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Best explanation of what's really behind austerity.


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29 minutes ago, Si1 said:

Feel free to get these merged.

Sorry, but they don't really relate to the same topic. (My bad for posting the video without explicitly explaining that my purpose in doing so was to give an example of how he talks.)

The talks I posted in the Economics sub-forum are about the financial crisis but this thread is about his book Austerity which is about, in part, why austerity as an idea continues to "dominate economic thought, both practical and theoretical, of governing and academic classes of this generation, as it has for a hundred years past" (John Maynard Keynes  in 1936 in the The General Theory of Employment, Interest and Money, quoted in Blyth, page 98).

Austerity has been the favoured policy response to the financial crisis in some countries (but not all countries) but there was no necessary reason that a conventional Keynsian approach (or some other approach entirely) might not have been followed and therefore there's no basis for merging a topic about the financial crisis with a topic about Blyth's book on austerity.

We don't have austerity because we had a financial crisis. We have austerity because we chose to respond to a financial crisis with austerity. Blyth's book throws a lot of light on why politicians made the choices that they made and also, to my mind, makes a convincing case about why it was the wrong thing to have done.

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8 minutes ago, Bland Unsight said:

Austerity has been the favoured policy response to the financial crisis in some countries (but not all countries) but there was no necessary reason that a conventional Keynsian approach (or some other approach entirely) might not have been followed and therefore there's no basis for merging a topic about the financial crisis with a topic about Blyth's book on austerity.

 

Surely a conventional Keynesian approach would have involved being in budget surplus before the crisis, which we were not.  According to Wikipedia for 2006

Quote
Total revenue £516 billion[1]
Total expenditures £552 billion[1]

https://en.wikipedia.org/wiki/2006_United_Kingdom_budget

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7 hours ago, iamnumerate said:

Surely a conventional Keynesian approach would have involved being in budget surplus before the crisis, which we were not.  According to Wikipedia for 2006

https://en.wikipedia.org/wiki/2006_United_Kingdom_budget

The book isn't really about the policy response that should have been followed - it's about the policy approach that shouldn't have been followed.

Consider a man with testicular cancer who is following a course of treatment (the details of which came to him in a dream) that involves the regular application of leeches to his temples and periodically whacking himself repeatedly in the nuts with a torque wrench. There is obviously more than one conversation that needs to be had with such a fellow but one conversation that definitely needs to be had concerns the fact that the leeches and self-battery aren't good ideas and aren't helping.

There's a danger of posing an entirely false binary choice; austerity or a Keynesian approach involving the government expanding public expenditure and funding the additional expenditure with debt. It's not a choice between Keynesian approaches and austerity, it's a choice between austerity (being the policy actually pursued to some extent here in the UK) and all other possible policies.

 

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I like the way Mark Blyth speaks and he is obviously very intelligent.  I'm not intelligent enough to really critique him but he sounds a bit Krugman-ish to me.  I'd like to hear his precis of the UK and world economies in the years 1996 - 2006.

 

djmgw

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Bland, I'm afraid I don't have the time to read Blythe's book so it, fairly, disadvantages me on this discussion.

He does sound like that particular combination of intelligence with little or no real world experience that Krugman projects.

Certainly the likes of Roger Bootle argue that the existing fiscal response HAS been Keynesian, in that austerity was not followed, certainly in the UK, as brutally as it was initially intended to. This was a real response to the economy not recovering as quickly as anticipated. And lampooned by many opposing the govt for not hitting their own fiscal targets.

The EU parliament and central bank of course has a different approach, and the austerity imposed on Greece has indeed been utterly brutal.

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40 minutes ago, Oliver Sutton said:

What austerity?

When real austerity is finally forced on the UK most people won't know what hit them.

Here's the thing. If you argue that you don't have austerity until the budget is balanced then sure, there's been no austerity but read something like The Secret Barrister and you'll see that if you allow that a policy of austerity has been enacted if public spending has been radically cut then it's clear that we have had (and continue to have) austerity.

The argument that there's no austerity because the state's provision of services is still a significant part of GDP or because the tax base won't cover the expenses we do incur always rings a bit hollow with me.

I think the underlying weakness of the 'this isn't real austerity' argument is that it both alludes to and ignores the obvious fact that austerity can be pursued aggressively or lackadaisically. I'm pretty sure that the people who were really relying on public services that have now been cut are not buying the "what austerity" banalities.

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1 hour ago, Si1 said:

The EU parliament and central bank of course has a different approach, and the austerity imposed on Greece has indeed been utterly brutal.

