The dismal science

Maybe because we were poor when I was young I’ve always had a keen interest in economics. Not long after I started writing a blog a reader gave the curt comment that it contained too much economics. I’m an amateur in the subject and the nearest I came to formal study was an evening course at Vaughan College, the Adult Education part of Leicester University. I did this in my industrial year in Leicester.

I was working during the day and frankly by evenings I wasn’t at my best. In fact I remember during some rather boring lectures struggling to keep my eyes open. If nothing else the whole experience gave me a lot of respect for those who studied anything in evening courses. I did all my professional study full time and I’m very glad about that.

One of the first things on the course was a definition of economics. It was defined to us as “the science of the allocation of scarce resources”. I think I would put the definition rather broader but this rather grim definition has led to economics being called the dismal science. I would say the reason for my interest is that I see economics as tackling wealth creation; the reason why some countries, companies or other entities make wealth and some don’t.

Economics doesn’t show the way to a “magic bullet”; a sure fire way to make money. However there as some general guidelines. Firstly as Bernie Cornfield at the height of Investor Overseas Services would put it ” do you sincerely want to be rich”. I’m rather amazed that many people simply appear not to want wealth. I suspect mainly they do but they have absolutely no idea what makes for wealth creation.

 All the anti this and anti that brigade just don’t understand that their actions have consequences. For example there is ( just about ) an argument against fracking but the economic benefits of fracking are vastly greater. The ridiculous argument that the anti’s put forward against the idea of awarding folk in fracking areas a proportion of the taxes raised is to say it’s bribery. Of course it is: the whole point of the wealth creation of any kind is to accept the ( often small ) negatives for the large positives.

There are some fairly well known things which help wealth creation which have rather low costs. Peace, a strong civil society, good education, the rule of law, no corruption, good infrastructure. I suppose one could argue that education is hardly low cost while peace demands good defence forces but most of the rest is rather cheap. One could add some other rather more nebulous attributes such as inequality but not too much. Enough inequality to ensure aspiration but not enough to arouse too much jealousy and resentment.

To return to subject of wanting wealth I suspect that many who voted leave in the EU referendum partly did so because they didn’t want wealth or perhaps more precisely they didn’t see any connection between the source of societies wealth and their own personal wealth. While it is early days we can already see the costs will be large. However the personal perspective is that the cost is small. The impact of disregarding the budget deficit lies many years hence, while the effects of the plunging pound haven’t yet made much effect. It has been fortunate that oil prices have dropped so the weak pound hasn’t had much impact on the forecourt. I suppose it is the overseas holiday maker who feels the pain of the weak pound the most at present..