Ritchie and economics

No one has ever been able to define a structural deficit

But if we have ever had one it’s only been since 2010

And I am not sure I would agree with that

Hmm:

Structural Deficit

The portion of a country’s budget deficit that is not the result of changes in the economic cycle. The structural deficit will exist even when the economy is at the peak of the cycle.

We were pretty clearly at the peak of the cycle in 2005-7. We were running a budget deficit at that time. It may well have been to “invest” in the future but it was still a deficit at the peak of the cycle. A structural deficit therefore.

Is there no beginning to this man’s understanding of economics?

12 comments on “Ritchie and economics

  1. As you say, just repeat the words, “All (Labour) Government spending is investment” and (Labour) deficits fade away.

  2. Can’t see the problem. A structural deficit is as per Tim’s above definition, i.e. “The portion of a country’s budget deficit that is not the result of changes in the economic cycle….”.

  3. I think I can interpret this:

    No one has ever been able to define a structural deficit
    I can’t get my head around the meaning of “structural deficit”

    But if we have ever had one it’s only been since 2010
    But I can make a wild guess sound authoritative

    And I am not sure I would agree with that
    And am prepared to abandon it if needs be

    Hopla!

  4. But if we have ever had one it’s only been since 2010
    But I can make a wild guess sound authoritative

    … especially if I can shift the blame off the last Labour government

  5. Tim – you’re right that a structural deficit is easily defined. But it is not so easily measured, not least because the output gap is unmeasurable and perhaps even nonsensical; Paul Ormerod calls it a mumbo-jumbo idea:
    http://www.paulormerod.com/the-so-called-output-gap-another-piece-of-economic-mumbo-jumbo/
    As one who is (perhaps rightly) sceptical of macroeconomics, I would have thought you’d sympathize with this view.
    It’s easy to define “unicorn”. It is not so easy to observe them in the real world. And it is blithering idiocy to have a policy about unicorns,
    Yes, Richard is wrong. But if you replace “define” with “measure” he’s right.

  6. Indeed, it is easy to define but less easy to accurately measure.

    A bit like the Laffer Curve. The tax optimisation point on the curve is clearly there but next to impossible to accurately determine in respect to setting tax rates in real time.

  7. Chris above goes a bit too far when he says it is “blithering idiocy” to have a policy about the structural deficit given that the latter cannot be measured.

    NAIRU (and equivalent phrases like “natural level of unemployment”) cannot be accurately measured, but they are indispensable ideas. And for those who are omniscient (God or whoever) NAIRU and the structural deficit are presumably measurable. The square root of minus one, so I gather, is indispensible for mathematicians, but God knows what the square root of minus one actually is.

  8. @ Ralph Musgrave
    ” but God knows what the square root of minus one actually is.”
    To quote Douglas Adams it is “at right angles to reality”.
    Murphy however is at two right angles to reality.

  9. @ Ralph: “for those who are omniscient (God or whoever) NAIRU and the structural deficit are presumably measurable.”
    Possibly. But policy isn’t made by the omniscient, and never will be. Call me a radical, but i think we should base policy upon what humans actually know, not upon what gods might know.

  10. We don’t exactly know what the square root of minus 1 is, but modern electronics won’t work without it.

    So we know enough to use it effectively.

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