There's some great stuff about Greece and the Eurozone in the book:

Quote

There may be no convertibility into gold under the euro, but the credibility of the claim to be able to pay back government debt performs the same function, providing an external constraint to policy as gold did eighty years ago. Indeed, the the euro arguably provides even more of a constraint than the gold standard in one respect. Whereas states on gold can always "get off gold" - there is no need to print a new currency when doing so - the "once and for all bargain" that was the euro made states dump their old currency for good. There is nothing to go back to, which adds an extra layer of bondage to what is effectively a gold standard without gold.

As to Blyth being of the same ilk as Krugman and Bootle, basically no. Bltyh's field is political economy. He's not tinkering with some maths to build a model of trade and nor is he feeding inputs into a DSGE model of the economy. He's more in the vein of hunting the ideas that Keynes was referring to when he talked about the ideas of practical men and madmen in authority: "Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back" (another quote from the General Theory, according to the internet, link). It's reasonable to say that you're not interested in that kind of historical reflection, but it's not quite as reasonable to dismiss it as without merit because it doesn't interest you.

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33 minutes ago, Bland Unsight said:

There's some great stuff about Greece and the Eurozone in the book:

As to Blyth being of the same ilk as Krugman and Bootle, basically no. Bltyh's field is political economy. He's not tinkering with some maths to build a model of trade and nor is he feeding inputs into a DSGE model of the economy. He's more in the vein of hunting the ideas that Keynes was referring to when he talked about the ideas of practical men and madmen in authority: "Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back" (another quote from the General Theory, according to the internet, link). It's reasonable to say that you're not interested in that kind of historical reflection, but it's not quite as reasonable to dismiss it as without merit because it doesn't interest you.

Rather then take on your details, interesting that they are, the quote in the op is still rambling and very general.

 

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56 minutes ago, Si1 said:

Rather then take on your details, interesting that they are, the quote in the op is still rambling and very general.

OK, I'll still go in to bat for Blyth. A quick google reveals that it's the final two paras of fifth of six sections in the introductory chapter (the six sections are "Why Austerity?", "It's Not Really a Sovereign Debt Crisis", "Bill Gates, Two Truths about Debt, and a Zombie"*, "So Does "All that Debt" Not Matter", "The Distribution of Debt and Deleveraging" and finally "The Book in Brief").

In the preface he says that the book is "designed to be modular" and "if you just want an overview of what's at stake in the fight over austerity, just read chapter one 1".

I think that the shortcoming of the quoted section is not that it's rambling but that it's threadbare. In order to cover a lot of ground quickly lots of stuff is taken for granted which could be contested and perhaps ought to be explained. As to it being very general, well if what he was aiming to provide was an overview, then surely he intended that it be general.

It's a good book.

* The Bill Gates business is fun "Economists tend to see questions of distribution as equivalent to Bill Gates walking into a bar. Once he enters, everyone in the bar is a millionaire because the average worth of everyone in the bar is pushed way up. This is at once statistically true and empirically meaningless... Austerity policies suffer from the same statistical and distributional delusion because the effects of austerity are felt differently across the income distribution" (page ?.

 

Edited by Bland Unsight
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2 hours ago, Bland Unsight said:

Here's the thing. If you argue that you don't have austerity until the budget is balanced then sure, there's been no austerity but read something like The Secret Barrister and you'll see that if you allow that a policy of austerity has been enacted if public spending has been radically cut then it's clear that we have had (and continue to have) austerity.

The argument that there's no austerity because the state's provision of services is still a significant part of GDP or because the tax base won't cover the expenses we do incur always rings a bit hollow with me.

I think the underlying weakness of the 'this isn't real austerity' argument is that it both alludes to and ignores the obvious fact that austerity can be pursued aggressively or lackadaisically. I'm pretty sure that the people who were really relying on public services that have now been cut are not buying the "what austerity" banalities.

Public spending hasn't been radically cut.

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2 hours ago, Bland Unsight said:

Here's the thing. If you argue that you don't have austerity until the budget is balanced then sure, there's been no austerity but read something like The Secret Barrister and you'll see that if you allow that a policy of austerity has been enacted if public spending has been radically cut then it's clear that we have had (and continue to have) austerity.

The argument that there's no austerity because the state's provision of services is still a significant part of GDP or because the tax base won't cover the expenses we do incur always rings a bit hollow with me.

I think the underlying weakness of the 'this isn't real austerity' argument is that it both alludes to and ignores the obvious fact that austerity can be pursued aggressively or lackadaisically. I'm pretty sure that the people who were really relying on public services that have now been cut are not buying the "what austerity" banalities.

The wannabe bond market vigilantes don't like what he's saying because they've been listening to that broken record, about sovereign debt, the right wingnuts have been playing over the pond for decades. The same ones who have never heard of modern monetary theory, that were advising everyone to short Treasuries and go long on oil at $135 back in 07/08.

