. Having a piece of paper, or even a golden gong, saying “you are an economist” does not mean you are “good at economics”.
There is no doubt that we have economists, and many of these economists are very good. Many work in government, making the best of a torrid situation. Others work in the academy providing fascinating ideas and insights, or in financial institutions ensuring that our society continues to function. But one cannot say what an economist is, because there are so many types. I would even be so presumptive to say that I am an economist — I write about economics, certainly, and I have published well-received (even award-winning) papers on the matter. Yet I’ve never sat in an econometrics class. True, I have taught myself economics and I’m very fortunate to work alongside superlative degreed-economists such as Jethro Elsden and Mitchell Palmer, but I do not hold an economics degree.
Does the fact that I have shown that I understand economics and write about it cogently, but do not hold a piece of paper saying I sat in enough lectures and classes to merit said parchment, mean that I am not an economist? To Rory Stewart I am not — even if I know more about the subject than he does.
Ivory Towers, of which Rory sits at the top and Gary had to fight his way up, remain the crux of the issue here. In his acceptance lecture for his own Nobel Prize, Friedrich Hayek claimed that the gatekeepers of titles, papers, and parchment are often worst placed to opine on the subject. As Hayek informs us, it is the market which is most knowledgeable in economics, for it is the economy. Prices, intentions, profits, and supply chains know more about their movements than any swot in a library ever can. Moreso, the economist may boast a degree, but knows very little about the subject. Owing to the Ivory Tower of which they inhabit, according to Rory, we should listen because of the letters after their name rather than the words they spill forth.
As Joseph Schumpeter noted in 1947, economies benefit from Creative Destruction. The annihilation of outdated ideas or processes by better, efficient, and more profitable inputs results in better outputs for all. How many horseshoe makers do you know? Or people who still burn whale-oil? How is your camera obscura compared to the three glass dots on the back of your phone? The same is true for the profession of economists — those who may not be formally economists can bring to the fore wisdom and acumen that the Ivory Towers would not have accepted, or at least drilled out of the individual proposing them.
To be a good economist, you must understand that innovation occurs, and that people often do or believe in things that may be entirely counterintuitive to their own good — as the evidence shows, often their actions are indeed counterproductive. But as with any establishment thinker, it is the inhabitants of The Rest is Politics who think this can be arrested through well-intentioned and informed policy making, rather than by letting the market pick its winners and losers. And that is why they should not be allowed to anoint who is an expert and who is not.
For economic activists like Gary, his understanding of economics causes problems (not least, potentially, for politicians such as Mr Stewart who oversaw deeply destructive Keynesian practices pretending to be Conservatism). Is he an economist? I would say so — he has written about the subject fluently, if not reaching misguided and incorrect conclusions, but he is an economist nonetheless. If we were to revert to Rory’s world, it would only be the professional class, with their gowns, hats, and lecture theatres that would decide what is right and wrong. We have seen the damage this has caused?
Economics, now more than ever, should be at the forefront of political debate. The Greens propose monstrosities such as rent controls, higher minimum wages, abolishing landlords, and all manner of politically popular but economically suicidal measures. The government, too, are prone to these thoughts, as are the Conservatives, Reform, and others. So, it lies to the self-appointed, the nominally unqualified, but righteous commentators, analysts, and readers of the world to point out what is right and what is wrong. That will require knocking down Ivory Towers and permitting a few more Garys, but we will be better for it.
