tag:blogger.com,1999:blog-2546602206734889307.post1623414491123313087..comments2024-03-28T04:29:22.717+00:00Comments on mainly macro: Keeping quiet about hidden motives?Mainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger18125tag:blogger.com,1999:blog-2546602206734889307.post-55163164838414047152015-02-07T22:41:24.072+00:002015-02-07T22:41:24.072+00:00I don't like saying it's about an ideology...I don't like saying it's about an ideology, as it implies that right wingers really think a small state is good. I think "small-state ideology" is actually the smokescreen that the right wing use to hide their real motives!!<br /><br />Bondholders, or indeed anybody on a fixed-interest income, benefits financially from low inflation. They benefit even more from deflation, even though it's bad for everyone else. And the simplest way to cause low inflation, or even deflation, is to order your government chums to switch off spending.Anonymoushttps://www.blogger.com/profile/17204472992759448532noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-46408941337542026142015-01-27T08:53:30.646+00:002015-01-27T08:53:30.646+00:00Politicians pursue power as an end in itself. Its ...Politicians pursue power as an end in itself. Its rare to find a politician acting in a way which will diminish his power.<br /><br />If you want to understand why Osborne has behaved as he has I suggest that macroeconomic analysis is probably not the right diagnostic tool. Having used that tool and found it wanting Simon speculates that the desire for a smaller state might explain his actions. <br /><br />Well it might but I suggest that Osborne's actions can be better explained by his desire for power.<br /><br />Recall the conservative pledge before the crisis to share the dividends of growth when the great moderation looked never ending. <br /><br />Recall the switch to household economics (maxing out the nations credit card) post the crash and before the election<br /><br />Recall expansionary fiscal contraction after the election and its silent demise a couple of years later. <br /><br />I could go on but the over riding feature of all of these tactics is that they did not emerge from macroeconomic but political calculation. Well he is still the Chancellor and he might well be the foreign secretary in the next govt. I imagine by his lights its all going swimmingly.<br /><br />And the latest round of nonsense over post election cuts to public spending is of course driven by politics of the worst kind but its politics not economics.<br /><br />PS, Simon's point that the British People don't want a smaller state is I suspect contingent on the tax system that pays for it rather than an absolute positionNeilhttps://www.blogger.com/profile/05648188116661554234noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-83589767855765904912015-01-27T01:26:35.500+00:002015-01-27T01:26:35.500+00:00After the victory of Syriza in Greece in overturni...After the victory of Syriza in Greece in overturning a Government that won 40% of the popular vote four years ago I imagine any austerity-led party or Government seeking re-election will be rethinking their strategies, and revisiting their numbers again. Newsnight this evening had an interesting discussion about that victory in which they showed a very simple but powerful fact: Greek Debt to GDP ratio in 2008: 109%; after severe austerity for six years resulting in a fall in GDP of 25% the ratio was in 2014: 160+%. All austerity did was to cut tax receipts faster than it cut spending. <br /><br />In that discussion it was once again a German - this time, Artur Fischer, Joint CEO of the Berlin Börse - who was sticking with the ubiquitous argument (in Germany) that not just austerity, but also restructuring is necessary in order for Greece to get out of trouble. I can understand why many Germans hold that view after the painful restructuring Germany went through in the mid-noughties was followed by growth and success for Germany, but as Nassim Nicolas Taleb argues, we should beware of attributing success to our actions when really it was just down to luck. Or was it?<br /><br />So, after Syriza, and in the current climate, if Osborne keeps on trumpeting austerity and the need for more cuts in the same way that Churchill did in the run up to the first post-WWII election, he could once again hand power to the same sort of party as set up the Welfare State he is trying so hard to dismantle - or as in Greece, an alliance between the leftmost and rightmost parties (Labour and UKIP?). Ironic that it was another Tory, Churchill, who described politics as "the art of the possible".<br /><br />One thing will probably ensure that doesn't happen though: Ed Milliband's Labour Party has a questionable strategy, letting the Conservatives dictate their agenda while the Conservatives are letting UKIP dictate theirs. I suppose all this really proves is if you want to muck out your stable, you don't need a spad, you need a spade.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-24543946474269606722015-01-27T01:09:31.858+00:002015-01-27T01:09:31.858+00:00Well there are no “objective physical certainties”...Well there are no “objective physical certainties” involved in any science (<a href="https://telescoper.wordpress.com/2010/12/11/deductivism-and-irrationalism/" rel="nofollow">irrational philosophers and statisticians</a> notwithstanding) but of course there are propositions (in the form of values of measurable quantities, laws, models etc.) which are sufficiently well established that, depending on context, the uncertainties in them can be neglected. For example, in climatology there is negligible uncertainty in the AGW hypothesis but non-negligible uncertainty in the <a href="http://www.nature.com/climate/2009/0905/full/climate.2009.41.html" rel="nofollow">value of the sensitivity</a> in the respective contexts in which those two propositions are usually considered. Now I don't know what [the] subjective utility maximisation [law?] is, or much else about economics, but is it really so dismal that there is nothing (useful) in it that we can be pretty sure of?Paul