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A Lack of Interest in Ideas...
Few Australian businessmen, whether they run a corner milk bar or chair a multi-national and publicly-listed enterprise, claim that economic ideas arouse their attention and curiosity. Fewer still are interested in these ideas’ genesis and development. Hardly any, therefore, realise that certain views about business and economics suddenly swept all before them during the late 1930s and 1940s – and that these views became and remain not just ingrained habits of economic thinking and media commentary but also entrenched fixtures of public policy. (Analogously, large institutional investors whose ranks include arrays of economic analysts and commentators, despite their reliance upon econometric models and myriad forecasts derived from these models, rarely pause to consider either the plausibility of the assumptions underlying these models or the validity of the data used to estimate their parameters).
It may be unreasonable to expect that businessmen should be students of economic thought. In a competitive – and possibly slowing – business environment, after all, they must devote their time and energy towards never-ending tasks such as the reduction of costs and maintenance of margins, the improvement of existing processes and products, the culling of outmoded ones, the creation of new ones and the satisfaction of consumers. From this point of view, awareness of the origins and plausibility of economic ideas is best left to the securely tenured academics who have time on their hands and no need to sing for their supper.
... Is Costly
But this stance has costly consequences. Most businessmen’s concentration upon immediate and concrete tasks often seems to manifest itself not just in an indifference towards abstract economic ideas, but also in a general (and sometimes complete) lack of interest in principles of applied economics. Similarly, the fixation with today’s prices, tomorrow’s release of data by the Australian Bureau of Statistics, the forthcoming announcement by the Reserve Bank and the next round of earnings announcements leaves no room for critical self-appraisal by brokers, analysts, traders and other market participants of the ideas and principles which (often implicitly and hence all the more powerfully) guide their actions. Indeed, from entrepreneurs’ possibly excusable shortage of interest in principles often follows a less-than-excusable dearth of knowledge of principles. At most times, then, market participants’ fixation with the here-and-now manifests itself in inattention and indifference with respect to the logical bases of prevailing economic ideas.
This inattention often persists in the face of ambitious proposals which (if acted upon) might harm businesses, their employees, customers and shareholders; and sometimes this indifference persists even after such a proposal is put before the Parliament and enshrined in legislation. Not surprisingly, shock, belated anger and confusion typically erupt when it is realised that supposedly beneficial policies have not produced their intended results but instead have produced unintended and harmful results. In such instances aggrieved market participants are apt to believe that yet another, ‘simpler’ policy will ‘solve the problem’ and that politicians (particularly those members of parties which allege that they are ‘business friendly’), when presented with the relevant facts of the matter, will be not only be alerted to the problem’s existence but also persuaded by the pressing need to ‘solve’ it.
... Vis-à-vis Governments Steeped in Particular Ideas...
Usually, however, this belief is incorrect and this strategy bears little fruit. This is because the ultimate source of the damage caused by such policies lies not in any intended malevolence by politicians, bureaucrats, regulators or special interest groups. Rather, it lies in the ideas which underlie their actions. These ideas are fundamental but seldom espoused clearly (or at all). Instead, they tend to be sanctioned by authoritative texts and scholarly articles and legitimised by uncritical second- or third-hand repetition in mainstream media of communication.
These ideas, whether spoken, written or unstated, become the lenses through which economic policy makers view the world. Bureaucrats and politicians, one needs hardly to mention, inhabit bureaus rather than businesses; further, the progression of their careers depends upon the extraction and expenditure of taxes – not the creation, retention and growth of profits. Bureaucrats and the politicians whom they tutor are likely, whether consciously or not, to propagate the mainstream economic theory to which they were exposed at university. But like the academics who promulgate this theory, policymakers are unlikely to experience applied economics at the coalface, i.e., to operate real businesses that compete for real customers in real markets. Nor are bureaucrats or academics likely to experience the concrete consequences of their abstract theories: they are very unlikely, in other words, to suffer materially in the event that their actions injure businesses, employees, customers and shareholders.
Unlike bureaucrats and politicians, businessmen are likely to know the facts and implicit knowledge pertaining to their own businesses. Unlike bureaucrats and politicians, they are also likely to prosper in roughly direct proportion to the fortunes of their businesses. But because they are unlikely to possess any detailed knowledge of abstract economic theory, they often find themselves at a sharp disadvantage when confronted with the actual results of governments’ economic policies. Businessmen cannot answer – and are frequently unaware of – the premises on which economic policies rest. Even more fundamentally, and as is the case (to a greater or lesser degree) in all Western countries, so too in Australia: these premises, seldom stated explicitly or formulated clearly by élitists, have since the late 1930s recast the climate of economic opinion. Like other Australians, businessmen have inhabited this climate of opinion and their views about economic matters have been moulded by it. Accordingly, for more than a half-century the Commonwealth government’s Keynesian instincts, premises and policies have been generally – and in many instances enthusiastically – supported by Australian businessmen and their lobbyists in Canberra.
One of the government’s most ubiquitous statistics (Gross National Product), and one of its most sacrosanct policy objectives (the encouragement of private-sector and public-sector consumption) provide notable examples of this phenomenon. Each, despite the distortions and (arguably) harmful results which have been wrought in their names, has been accepted without comment or question by businessmen, media commentators, market participants and consumers.
...continued in Part II
 
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