Having heard two tremendously amusing interviews with John Lanchester (I think one was on Bloomberg and one on the BBC, tho maybe it was ABC and somebody else; in any case there seem to be lots of interviews with him floating around.) I was looking forward to reading his new How to Speak Money. I’ve long agreed with his basic point, that people talking about financial issues use a shorthand which can confuse civilians, and it would be helpful to have a glossary handy. What he has written gets part of the way there.
The first part of the book is an introductory, making the important point that economics isn’t a science, really can’t be in the way that physical or biological sciences are. For one thing, chemists don’t have to worry that the molecules they’re studying will read the results of prior research and decide that behaving differently would be to their advantage. He also notes that most of the main questions of economics remain open, but at least if we are going to discuss them we need to understand what we’re talking about. He brings up the concept of “reversification,” whereby things come to mean the opposite of the word used to describe them.”Securitization” doesn’t mean making things more secure, but more likely less so. The “Chinese wall,” which is supposed to divide functions within financial firms to prevent conflicts of interest, is in fact neither a physical wall nor an impenetrable barrier. And it’s reversification when the “credit” is defined as the amount of debt.
The largest part of the book is simply an alphabetical list of financial concepts, each explained in a somewhat helpful way. I learned that PPI, which I always thought was “producer price index,” in the UK stands for “payment protection insurance,” a financial scandal whereby people were sold insurance for which they were ineligible to claim any benefits. And I found out the meaning of La ricchezza è una ragione (which is that you feel rich or poor based not on the absolute amount of stuff you have, but on how it compares to others’.) Lanchester’s comments on ratings, immigration, and some other key concepts are spot-on. His description of “rent” isn’t wrong, but does not mention land or sites, nor even “intellectual property.”. Also entirely missing from the book is any mention of land as a source of revenue, and naturally there’s no mention of the citizen’s dividend or its practical implementation.
Important terms missing entirely from the list include “privilege,” “intellectual property,” and “corporation” (tho he does discuss “limited liability.”) . Originally, corporations were chartered by states for specific periods and purposes; only in the 20th century did they become perpetual and almost unlimited in their powers. (Gangs of America is a good history.) And while Lanchester does mention, in a positive way, economist Steve Keen, he neglects Keen’s Jubilee Shares proposal. He gives good attention to Adam Smith (positive), Karl Marx (mostly positive), Frederich Hayek, and (in the introductory) Alfred Marshall, but somebody forgot to tell him about Henry George.
On page 167 he describes “mercantilism” as “The discredited economic doctrine … that countries should export their ways to riches,” apparently having forgot that on page 72 he said “A positive balance of payments, meaning a country is taking in more money than it is paying out, is a good thing.”
And then there is “free trade.” which he defines as “The system in which countries trade with each other without tariffs and taxes.” I shall assume that he also meant to say “quotas and other unreasonable requirements.” He goes on to say that “there is free trade within NAFTA, comprising the USA, Canada, and Mexico…” Now, I haven’t read the whole 1700 pages, and much of the opposition to NAFTA comes from formerly protected interests subject to new competition. But it seems that a true “free trade” policy would be about one page, saying “Here is the schedule for eliminating all tariffs, quotas, and other privileges which have been bestowed upon natural or legal persons, and here are the health and safety requirements for any products sold in the United States, and that is that.”
Actually, if “countries trade with each other” that would seem to be some sort of state-capitalism model. I would prefer that “individuals and organizations trade with one another, regardless of whether they are under the same or different national regimes.”