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 a professional economist 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 debts accumulated in Australia, 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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