Behavioral Economics: "Rightwing Methods to Achieve Progressive Ends"
April 13, 2009 • 11:34PM

On April 8, British Conservative Shadow Chancellor George Osborne addressed the Royal Society for the encouragement of Arts, Manufactures and Commerce, and, in what was obviously a statement of policy, he made clear that Behavioral Economics is at the heart of the "new" Tory program. He identified "two crucial insights" into the limitations of market economy: First, "that individual rationality does not ensure collective rationality," and second, "that even individual economic behavior is not always entirely rational."

These are two of the key tenets of the lunatic theory of Behavioral Economics, which Lyndon LaRouche denounced in his April 11 webcast as having the Obama White House in its grip, through the likes of Larry Summers.

Clearly preparing for Depression austerity, Osborne said that the Tories had now been vindicated, and that the idea that the government can "pump up demand" (stimulus and bailout) to keep unemployment low, could no longer be continued. On his second point, Osborne displayed that he was extremely well-versed in the prime movers of BE, identifying Kahneman and Tverski by name, and expanding on the more recent theories, such as Daniel Arielys "anchoring," Robert Shiller's "irrational exuberance," and Hyman Minsky's work on speculative booms ending badly. He stated that the Tories had been developing their freakonomic program over the last 18 months, working directly "with Richard Thaler, Robert Cialdini and others."

He indicated that the Tories would oversee a massive tightening of credit, and beef up the Bank of England to make them the overseer of stress testing the institutions. They would also create an "independent" Office of Budget Responsibility to "act as a rod for the back of all future Chancellors." The irrationality of the markets and of the people who make them up, "isn't a failure of capitalism," he said in closing, "it's a feature of capitalism."

A review of Nudge in the Guardian from July 12, 2008 (when this "cooperation" with the Tories was in high gear), said Thaler "ducks the political argument," then quoting Thaler describing his policies as "beyond left and right—it uses rightwing means to achieve progressive ends." Thaler added that, although he was a Democrat, Tory "David Cameron is the one sweet-talking me."