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June 10, 2015

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Posted: 10 Jun 2015 12:06 AM PDT

'The Party of Fiscal Responsibility in Action'

Posted: 09 Jun 2015 09:58 AM PDT

Paul Krugman:

The Party of Fiscal Responsibility in Action: One of the greatest confidence tricks ever pulled in American politics was the way Republicans managed, for a while anyway, to convince centrists that they were apostles of fiscal responsibility. Paul Ryan presented budgets that combined huge tax cuts for the rich with not quite as huge benefit cuts for the poor, added some magic asterisks — basically deficit-increasing redistribution from the have-nots to the haves, with added fraudulence — and received awards for fiscal responsibility.
Anyway, at this point we have evidence of what such politicians actually do in office, thanks to the many US states where Republicans control both the governor's office and the legislature. And the result is an epidemic of fiscal crisis, despite a recovering economy. Yes, some Democrat-controlled states are also having problems. But they didn't go around pretending to be the nation's fiscal saviors, and the biggest state controlled by Democrats, California — which was supposed to be a basket case — is in quite good fiscal shape.
And yes, I think this observation is a lot more important than Marco Rubio's personal financial difficulties, although those are pretty bizarre.

'What is it about German Economics?'

Posted: 09 Jun 2015 09:58 AM PDT

Can you help Simon Wren-Lewis figure this out?:

What is it about German economics?: ...Keynesian ideas are pretty mainstream elsewhere...: why does macroeconomics in Germany seem to be an outlier? Given the damage done by austerity in the Eurozone, and the central role that the views of German policy makers have played in that, this is a question I have asked for many years. The textbooks used to teach macroeconomics in Germany seem to be as Keynesian as elsewhere, yet Peter Bofinger is the only Keynesian on their Council of Economic Experts, and he confirmed to me how much this minority status is typical. [1]
There are two explanations that are popular outside Germany that I now think on their own are inadequate. The first is that Germany is preoccupied by inflation as a result of the hyperinflation of the Weimar republic, and that this spills over into their attitude to government debt. (The recession of the 1930s helped create a more serious disaster, and here is a provocative account of why the memory of hyperinflation dominates.) A second idea is that Germans are culturally debt averse, and people normally note that the German for debt is also their word for guilt. The trouble with both stories is that they imply that German government debt should be much lower than in other countries, but it is not. (In 2000, the German government's net financial liabilities as a percentage of GDP were at the same level as France, and slightly above the UK and US.) ...
It is as if in some respects economic thinking in Germany has not moved on since the 1970s: Keynesian ideas are still viewed as anti-market rather than correcting market failure...
One of the distinctive characteristics of the German economy appears to be very far from neoliberalism, and that is co-determination: the importance of workers organisations in management, and more generally the recognition that unions play an important role in the economy. Yet I wonder whether this may have had an unintended consequence: the polarisation and politicisation of economic policy advice. ... If conflict over wages is institutionalised at the national level, perhaps the influence of ideology on economic policy - in so far as it influences that conflict (see footnote [1]) - is bound to be greater. 
As you can see, I remain some way from answering the question posed in the title of this post, but I think I'm a bit further forward than I was.

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