economics lecture

I was out at an economics lecture last week, by Erik Britton and Dannay Gabay of Fathom Consulting. They are both former Bank of England economists and bright chaps.

http://www.fathom-consulting.com/about-us/directors/

I am interested in economics, but I've only really studied it at an introductory level, so much of the technical content was going over my head so rapidly that I didn't notice what I was missing. However I do rather take the view that economics is one area where people are arriving at explanations of the past, or predictions of the future, based solely on a handlful of prominent variables. So if they have picked the wrong variables then it does not matter how convincing they are, there is something out there to derail their theories.

I came away broadly convinced that we are looking at a fairly stagnant economy for the next few years. Japan has had a stagnant economy for decades, and there is nothing to say that Europe is exempt from such a malaise. The structural imbalances whereby China is perpetually short of domestic consumption, while the West overconsumes, all the while getting deeper in debt, were bound to end in tears.

The standard economic view is that savings are bad for the economy, while debt is actually good and creates activity. To me this seems counterintuitive. I suppose that it might work if the people taking on the debt were rational operators, if they are not, then it might work if they had a way to cope with the debt burden. In the past increasing GDP, inflation and devaluation were relatively pain free fixes.

This scenario is being unpicked now, we cannot argue that governments are rational, recent events show them to be short term, unpredictable and erratic, unwilling to make decisions, and unwilling to face the consequences of their actions. GDP is increasingly stagnant, inflation at hyper inflation levels is unlikely and unpalatable, while devaluation would be difficult within the Euro, and is only an option until your trading partners attempt it too.

The challenge going forward for government is to rebalance the economy and their role within it. For an individual it is always easier to budget when you know you will get a pay rise next year. It is when you move onto a fixed income that things really start to get difficult. It is impossible to be on a fixed income without some element of austerity creeping in.

As a country we are going to have to get used to living on a fixed income. We are going to have to make real decisions on what priorities are. The debt burden now is equivalent to the burden at the end of the second world war. Back in those days austerity meant rationing!

For the long term it seems likely that developed countries will face a low level of GDP growth. We are not going to be poor, but you cannot keep growing forever.

Perhaps what we need is dull managerialism, government that is increasingly competent, rational, capable of making decisions and learning lessons. A government that has a firm grasp on the back office costs, that is crisp and effective in making decisions. Government that manages its money like a canny pensioner, rather than some highflyer waiting his next bonus.

an irrational fondness for outdated technology

I must confess to an irrational fondness for outdated technology.

I was recently in the market for a new alarm clock. So I went to John Lewis, which sells slightly more attractive, considerably more expensive versions of things that everyone uses. The cutest alarm clock by a long margin was the Karlsson Mini Binky, so I got a little black one. It was clockwork, and had the cutest wee face you have ever seen. This thing was cuter than a day old puppy. It fitted perfectly into the hand, with the heft of a cricket ball. It ticked away reassuringly all night long. A fine tick that you could fall asleep to.

But on fully winding it, it would only run for about twelve hours. After twelve hours it would either stop altogether or stop for a wee while. On checking the Amazon reviews here, and in the USA (who knew that there was no Amazon in Australia or New Zealand?) these problems seem common. So regretfully I had to take the clock back, inordinately fond as I was, of this day old puppy that was starting to crap on my carpet.

The clock was made in China, and browsing the other clockwork clocks you can still buy, they equally seem to be made in China these days and are equally prone to similarly mixed reviews.

How is it that China can make an iPhone knock off in about twelve minutes, but when it comes to replicating technology that is centuries old, they fall down miserably. It is not as if these Chinese clockwork clocks are cheap, or as if clockwork technology is impossibly difficult.

When I grew up there were big factories in Scotland making clockwork alarm clocks, the hideous Westclocks {?}. But now, no one apart from the Chinese makes clockwork clocks.

In my lifetime it is a technology that has gone from ubiquity to a historic curio. It is a pet peeve of my to go somewhere, and see a fine old clockwork clock, that is not ticking. I love to be surrounded by the ticking of clocks. I like their slightly impressionistic approach to timekeeping. I like that you come home to an empty house after a week and all the clocks have stopped ticking, so you take five minutes to wind them all. I like that each week I take the brass key and wind up the hanging clock on my wall.

I was going to call this blog posting, "why don't Chinese people get clockwork".

But there are a lot of Chinese, you would be foolish to bet against them. For now they are producing things to our specifications. But while English uses an alphabet of 26 characters, Chinese uses an alphabet of over three hundred. A computer key board makes sense with 26 characters, in effect you have almost that many fingers, a piano keyboard has that sort of number of keys. There is an inherent ease to keyboard input for that sort of level of differentiation.

But Chinese has over 300 characters. If the Chinese had invented the computer, they certainly would not have invented the keyboard as we know it. You can certainly use a computer in Chinese, scrolling through to select the correct character. But starting from scratch that is now how you would input to a computer if you were designing a method of input for over three hundred characters.

Similarly the paradigm with a computer is that one you have entered a character, you move on from the space never to return. You cannot overlay one character upon another. You could with an old manual type writer, you probably would want to for transcribing Chinese.

And Chinese is a tonal language, unlike ours. Chinese medicine operates to different paradigms. For the moment the Chinese are building things to our specifications.

But all those factories in Scotland that made alarm clocks in my youth, are gone now, what else is going to be different forty years from now. You should never bet against the Chinese, and you should never bet against change.