There are almost as many jokes about economists as there are jokes about drummers. One of the oldest is that if you present 12 economists with a question you get 12 different answers, unless one of the economists is Keynes, in which case you’d get 13. Last week, some 80 economists signed up to three letters (one to the Sunday Times followed by two to the Financial Times). In the first, a 20-strong group stated that deficit reduction must start right away, while in the two letters that followed, 60 economists claimed that to do so would be dangerous and reckless.

You might think such a stark difference of opinion, expressed in absolute terms by an angry army of academics, is pretty significant. But really, this is little more than an academic argument dressed in the clothes of political ideology. The serious discussion should concern the nature of the cuts required to reduce the public deficit, not which way you read an obscure equation known as the quantity theory of money, which is the main difference separating those espousing a broadly Keynesian approach to the current deficit (the 60) and those adopting a harder, monetarist stance (the 20).

Everyone agrees that public finances are in a mess. Deficits around the world have shot up following the worst recession for generations. There’s no news there. Rescue packages for banks and scrappage schemes for the car industry, along with greater support for job seekers, lower tax revenues and higher benefits payments, have all contributed. The question is what to do next.

This is where the economists—and the politicians they support—diverge. In an age of middle-ground politics, in which the twin chimeras of presentation and spin offer the only distinction, the deficit debate has the air of something solid. At last, here is a proper issue that separates the main protagonists. But in truth there is little difference between them. Do away with the high-blown economics and any sensible Chancellor faced with the current situation would do the same thing: pay off as much debt as he can as soon as possible without endangering the recovery. It’s a balancing act between pleasing the bond markets and keeping the economy alive.

That this election’s only debate of substance is about economics is a genuine worry. Consider, first of all, the so-called science on which these arguments are based. In 1994, Paul Ormerod published a devastating attack on this most contentious of social sciences, entitled the Death of Economics. In it he described orthodox economics as “an empty box… its understanding of the world,” he wrote, “is similar to that of the physical sciences in the Middle Ages.”

The current debate carries even less significance when you start to unpick the assumptions that lie behind the equations. Let’s go back to the quantity theory of money. This is the equation that “proves” the monetarist mantra that inflation is caused by expansion in the money supply. But it’s a prime example of the recipe used by modern economics. Take a number of unproven, sweeping assumptions (that the money supply can be controlled by governments and central banks, that the velocity of money—which can’t be measured—is more or less constant, and that the value of goods and services produced stays the same as money supply increases); then throw in a dash of supposition and a hint of differential equation to give it gravitas. Shake well and serve up to ideological politicians desperate for a theory to match their conviction.

During the expenses scandal, the old theory was once again rehashed that politics is too important to be left to politicians. I’d go one further: in its current state, the economy is far too important to leave to economists.

Richard Cree

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