Navigating Ideologies

The economic crisis of the past four years has made all sort of commentators come out of the wood work, with many finding a ready audience in search of solutions to today’s ills.

A few weeks ago, this humble blogging adventurer decided to venture down to the occupy Sydney encampment outside the Reserve Bank of Australia to see who was there and what their general ideological consensus was.

I did not find one. I was rather astonished to see various ideologies represented, all seeking a platform to foist their world view on the rest of us. On the far left, we had Marxists ideology which sees the current fracas in the financial markets as merely the latest incarnation that capitalism is an inherently unstable system that will simply implode.

Ironically though, there were also individuals with more paleo conservative world views, with a heavy faith in Austrian economics and the theories of crazy Freddy.  Their basic position is, all government intervention is inherently flawed, be it via fiscal or monetary channels, causing massive misallocation of capital or “malinvestment” as they term it.

The two economic ideologies are at extreme ends of the ideological spectrum. Yet, there they were, shoulder to shoulder with their sworn ideological enemies. Bizarre I thought.

To some degree the occupy movement represents a nice little microcosm of the confusion amongst the populace on how to “fix things”. Extreme times often result in in individuals searching out prophets with all the answers. Hayek, von Mises, Keynes and Marx are all very much in vogue, while the Lucas and Friedman schools have lost much of their popularity and admiration during these tumultuous times.

Although we can claim somewhat humorously that the economics profession is not taken all that seriously, the simple fact is that ideas impact on people’s behaviour and how they view the world.

As someone who has always liked clarity of thought, I’m often confused by the flurry of economic commentary and prognostications that hit every news headline or blog.

It is always handy to have a robust framework in one’s mind that clearly delineates the positions of many of these commentators. Otherwise the debates become exceedingly sloppy, bereft of rigor.

Recently, I had the pleasure of discussing with financial planners their business models and where they see the challenges and opportunities in the coming years.

An interesting theme to come out of the interviews was how cynical and opinionated clients were now becoming. Indeed, many had a firm grasp on economics and investments that often surprised the advisers.

Many of those in financial services that have formal training in financial economics are more than likely trained in the Chicago style of economics (Fama and co). But such a training might not be enough anymore.

It may be worthwhile attaining greater depth of understanding of the ideological battles being fought.