George Soros wants to advance a “new economic thinking” and to that end he has pledged a persuasive $50 million grant. The money will fund the Institute for New Economic Thinking, a think-tank/research philanthropy that already boasts some impressive members on its advisory board. Soros maintains that, “The entire edifice of global financial markets has been erected on the false premise that markets can be left to their own devices, we must find a new paradigm and rebuild from the ground up.”
Soros as usual is being controversial and thought-provoking. In the first place, the idea that global markets are “an edifice” implies that it only takes some well-trained economic-architects to rebuild them. In other words, bring together some bright minds and they will be able to design the right foundations, choose lasting building materials, and pick cheerful paint colors. However, the question remains, who were the inept architects responsible for building the current flawed edifice and how exactly did they miscalculate?
On the other hand, Soros seems to be suggesting that the current economic crisis resulted solely from leaving markets to “their own devices.” Although it’s hard to see how a top-down public monetary monopoly connotes “markets,” few doubt that markets need good institutions to function. Nonetheless, even if economists can design the right “market devices”, there’s no guarantee that one size will fit all. That’s why is always good to keep in mind F. A. Hayek’s axiom, “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
Published Date: November 02, 2009