 

Edit:

Or, what he says is too complicated. It's easier to blame immigrants and poor people. 

Edited by dom
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19 minutes ago, Bland Unsight said:

 

* The Bill Gates business is fun "Economists tend to see questions of distribution as equivalent to Bill Gates walking into a bar. Once he enters, everyone in the bar is a millionaire because the average worth of everyone in the bar is pushed way up. This is at once statistically true and empirically meaningless... 

 

 

that's just bad statistics - call it out for what it is, bad stats, so the stats need to be better than that to refine governance. It doesn't mean all stats are bad. It just means they can be abused. I should hope/expect central banks and treasuries are capable of seeing that, although of course stats can be used as a weapon. Laying the blame for the shortcomings of some bad stats at the feet of prevailing economic theories is illogical. And this is where I take issue with verbose theorists like this chap who (afaict) reject numbers and quantifiable models - in rejecting these things they simply demonstrate, with examples, they don't understand the principles in the first place.

It makes me not want to read much more by him, sadly.

And I am forced to agree with you, he really isn't like Krugman in this respect. I like reading Krugman, I like disagreeing with him or not, I like being challenged.

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37 minutes ago, dom said:

Could you expand on this please?

Ok. As an example. The Bill Gates story. The mean average is a very crude statistical measure and in reality you'd try to characterise such a data set with a mix of statistical measures. A good statistician knows his data. And I'm not a statistician btw :)

 

Of course this is a limited example and I'm demonstrating bad stats of my own by extrapolating this to my general view of professor Blythe. Can of worms.

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6 minutes ago, Si1 said:

Ok. As an example. The Bill Gates story. The mean average is a very crude statistical measure and in reality you'd try to characterise such a data set with a mix of statistical measures. A good statistician knows his data. And I'm not a statistician btw :)

 

Of course this is a limited example and I'm demonstrating bad stats of my own by extrapolating this to my general view of professor Blythe. Can of worms.

I was hoping you would explain which principles you don't think he understand.

The Bill Gates example ...............https://www.theguardian.com/commentisfree/2017/jan/10/blunt-heckler-economists-failing-us-booming-britain-gdp-london

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6 minutes ago, dom said:

I was hoping you would explain which principles you don't think he understand.

The Bill Gates example ...............https://www.theguardian.com/commentisfree/2017/jan/10/blunt-heckler-economists-failing-us-booming-britain-gdp-london

All the ones I've read on this thread that he's banged on about.

 

It's fair to say I'm from a different economic school of thought to him. Although I don't like Haldane at all either, that's more to do with his contempt for everyday people.

 

In moral defence of Blythe, he does seem to care, which as a final observation is no bad thing.

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6 minutes ago, dom said:

Which ones?

 

Complaining that austerity affects different people differently. But so does any economic policy. What's his point? And he ignores degree as well as detail. Which is funny considering he emphasises detail elsewhere in his anti statistical stance. And again generalising 'those at the top'. Who. Specifically? It's way more nuanced than that but he doesn't tell me much new. And misunderstanding one of Margaret Thatcher's most important statements, cryptic that it was but still English.

And the Euro currency cage. The Greeks could still establish a Greek Euro currency free floating against the main euro. They'd be in trouble with Brussels for sure but it's not logically clear why it can't be done. Nuance - maybe it would cost more then leaving a gold standard by then again the eurozone is a deliberate economic cage compared to this. Just not for the simplistic reason he cites.

 

I respect the fact that this is all debatable stuff. At the same time I can see why this guy's career is limited to academia.

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2 minutes ago, Si1 said:

Complaining that austerity affects different people differently. But so does any economic policy. What's his point? And he ignores degree as well as detail. Which is funny considering he emphasises detail elsewhere in his anti statistical stance. And again generalising 'those at the top'. Who. Specifically? It's way more nuanced than that but he doesn't tell me much new. And misunderstanding one of Margaret Thatcher's most important statements, cryptic that it was but still English.

And the Euro currency cage. The Greeks could still establish a Greek Euro currency free floating against the main euro. They'd be in trouble with Brussels for sure but it's not logically clear why it can't be done. Nuance - maybe it would cost more then leaving a gold standard by then again the eurozone is a deliberate economic cage compared to this. Just not for the simplistic reason he cites.

 

I respect the fact that this is all debatable stuff. At the same time I can see why this guy's career is limited to academia.

He's not complaining, he's pointing out the fact. Yes, so does any policy that he could write a book about, this one is about, guess what?

You clearly haven't read the book and your respose reflects that, almost to the point where I feel bad for eliciting, when it's clear you have no idea what you're talking about.

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