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What the Austrians can add to our understanding is a mechanism by which this shift can occur. OK, so the Keynesians provide a fiscal boost, but we’ve still got to somehow move those resources from banking to some other sector. Ditto the monetarists with low interest rates. We don’t, thankfully, live in a country where anyone can, by fiat, tell the bankers to go and be salt miners in Derbyshire - so what is the method by which this shift is going to occur?

The Austrian answer, crudely put, is entrepreneurs. The price of bankers has fallen, continues to fall and presumably will fall further in the future. The buildings they banked in, the capital they banked with, are also looking for a new and productive home and thus their prices have fallen too. What we want and need is therefore some bright spark to come up with a way of using these newly released resources to do something else that we might appreciate. Quite what is entirely unknown: what do you use ex-bankers, however cheap for? Loft insulation?

It’s true that this almost paramilitary wing of liberal economics places a great deal of faith in the idea that someone will come up with a decent and profitable use, yes, but they do at least provide us with the mechanism by which any recession or depression will be ended.

When the resources currently not being used are indeed being used then we won’t have unused resources: the very definition of a recession being that, at heart, we have unused resources lying around. And the people who are going to find those new uses are the entrepreneurs. For that's what entrepreneurs do - experiment with combinations of resources to provide new and/or different products and services. Anyone who finds a profitable use for a few hundred thousand ex-finance middle managers is going to both make a fortune and earn the undying devotion of a nation.

There’s nothing particularly ideological about this analysis (although there very much is about the philosophy that underlies it) - it’s just another strand of economics giving us a glimpse of a partial truth. What it does lead to is something which I think is rather important to remember in the debates over what to do next.

We’ve been told that our current problems have been caused by markets run amok, by an excess of innovation. That might even be true, but what is certainly true is that we’ll get out of our problems only by entrepreneurs innovating. They might be in the public sector (I leave it to you to decide how effective that’s going to be) or the private, but it will be people trying new and different ways of combining resources that will make sure that all get used and thus end the recession.

If anyone’s got any possibly profitable ideas about what to do with all these excess bankers, drop them in the comments and we’ll see if we can raise the money then, shall we? ®

Tim Worstall knows more about rare metals than most might think wise, and writes for himself at timworstall.com, and for The Business and the Adam Smith Institute, among others.

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