This brought the apt riposte from Marshall Auerback of the New Deal 2.0 thinktank. \”So we\’re supposed to ratchet up government spending when the economy is growing? When it can present genuine inflationary dangers? If this is the type of policy incoherence we have in store, then God help the United Kingdom.\”

That is of course what El Gordo did and that is, of course, why we seem to be facing debt constraints on what we can do about the recession. Coming off the top of a decade and a half\’s worth of boom we should not only not have been running a budget deficit we should have been running a large budget surplus.

That is what Mr. Keynes would have recommended, is it not?

And if we had been then we wouldn\’t be facing the worry of a runaway debt trap if we expanded fiscally now.

I do think it\’s quite gorgeous to accuse the current government of exactly the mistake that the last one made……

1 thought on “Well, yes….”

  1. This is two questions, isn’t it? –

    1) is it sensible to expand government during a one-off boom? = NO.

    2) was it rational to believe that the economic conditions in the 2000s were a permanent shift in the supply curve rather than a one-off boom? = questionable.

    In reality, we know it was the latter; at the time, most economists (including most right-wing economists, whose main complaint at the time was of insufficient corporate deregulation) thought it was the former.

    Tim adds: Fairy snuff…..although I’d point out that little old not an ecnoomist me was shouting that we were in a boom and not a permanent shift in the supply curve….indeed, if I look hard enough I’m sure I could find me saying that the suopply curve was being shifted the wrong way by overzealous regulation only being masked by the boom.

Leave a Reply

Your email address will not be published. Required fields are marked *