Skip to main content

Home/ TOK Friends/ Group items tagged countercyclical

Rss Feed Group items tagged

Filter: All | Bookmarks | Topics Simple Middle
Javier E

Robert Samuelson: Economists face hard times - The Washington Post - 0 views

www.washingtonpost.com/...3-afce-3e7c922ef31e_story.html

economics forecasting policy austerity Keynes countercyclical

shared by Javier E on 17 Feb 14 - No Cached
  • These are hard times for economists. Their reputations are tarnished; their favorite doctrines are damaged. Among their most prominent thinkers, there is no consensus as to how — or whether — governments in advanced countries can improve lackluster recoveries.
  • economists at the Organization for Economic Cooperation and Development (OECD) published a retrospective study of its economic forecasts. This qualifies as an act of bureaucratic courage, because the record was predictably dismal
  • Interestingly, one item not on the list is “too much austerity.” The OECD economists found that they generally hadn’t underestimated the effects of spending cuts and tax increases intended to shrink budget deficits in Spain, Italy, Ireland, Portugal and elsewhere
  • ...6 more annotations...
  • This conclusion is surely controversial because many economists attribute the weak recovery to misguided austerity, especially in Europe.
  • Perhaps history will vindicate this appeal to Keynesianism. Or perhaps not. The fact is that the United States did respond aggressively under both George W. Bush and Barack Obama. It certainly didn’t embrace austerity. Federal budgets ran massive deficits — $6.2 trillion worth from 2008 to 2013, averaging 6.4 percent of the economy (gross domestic product).Nothing like this had occurred since World War II. Yet, the economy limped along. Why wasn’t this enough?
  • It’s not just Keynesianism that’s under a cloud. The same fate has befallen monetarism — the doctrine that stable growth in the money supply can promote a more stable economy. Since 2008, the Federal Reserve has poured more than $3.2 trillion into the economy to keep interest rates low and accelerate economic growth. By monetarist reasoning, so much money pumped out so quickly should spawn higher inflation. Some economists predicted as much; it hasn’t happened yet. Consumer prices today are up a mere 1.5 percent from a year earlier.
  • The Great Recession and financial crisis changed behavior in fundamental ways that economists have yet to incorporate fully into their models or theories
  • The widespread faith that modern societies were sheltered from deep and sustained economic setbacks has been shattered, causing consumers, business managers and bankers to be more cautious in borrowing and spending. Economic stimulus may offset this caution, but if it signals that the economy is weaker than expected, it may also further depress private spending.
  • The faith in economics was, in many ways, the underlying cause of both the financial crisis and Great Recession — it made people overconfident and careless during the boom — and the basic explanation for the weak recovery, as stubborn caution displaced stubborn complacency
1 - 1 of 1
Showing 20▼ items per page