Tomorrow in Manchester, we have Gerry Steele giving a talk on the Austrian school of economic thought. The Austrian school emphasises the importance of individuals in economic transactions, and in particular, the importance of a market price in allocating resources efficiently, and includes the notable theorists, Ludwig von Mises and Friedrich Hayek: here is a clip of the latter, explaining why price is so important to Austrians.
We’ve also had a submission from a UK-based criminologist, Criminonymous, analysing the effect of the market price in the financial sector. The piece is economic comment in the form of a poem, exploring the nature of financialisation and argues that a violent ignorance lies at the heart of the City’s decision-making.
If insanity is doing the same thing over and over again and expecting different results
Then calamity is clearly what these guys are all about
It doesn’t make you a Luddite to say that, with hindsight
Our confidence in the ratings agencies was totally misplaced
Does anyone else remember the way that they acted yesterday?
They said to put your mind at ease with a few of these mortgage-backed securities
Good enough for Lloyds TSB
Endowment funds at universities
And public sector retirees
Whose pension funds don’t invest in anything rated under a couple of B’s
Luckily, those A’s and B’s are usually estimated accurately
Sí?
And then, low on gumption, they made the false assumption
That all Eurozone debt was equally fit for consumption
Served on a plate with a scotch at a luncheon
Whatever! Just triple-A it!
It doesn’t matter of what it consists
Or what it means for our parents and kids
Speculative capital flows distort supply and demand
The price of the wheat and the price of the land
Banks act like they can increase their profits without increasing their risk
But leverage drowns them in risk like crustaceans in bisque
A little whiff of Fitch saying “Greece is this way… and you’re late”
“It’s a fine time to play, the countries in the Eurozone have one blanket interest rate”
But the reality on the ground was different in different states
Acting as bait, manipulated by straggling hedges
Club Med debt then shorted, inducing default
I guess it probably wasn’t AAA in the first place
But it certainly isn’t now
At most, we’ll see them pay a fine
Still owning 3 bedrooms in Liechtenstein
And one or two in Rome may cost a dime
But they give no quarter to Italy
To me, it just beggars belief that people continue to take their nonsense literally
From New York to the Aegean Sea
People pay for this service, it isn’t free
And now they might be rating NHS hospitals apparently…
Seriously!
I thought I heard it on TV, and I corroborated it on the PC
Just type it in, you’ll find it easily
In both the Telegraph and the Guardian, 2012, January 19th
It was a Thursday, I believe
But clearly this is no rhyming matter
The only reason any of these guys should go anywhere near a public hospital
Is to receive medical treatment
Or, to be at the side of someone close to them
Honestly!
Is it just me who fails to see a P.O.V.
From which these sleazy agencies have any credibility?
They’d see nothing but hard assets in the basement of the Louvre
And among the golden trinkets in the tomb of Tutankhamen
Yet, their methods can’t be disputed
Because they’ll assess your criticisms with the same spurious analytics
That have perverted the incentive structures in our public and private sectors
They represent the epitome of the falsehood
That we should act the same in a social or political situation
As we would in a commercial situation
That’s a key facet of financialisation
Austrians also insist that the institutional environment in which a given market operates, is fundamental in determining the market’s success. The question then, perhaps, is whether the issues Criminonymous outlines in the above, can be related to a weak institutional framework, which need be reconstituted in order to construct a more successful market in the financial industry.