Prices: Gerry Steele, poetry, signals and efficiency

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.