The present British government is inching towards supporting house values, which is quite absurd when one of the roots of the crisis is that house prices have been inflated to a ridiculous degree, and I think more in Britain and Spain than the United States. I can't make up my mind whether it is better that house prices fall suddenly by 20 or 30 per cent, or whether the process had better be long and drawn out. It's just a pity that people who have had nothing to do with this suffer because of the monetary mechanism seizing up. We have to get enough money going into the system.

David Cameron has been applauded for hinting that taxes might have to go up and that there will be great limits to what government can do, not because he believes in people doing things for themselves but because we are supposed to tighten our belts. Now Keynes said that saving and scrimping is sometimes good, but in the middle of the Great Depression in 1931 he said people should go out and buy things, and he was right. Adam Smith wrote that what is virtue in a household can hardly be folly in nations, but it can be. In fact it seems to me common sense that when people are nervous and reining in their spending, that it is just the time for governments to finance schools, tax cuts, cathedrals or anything else. It's about the best time to do it when the opportunity cost is low. I think moralism is an extremely bad guide.

EH: Well sure, depending on what is meant by moralism. If you want to find someone to blame for the current crisis in terms of morality, I'd go for Adam and Eve. If they hadn't eaten that apple...

SB: I can't contradict you there!

EH: I think you have a perpetual moral problem in any kind of economic arrangement or any kind of human arrangement. People are good but they are also weak, sinful if you will, so they will be too greedy when they should be generous, too generous when they should be prudent - generally too greedy more than anything else. And that's a perpetual problem, which no amount of social engineering will resolve. In fact, one of the many fallacies of Marxism is to claim that at the end of history is this idea of communism, where we will finally eliminate all of the weaknesses that make society bad, or difficult.

But then there are also a set of technical questions which any economy has to deal with. In many cases these are problems that people, when they were first thinking about them, thought would be insoluble. When pollution became an issue in the 1960s, people thought this wouldn't be a soluble problem, and yet pollution levels have been reduced dramatically in industrial societies through a combination of private, public and semi-public measures. But one of the problems we haven't been terribly successful at addressing is the monetary problem.