(27 March 2009; no response received)

Economic and financial crisis: causes and solution

You have stated that you are looking for, and are open to, new ideas about how to solve this crisis. On the basis of recent personal experience I believe that your open-minded attitude is not reflected in the offices and agencies of the US Government, or in the staffs of Congressional committees involved in economic and financial policy matters. Reasons for this are advanced below.

Longstanding, permanent and (individually) fatal deficiencies in macroeconomics caused the crisis. Academic economists identified most of these in published analyses and assessments in the decade from the early mid-1960s.

The macroeconomic orthodoxy is the most-influential and -powerful vested interest in any western country. It is also a 'self-sealing ideology'. No matter how bad are economic and financial conditions the orthodoxy will not allow other techniques and approaches etc to contribute to resolving the crisis. Macroeconomics has privately long held the position that, if its approaches and techniques cannot solve particular problems, those problems shall remain unresolved. The orthodoxy is completely unaccountable in practice and the entire economic and financial debate is conducted on its terms.

The orthodoxy's vested interest (in perpetuating its ideology, influence and power) is currently being advanced over the public interest, internationally. In this sense macroeconomists among staffs in offices and agencies of the US Government, and those serving Congressional committees, inescapably have a severe conflict of interest. All concerned are grimly determined that macroeconomics will emerge intact from the Great Recession; no matter how long it takes, and irrespective of who and what gets hurt along the way. That is how the orthodoxy has always operated.

Macroeconomic interests may, therefore, cause your Administration significant harm, because

• Their ideology is inimical to the Administration's, the Nation's, and the International Community’s interests and needs.

• The orthodoxy is autocratic, inflexible and zealous in applying that ideology.

I have enclosed a short document, requested by a British member of parliament, which identifies the fatal deficiencies in macroeconomics that collectively caused the current crisis.

Another short document gives two recent US examples of the orthodoxy’s actual behaviour as a 'self-sealing ideology'. Additionally, neither the US Treasury nor the National Economic Council is willing to receive, consider or discuss my proposals.

Among the numerous deficiencies three may be mentioned as examples of why legislators, policy makers, advisers and regulators etc are all currently ineffective; and why they had no advance warning of the coming storm. These are:

• Inability to handle, for policy and regulatory purposes, the great dynamic and interactive complexity in financial institutions and other economic entities and systems.

• Absence of real predictive capacities for policy formulation and regulatory purposes (as distinct from inferior forecasting capacities).

• Lack of a detailed, designed interface between policy and regulatory design, on the one hand, and the actual behaviour and outcomes that determine its success or failure, on the other.

The celebrated economist Professor Paul Samuelson, MIT (Nobel, 1970), recently referred to 'fiendish frankenstein monsters of financial engineering' as a main cause of the financial crisis; adding ominously that some of the financial instruments concerned were designed by people like him.

In the face of such complexity in the economic and financial spheres ‘manual’ approaches to regulatory design, revision and implementation must be expected to fail. For ideological and vested interest reasons the orthodoxy will resort to manual organisational, personnel and governance changes, in preference to using appropriate (non-macroeconomic) approaches that can do the job properly.

It is the contemporary equivalent of ‘bread and circuses’, which does no more than kick the can down the road. Causes of the problems remain intact, as do macroeconomic influence and power. Legislators and the public are mollified for the time being. Business returns to normal – including policy formulation and regulation that do not serve the public interest well.

Economics (particularly macroeconomics) does not equip legislators, policy makers, advisers and regulators etc to handle real-life complexity effectively and efficiently. Other techniques do, but they have been excluded by the macroeconomic orthodoxy for the past fifty years. These other techniques also provide real prediction, and resolve other fatal deficiencies in macroeconomics.

I specialise in those other techniques, which are a branch of management science. I have devised two projects, each of which will blend management science and economics (but not macroeconomics).

The first will replace macroeconomics with a software-based alternative that is more modern and powerful; and able to achieve the goals of public policy in harmony with each other. I am apparently the only person since WW2 to have devised a serious alternative to macroeconomics.

The second project will provide a comprehensive decision-support capacity, also software-based, for financial and related institutions and their regulation. This capacity will

• Be used by institutions, legislators, policy makers, advisers and regulators.

• Support activity and resource control, planning, budgeting and real accountability.

• Provide the ingredients of modern decision support – real prediction, low-risk ‘what if’ experimentation, system-wide analysis of reasons for actual and simulated outcomes, and replication of past behaviour and outcomes.

I request that these two proposed projects should be evaluated (independently of the macroeconomic orthodoxy), with a view to enabling me to undertake those projects for your Administration.

Sincerely.