Thomas Cool / Thomas Colignatus
March 24 1996
The economic record of this century may be judged with mixed feelings. Much has been achieved, but much has gone wrong too. The bad part in the record has not been caused by economic science but by economic policy making. The structure of economic policy making gives too much room for political distortion. Since this problem is equal across nations and across time, we may look for common factors, and one of them is the Trias Politica structure of our democracies. Especially since the future seems precarious, it could be wise to restructure the current division of powers. The paper drafts a constitutional amendment to create an Economic Supreme Court with a limited but vital role, for a ‘high definition democracy’.
The economic record of this century may be judged with mixed feelings. Much has been achieved, but much has gone wrong too. The bad part in the record has not been caused by economic science but by economic policy making. The structure of economic policy making allows politicians, bureaucrats and special interest groups to distort the contribution of economists. Also, projections for the future indicate risks that could be avoided if we change the structure of economic policy making.
Here we only indicate the
evidence, and do this by means of three quotes:
John Maynard Keynes,
"The General Theory of Employment, Interest and Money", 1936:381-382
"In his biography of Keynes, Sir Roy Harrod reports a widely acclaimed speech delivered by his subject to the House of Lords in 1946, the year of his death. ‘But Keynes had been talking in this style ... for some twenty-seven years. Why had his words not been listened to .... ?’ (...) Unemployment as a problem in economic theory may have been sufficient to produce a revolution in the discipline; unemployment was not a sufficient problem to society to produce a revolution in political ideas. If it was not the prolonged experience of mass unemployment that finally broke the hold of nineteenth-century ideas, what was it ? A strong case can be made out for war. ‘Normal’ life could coexist with unemployment; it could not with modern war."
"The reception of the Keynesian revolution", in Milo Keynes, "Essays on
John Maynard Keynes", CUP 1975:89 & 102-103
"The Global Crisis scenario (...) explores the risks and dangers of a neglect of, and late response to regional and global challenges (...) the world may end up in the throes of widespread distress, an eco-crisis, which can only be corrected at high cost. The policy message conveyed by this scenario is abundantly clear. Dismissing this scenario as unduly gloomy and pessimistic is in our view, absurd; such a statement would be tantamount to a complete denial of large segments of twentieth-century history."
"Scanning the future", SDU 1992:211
In the past there have been two steps towards more independence and more checks and balances in the management of the economy. First there was the independent Central Bank, and then the separate Council of Economic Advisors to the government.
We need to go one step further, and create a scientific Economic Supreme Court (ESC), saveguarded within the Constitution as an equal partner next to the three of the Trias Politica. The political philosophy of Montesquieu would be enhanced into a High Definition Democracy.
We need to move some power from the political muscle to the brain of the economy experts. The argument is not that politicians could not be qualified in economics. The argument is the balance of power. Having an ESC increases democracy, since it improves the quality of the checks and balances. It caters to the civic right of good government and to the right to know.
It would suffice for the ESC to have the power to veto the national budget if the stated information is scientifically incorrect. The information and statistics only. The ESC will focus on the statement of the size of the deficit and the national debt, since all errors accumulate in those figures. Parliament of course keeps the power to decide on the budget and on policy. Parliament would lose the power to make misleading statements as judged by the court.
As an economic expert I advice a parliamentary investigation and a public debate on this issue. It are the present powers in government that must grow convinced of the need for a better balance of power. The evidence will likely convince them, if only they study it.
The following is a text that
may serve as a concept for a constitutional amendment. The text assumes
the common Trias Politica. It uses the term "Parliament" for the legislative
branch (e.g. US Congress), and "President" for the executive branch (e.g.
the UK Cabinet). It then adds the ESC. The given size, terms and other
properties of the ESC seem optimal for group decision making, openness,
stability and change.
A constitutional amendent
The nation has an independent and scientific Economic Supreme Court of equal status next to parliament, the President and the Supreme Court.
One is advised to read my
analysis on unemployment too. As an economist working for the Dutch Central
Planning Bureau (CPB) - the counterpart of the US Council of Economic Advisors
- I found that I was not allowed to even discuss and eventually publish
my analysis on unemployment. The CPB of course does not have a sufficient
base in science. This in itself is an empirical "existence proof", that
there is a problem with economic advice within the policy making process.
Or, stated differently, the problem has not gone away since the time of
Consultancy & Econometrics,
March 24 1996
Internet: http://econwpa.wustl.edu/months/mac/9508.html and 9509.html
Home page 1996: http://www.can.nl/~Cool