Saturday, 7 April 2012

Who is J Anthony Boeckh?

I bought 'The Great Reflation' by J Anthony Boeckh when it first came out in 2010 and read it then.  I enjoyed it, with reservations, and  thought I'd read it again now, and I'll make a couple of postings on how it strikes me the second time around.  The first thing I try to do when reading a book like this is to peg the author, place him in my mental framework of financial or economic theorists.  The obvious place to start is with the endorsement quotations which come with the book.  I like to try to tie all these commentators up so I can understand what, if anything, is really new in what they/re saying.  Next I look at the bibliography and index to see who I've read before, who he's referencing, the quality of his sources,.  I then look at the acknowledgements, the preface, the author information section.  

The author has been the main driving force behind Bank Credit Analyst from 1968-2001.  Their client base covers just about every kind of institution involved in finance, including central banks and sovereign wealth funds.  I mention central banks in particular, since the book is quite critical of leading Western central banks.  He's not, however, crazily critical like the libertarian, Hayek-inspired, Irving Fisher-inspired modern day critics, personified in American politics by Ron Paul.  The author was an academic, and he also worked for a G7 central bank.  He's helped found the Fraser Institute, a think tank which seems to have seen one of its main goals as the education of Canadians to the risks of central planning and the benefits of letting people make their own choices.   He was listed in 1974 as on the founding board of directors.  Their most famous contribution of common understanding of economic and policy issues is the 'tax freedom day' - the date in the calendar year up to which we are said to be working exclusively for the government.  It is your effective tax rate times 365, rounded to the nearest day.  So clearly this body is in the business of empowering citizens to hold governments to account.

Early editorial advisors included mister public choice theory and Nobel laureate James Buchanan, Austrian  theorist number two and Nobel laureate, Friedrich Hayek and monetarist Nobel laureate Milton Friedman.   One of the founders, Sir Anthony Fisher, had previously, in Britain, in 1955, founded the Institute of Economic Affairs.  He'd set this up after having read Hayek's "Road to Serfdom" and taken advice from Hayek himself (then at the L.S.E.) on how best to serve the cause of libertarian freedom.  This was, and possibly still is, the most important British think tank.  The I.E.A. hosts the shadow monetary policy committee, a group of media-aware economists who meet and pretend to be the Bank of England monetary policy committee, delivering alternative reality, Hayekian versions of the committee's deliberations.  These deliberations are widely reported in the British financial press. Check out Adam Curtis's awesome cultural story of the Fishers and the hidden history of think tanks.  Fisher not only set up the I.E.A. and the Fraser, but also 150 others around the world.  According to this history, the think tanks were all about convincing opinion formers, including reporters, of the rightness of the warning of Hayek most clearly set out for the general reader in his "Road to Serfdom".

So I see Boeckh as following in this tradition, of politically motivated, proselytising, but with much more of a financial markets spin, and clearly also with an angle to influencing and making a profit.

Now there are many possible ways in which a finance professional could profit from listening to Boeckh's advice.  And many of them surely do.  First, they can learn a particular strand of economics from him.  Second, he could offer them macro-economic predictions from which they can profit. Third, in case they weren't already libertarian,   they could become exposed to libertarian ideas.  Fourth, they could learn to deliver to their own investor base a well-thought out rationale (perhaps a post-rationalisation) for their investing style.  Fifth, they can understand how government policy may be about to change, and position themselves to profit from this.  There are many more.

A key point, I think, is the point made by Curtis - these think tanks already knew the truth, so, paradoxically, they were about following a framework's axioms through to policy level decisions, not about the broad search for truth.  This caused them to be somewhat closed in their thinking.  So I re-read "The Great Reflation" as a kind of propaganda, though I see the author as on the more centrist side of the debate. He's after all in the business of offering actionable advice to investors, and the quality of that kind of advice can be measured.