The real Lord Keynes was the editor of a series of interwar elementary guides to economic ideas, which had a common introduction edited by the master. For most of these volumes, the introduction merely stated that economics was not a fixed body of ideas but a way of thinking which the reader should try to apply to problems. But in the last few guides the introduction was changed a great deal. He remarked that economics was in a period of turmoil, which until it was resolved, had virtually destroyed its application to policy. He modestly refrained from saying who was responsible for this turmoil.

We are clearly in such a period again. One only has to compare the sharply contrasting views of Otmar Issing, until recently economic director of the European Central Bank, and Kenneth Rogoff, co-author of This Time Is Different: Eight Centuries of Financial Folly, on euro area bail-out policies. Faced with this confusion among more or less established analysts, what is the poor policymaker to do? The academic confusion is most unlikely to be resolved in time to deal with present problems, if at all. It is all very well for financiers and economists to call for “leadership”, but it is all too obvious that they have nothing like a consensus idea of what that leadership should do. Nor do the abrupt changes in the Bank of England’s still complacent forecast inspire much confidence.

My first piece of advice is along the lines of the medical motto: above all, do no harm. It goes without saying that central banks in western countries should not raise short-term interest rates any further and if possible quietly rein them back towards near-zero. But the US Federal Reserve’s semi-undertaking to hold rates until the middle of 2013 seems a pretty cack-handed way of doing this. Should there be more “quantitative easing” by the Fed or the Bank of England? That is a close call. Is it worth upsetting the financial markets which, however irrationally, distrust such measures in the absence of clear-cut evidence of what earlier rounds have achieved? A lesser, but still important, measure would be for the US Congress to end “the oligopoly of Nationally Recognised Statistical Ratings Organisations before they contribute to or ignite another financial crisis”, as suggested by Bill Miller of Legg Mason Capital Investment. And above all we need more quantification and analysis of the derivatives market.