In my Vox piece, I did a simple exercise to show how important fiscal austerity has been in the US, UK and Eurozone. If government consumption and investment had grown by 2% from 2010 onwards, and assuming a multiplier of 1.5, GDP could be around 4% higher in all three ‘countries’. 
It cannot be emphasised enough what a huge waste of resources this represents. If 1% growth was lost each year, then by 2013 that gives a cumulative loss of 10% of GDP. That approximation works well for the US. It also roughly fits with Eurozone estimates based on simulations of the NIGEM and QUEST models described here, but the Rannenberg et al study that I have discussed generates cumulative GDP losses up to twice as large. The UK is different from the US because austerity was concentrated in the early years. Using the same methodology (i.e. a multiplier of 1.5) you get a cumulated loss of around 14% of GDP.
For the UK I’ve often quoted a smaller figure of a 5% loss, but based on an analysis which I have always been careful to describe as conservative. It takes OBR estimates of the impact of austerity, which uses lower multipliers (although it does include the impact of higher taxes, which I ignore), and then assumes that all this lost GDP was recouped in 2013. Both differences are equally important in going from 14% to 5%.
Why, for the UK, do I tend to quote the conservative estimate? Four reasons. First, the government is fond of using OBR analysis when it suits them, because their work has some authority. Second, the OBR analysis is more detailed and comprehensive, and it implicitly allows for some monetary policy offset, which may be reasonable given how high inflation was in 2011. (I discuss this issue in much more detail here.) Third, I thought there was some poetic justice in assuming that all of the GDP growth in 2013 was simply a bounce back from earlier austerity, given that many people argue that 2013 growth vindicated this policy.  Fourth, losing 5% of GDP is bad enough, so there seemed no gain in using a higher figure, particularly when most of mediamacro act as if the number is zero. But if you asked me what my best guess is, it is nearer 14% than 5%. 
As I show in the Vox piece, if US GDP was 4% higher in 2013 it would be above the CBO’s current estimate of potential. The same is true for OECD estimates of potential for the UK and the Eurozone. But all three estimates assume that ‘trend’ or ‘potential’ GDP, or whatever you want to call it, has slowed substantially following the Great Recession. In a subsequent post I want to consider how reasonable it is to assume potential GDP is independent of actual GDP, and why even my 10% (14% for the UK) figure could be an underestimate.
Whether it is 5% of GDP, or 10%, or more, it is numbers like this that I had in mind when I wrote these two posts. They illustrate all too clearly the asymmetric risks that I talked about there. If these numbers are right, but monetary policy makers are nevertheless broadly content with their performance over the last five years, they either have a completely distorted view of the costs of inflation , or they have become fooled by a belief in the divine coincidence: that they only need to look at inflation to judge performance. (They could believe that they did not have the tools for the job, or that they had the wrong target, but if that is what they thought that is what they should have said.)
Going from the past to the present, Paul Krugman recently talked about the difference between insiders and outsiders on policy. This also reflects my own experience in the UK. How do we outsiders change this? I think the best place to start is by getting the insiders to think about the costs of fiscal austerity. Once you do that, you realise how large the recent failure of macro policy (but not macro theory) has been, and therefore how important it is not to carry on making the same mistake.
 I write could, because any extra demand growth might - or might not - have been offset by a tighter monetary policy. If it had been offset, in this counterfactual world I would then be writing posts about the foolishness of monetary policy.
 We would then have a perfect example of my ‘closing a part of the economy down to boost future growth’ repost, which I used when people wanted to describe 2013 UK growth as vindicating austerity. Paul Krugman prefers being hit by a baseball bat.
 So rather than my conservative estimate that austerity lost every adult and child in the UK £1500, my best guess is nearer £4,000. (That is £10,000 per average UK household.) The equivalent number for the US (10% of GDP per capita) is just over $5,000, and for the Eurozone E3,000.
 A weak recovery probably shaved the odd percentage point off inflation between 2011 and 2014, but if you ask most people how much they would have been prepared to pay for this, I doubt if the answer would be in the thousands of dollars, euros or pounds.