Falling out of love with market myths - by Terrence Kealey
"My story starts with a theory that Ronald Reagan and Margaret Thatcher sold us. It is called "supply-side economics", and it claims that economic growth depends, first, on the rich (not the poor) being rewarded with tax cuts; and second, on markets being freed from regulation. Clearly the theory is flawed. The rush by bankers to pay themselves large bonuses, even as their failing banks were being nationalised, reveals the true function of this bloated remuneration - to benefit only its recipients - while the banks failed precisely because their regulation was too lax. Supply-side economics was buttressed by two further theories: "rational expectations" and "efficient markets". As their names imply, these assume that traders do not make systematic errors when predicting the future, and that the prices of financial products such as shares, bonds and property accurately reflect all relevant information.
Unfortunately, entrepreneurs today love the theory of market failure. Once, like Bill Gates, they rejoiced in the free market, but today, banker-like, they want to nationalize the costs of their R&D but to privatize their profits. Indeed, when I ran a biotechnology start-up in the 1990s, I too claimed every government grant going, even though I secretly knew that there is no market failure. False theories are often beguiling (markets look, at first sight, efficient; science looks, at first sight, like a public good) but while false economic theories are soon exposed by the crunches in the market, the tragedy of false economic theories in science is that they can be more easily disguised because their failings are more insidious."
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