Minsky has a point but who is to be the planner?
The Guardian view on an AI bubble: capitalism still hasn’t evolved to protect itself
Editorial
Warnings about inflated tech stocks suggest investors never learn and central bankers learn too late
Well, yes, booms and busts, speculative frenzies, sure they seem to be a part of this capitalism and free market mix. All the way back to tulips and the South Sea and the plan but no one to know what it is. Which is where the proposed solution rather fails:
But why? Look to economist Hyman Minsky, from whom Kindleberger borrowed much. Minsky addressed the deeper conundrum that is being sidestepped today: how to stabilise financial innovations before they destabilise the system? He thought that the longer markets remain calm, the more risk they take. The genius – and danger – of capitalism is that it can’t stop chasing another win. To prevent that, Minsky thought, required not moral restraint but institutional redesign.
Well, OK, maybe certainly worth discussing.
His plan advocated a “big government” not to prop up share prices, but to prop up society when share prices fall. Backing this was a “big bank”, a monetary authority that would make it harder to buy risky assets on credit. Minsky thought cash should be guided toward productive uses, not asset inflation. He didn’t want to stifle innovation but to make it safe for democracy.
Ah. Who is to do the guiding? Who is to decide what is productive?
A Minskyan approach would couple borrowing limits with fiscal and industrial policies that steer cash toward socially useful tech.
Who decides what is socially useful? Less crypto and more Digital ID perhaps?
Which is where this does become the plan but no one to know what it is. We do not know what is socially useful, we do not know what is productive, until it has been thought up, designed, implemented and we see what people do with it. For no one - no one at all and most certainly not some central planner - knows what people will use something for, whether they’ll use it productively or whether that will, by the decision of society itself, be socially useful. Socially useful being decided by the fact that society finds uses for it.
We can be trivial about it - who knew that the internet would solve the world’s cat picture shortage? We can be non-trivial about it. That hot or not site for Harvard undergraduates now - less than two decades later - provides free telecoms for 4 billion people, half the entire species. The British university copy of it was closed down on the grounds of not being socially useful.
Yes, yes, we know, Kip Esquire’s Law: “Any advocate of central planning is certain they will be the central planner.” But it’s not just the horror of thinking of the world being planned by Guardian editorials. Any rational adult will look at their own lives and grasp that gang aft agley thing and decide dang that for a game of soldiers - there is no rational planner possible therefore we’re just going to have to put up with the speculative frenzies of free market capitalism.
After all, there’s no pace, anywhere, anywhen, that has got rich by not so putting up. So there must be something to it.
Tim Worstall