An empirical nail in the austerity coffin

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I was going to write a piece about how Paul Krugman doesn’t understand IS-LM today, but as often happens when I read Krugman, I find myself agreeing with him – even if our approaches to economic analysis are very different.

That happened today as I prepared to write my “Krugman doesn’t understand IS-LM” post: I checked his latest blog entry “Paul De Grauwe and the Rehn of Terror” and found he’d linked to an excellent empirical paper on how austerity policies had functioned in Europe – or rather, how they had malfunctioned – written by Paul De Grauwe of the London School of Economics and Yuemei Ji of the University of Leuven. Since politicians everywhere seem enamoured of austerity right now, this empirical work deserves wide exposure; my theoretical pot-shot at Krugman can wait.
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About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.
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6 Responses to An empirical nail in the austerity coffin

  1. gfdghfghgf jhgjghjgh says:

    We still want that piece about IS-LM and Krugman 🙂

  2. Attitude_Check says:

    Steve, Since the total debt of the economy is the problem, if “Austerity” is only a balanced primary budget, with a public/private debt write-off of some form, would that work in your mind. Clearly for the US to continue borrowing $1T+ every year is not going to work, nor is similar behavior in Europe, especially since the primary purpose is avoiding recognition of already occurred bank loses.

  3. Joseph Lord says:

    Do you follow Martin Wolf in the FT? He is also concerned about austerity and in a recent article was accepting of the concept of bank created money.

  4. Steve Keen says:

    It’s coming–next week!

  5. Steve Keen says:

    Yes, and he’s one of a number of thinkers in the UK who are moving in this direction–Anatole Kaletsky and Andy Haldane being two others. Good to see.

  6. Mich says:

    I’m not sure what is meant by “austerity” these days. From where I’m sitting it looks like increasing tax/inflation burden on the population.
    There’s no difference in households and governments, households are capable of legaly counterfeiting money (=stealing previous worked for savings) by near unlimited borrowing, just like governments.
    Economics; Science of Pyramid Schemes, the Knowledge of Fraud, the Study of Counterfeitng Technologies.

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