And good on them for it! Academic economists are ignoring or minimizing the need for change, just as they did 40 years ago when I was one of the revolting students. So students are taking their demands to hear other stories read from other than the Neoclassical songbook to the streets–and the web and newspapers.
Last week I showed that Australia’s net government debt to GDP ratio is nothing to panic about when compared to the rest of the world. We’re currently at under 12 per cent, whereas most OECD nations have ratios of 50 per cent and above.
But maybe that’s one reason Australia’s economy is relatively strong.
This is a talk about what the economic consequences could be of Australia’s ambition to achieve a permanent government surplus of 1% of GDP. I present a very simple Minsky model in which banks lend money to the private sector, and the government both spends and taxes the private sector. I then explore 4 scenarios: a balanced budget; a permanent surplus of 1% of GDP with no change in bank behavior; a permanent surplus of 1% of GDP with a significant increase in bank lending; and a permanent deficit of 1% of GDP. The results are not what proponents of government surpluses expect.
Ask any politician if governments should run surpluses and the answer is likely to be a resounding yes, with the rationale being that governments should “live within their means”.
Precisely this reason was given by the Australian National Commission of Audit, which has been charged by the Abbott government with the task of suggesting ways to rein in government spending. Its first report gave as the very first of its “Principles of good government” the mantra that governments should:
I’m speaking at two events this weekend:
Northside Forum: “THE AGE OF ENTITLEMENT IS OVER” So claims our Treasurer, but for whom?:
Saturday May 3rd, 12-2pm, Function Room at the Union Hotel, North Sydney, 271 Pacific Hwy, North Sydney 2060
The launch of Geoff Davies’ book Sack the Economists:
In his latest blog, Paul Krugman slings off at non-mainstream economists — and the students at Manchester University campaigning for change to the economics curriculum — for wanting fundamental change in economics. paraphrasing his argument, it is:
Professor John Komlos has just released a new textbook on economics which breaks away from the mold of producing clones of Samuelson’s genre-defining opus. Its title is “What Every Economics Student Needs to Know and Doesn’t Get in the Usual Principles Text”. At a price of $26.55 via Amazon, it is priced to be an affordable supplement to a standard textbook. Given the failings of the discipline that were so vividly highlighted by the global financial crisis, this book is well worth considering as an alternative to the Neoclassical monoculture that dominates economic tuition today.
I will launch Sack the Economists, by Geoff Davies, on Sunday 4 May (3:30pm for a 4pm start) at Gleebooks, 49 Glebe Point Road Glebe NSW 2037 Sydney. The event is free, but an RSVP is required here or via phone at 02 9660 2333. Following is an edited extract pertaining to Thomas Piketty’s recent best-seller. I hope to see Sydney-side readers of this blog at the launch.]
There is no end of commentary about China’s real estate bubble, with an even split between those who believe it may pop at any moment, and others who argue it never will.
Back in the Olde Days, before the global financial crisis, when I was one of a handful raising the alarm, some of the most strident opposition to my opinion about what this might mean for housing in Australia came from Christopher Joye (who was then a Director at Rismark). We went head to head on many occasions, with me arguing that our prices were a debt-fuelled bubble, and Joye arguing that rising house prices simply reflected rising household incomes.