Economically wrong - 18-8-25
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Mani Basharzag in CapX wrote:
“On July 28, more than 30 so-called ‘top economists’ called for a wealth tax in the UK. Glance at the list of signatories and you’ll see the usual names who oppose almost any market reform: Thomas Piketty, Ha-Joon Chang and Martín Guzmán. Ironically, just over a year ago, many of them signed another letter warning against Javier Milei’s reform programme in Argentina, which they described as ‘potentially harmful’ to the Argentine people. (Ha!)
Fast forward to today, and historian Niall Ferguson calls Argentina’s economic turnaround a ‘man-made miracle’. Milei ended Argentina’s fiscal deficit for the first time in 123 years. Annual inflation plunged from 211.4% in 2023 to 43.5% by mid-2025. UNICEF reports that 1.7 million children have been lifted out of poverty since he took office and according to Econométrica’s EMAE, the economy grew by 8% year-on-year in April.”
Actually, Niall Ferguson is wrong. It is entirely Economics made, not man-made. What Milei has done is allow Mister Market to do his job properly. Get rid of all the interference and everything will come out right. A very good example is why nothing gets built in the UK anymore. The dreaded Judicial Review. This is supposed to ensure that the RULES are obeyed, not to decide whether something is a good idea or not. In fact, at the moment, actually building ANYTHING in the UK would be right because we are falling further and further behind our peers. The French – for God’s sake THE FRENCH - have out-built us three to one over the last 20 years.
But back to the article of July 28th. Why are these lefty economists always so spectacularly wrong? Remember the 364 who warned against Margaret Thatcher’s reforms? Tim Congdon, what I would describe as a reforming economist even if you don’t think so, quipped “The question is not if they are wrong or not but HOW wrong they are.” And boy were they wrong. The trouble is they never seem to learn. They still think centrist control will sort everything. It won’t. Not one state has EVER got richer using Marxist or Left wing Economic policies. Arguably, if they are left wing, strictly speaking they are not Economic policies at all. They are ideological diktat.
These ignorant economists (and there are lots) believe the market is perfect with perfect discovery. It is not. It’s a bit like artillery and Naval gunnery. You fire a ranging shot and then adjust. Then another and straddle the target. Then you make final adjustments and blow the target to smithereens. But if you don’t fire the ranging shots you will never do that. I remember years ago a military man giving me a whole list of different disciplines. The question was always what is two plus two. Artillery started with 5, then 3 then 3 and a bit and then 4. Engineers took two fullscap pads to work it out. Infantry took a long time but got there in the end.
The point is that the errors take us closer to a better understanding and nearer solution to what is correct as opposed to the diktat which says its X and never changes. And in case you are wondering, getting it right is not only its own reward but generally leads to riches.
One of the great themes at the moment is “dynamic pricing”. All that means is that you change the price as the market moves. As I’ve said before the critical element of Economics is what is called the market clearing mechanism. If you are manufacturing something, it doesn’t matter too much if you can’t sell it, you can just store it until you go bust. But think for a minute about produce markets. If you don’t sell it, your produce will go rotten and be worthless. Oh, and you’ll go bust too. So you better get it sold even if you have to take a loss and live to fight another day. In case you don’t know I started my business life in the wholesale fruit and vegetable markets. Pricing was extremely dynamic and within minutes a price at which something was sold was known throughout the markets – and not only in London but the whole of the UK. If you wanted to remain in business you better get on board with what that good old dictum, supply and demand, was telling you about price or you were dead. The profit or loss on a shipment needed to be known and acted upon. Hold out for a higher price and sell only half and it would be cheaper NOT to have had the produce to sell in the first place.
Back to our wrong economists. They think the state has the ability to judge the price perfectly. It doesn’t. Only a freely operating market can get that price correct – maybe not at the first shot, but after two or three goes it inevitably will. Doing that generates wealth and efficiency – and growth.
Back to Mani Basharzag. He mentions a 1962 essay of a chap called Kenneth Boulding. In it he refers to the fact that there is no feedback mechanism for ideas. In other words, the market place for things feeds back whether the price is right or wrong. That doesn’t happen with ideas. Anyone can make what they like of them. There is no clear rate of return. It’s one of the reasons that people couch ideas in vague terms – a bit like fortune tellers. You can never be wrong.
People vote with their feet every day. Bad meal in a restaurant? Leave a bad review and don’t go back. Car breaks down? Ditto. But if an elite (as in the politicians) advocate an idea, it’s very difficult firstly to either prove or disprove and it’s certainly not immediate. And the advocates of those policies are generally not the ones affected by it.
Economics in its simplest, unfettered form, is an immensely powerful force. Just ask the people in Argentina how well making free choices has worked for them as opposed to the completely bereft, deadly ideological policies before Milei. Which sadly we are now experiencing here in the UK leading to unsustainable tax impositions.