Hayeshttps://www.blogger.com/profile/04309125585593320043noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-67519186923653367902015-01-26T14:21:22.261+00:002015-01-26T14:21:22.261+00:00S W-L: What are your hidden motives?S W-L: What are your hidden motives?James in Londonhttps://www.blogger.com/profile/08392235894752150063noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-53221874535488225452015-01-26T14:16:37.517+00:002015-01-26T14:16:37.517+00:00I am astonished that anyone takes issue with the p...I am astonished that anyone takes issue with the proposition that politicians have ulterior motives which must be hidden from the voters.doncastrohttps://www.blogger.com/profile/04899327656859890216noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-42272123019876819282015-01-26T11:53:26.758+00:002015-01-26T11:53:26.758+00:00Indeed - you wouldn't use the size or change i...Indeed - you wouldn't use the size or change in deficit to judge how much austerity occured... you could use the 'Cyclically adjusted primary balance'.<br />http://mainlymacro.blogspot.co.uk/2012/10/different-approaches-to-austerity.html<br /><br />There has been significant fiscal consolidation in UK and US, and of course the Eurozone. The impact of which on retarding growth has been extensively documented on this blog (for the UK) and throughout the literature. Simonhttps://www.blogger.com/profile/01453060744510427275noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-17790490448842107492015-01-26T11:09:03.708+00:002015-01-26T11:09:03.708+00:00Spinning Hugo >> Is it attributable to a gen...Spinning Hugo >> <i>Is it attributable to a general policy of austerity then?<br /><br />Well, that looks a bit unlikely as we have had far larger deficits (with a corresponding stimulus) this time than in any previous downturn. In the 20s and 30s we had strong pro-cycle policies (before the dawn of Keynes) but the dips were not as long.</i><br /><br />This is not a good comparison, the recessions of the GFC have more severe than anything since the 30s, the 30s themselves are not a good comparison in terms of deficits as government spending was a smaller part of the overall economy so we would expect smaller deficits. You also seem to make the mistake of assuming that deficits = stimulus, this isn't necessarily the case, the UK's stimulus measures were only around 1-1.5%% of GDP for example.<br /><br />I really don't see why you dismiss the general policy of austerity, since as far as I can tell some degree of austerity has occurred in the States, Europe and the UK over the past few years.Andreas Patersonhttps://www.blogger.com/profile/06431120459465519240noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-31311108943091831802015-01-25T22:29:40.400+00:002015-01-25T22:29:40.400+00:00I find this whole debate a bit strange. Osborne is...I find this whole debate a bit strange. Osborne is just running an argument designed to box Labour into a corner. The economic fundamentals are largely irrelevant, and the agenda is only hidden to the extent that most people aren't paying attention.JDnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-20920115879824241392015-01-25T15:33:35.931+00:002015-01-25T15:33:35.931+00:00“The bottom line is that you can only really make ...“The bottom line is that you can only really make serious inroads into the size of the state during an economic crisis."<br />I don't think this is true. Public spending hit a multi-decade low at the end of the 1990s, the best part of a decade into an economic recovery. That it increased sharply afterwards was a political decision by the Labour government. More accurate I think would be to say that Osborne thinks that an economic crisis that can be squarely pinned on the previous administration is a good time to cut spending, because the decision can be packaged as regrettable-but-necessary-after-the-last-lot.AlanBhttps://www.blogger.com/profile/18166933357591919021noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-88872364889716911232015-01-25T14:18:20.958+00:002015-01-25T14:18:20.958+00:00It is not too surprising to find Blairite John Ren...It is not too surprising to find Blairite John Rentoul trying to find two extremes and then position himself as the Third Way. <br /><br />I think it is time for the Blairites to put up or shut up, or else they are going to carry on sounding like "all I can see here is...pathological centrism...[an]...intense desire to see that the truth is in the middle, never mind actual facts — requires that he invent a history in which Keynesians were just as guilty of politicization as the other side. Unfortunately, those actual facts — with their well-known liberal bias — do exist, and are right there in the public record" (Paul Krugman blog May 7, 2013 'The Stimulus Debate, Revisited').<br /><br />And we all know what happened the last time Blairites sounded like Republicans.<br /><br /><br /><br /><br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-3633367144137619532015-01-25T13:38:54.435+00:002015-01-25T13:38:54.435+00:00We need to differentiate between Osborne's act...We need to differentiate between Osborne's actions and his words.<br /><br />On his actions, as you and Blanchflower have not hesitated to point out this is the slowest recovery ever. Is this attributable to Osbourne (sic) as so many want to claim?<br /><br />Well, it looks a bit unlikely as this is the slowest recovery ever for every country in the west. <br /><br />Is it attributable to a general policy of austerity then?<br /><br />Well, that looks a bit unlikely as we have had far larger deficits (with a corresponding stimulus) this time than in any previous downturn. In the 20s and 30s we had strong pro-cycle policies (before the dawn of Keynes) but the dips were not as long.<br /><br />Osborne, like almost everyone, didn't expect this time to prove so much worse, leaving more room for cuts (the political timetable alao required them to be made early).<br /><br />The world had changed in ways we did not then understand. In previous dips commodity prices fell as the west fell into recession, cutting costs and brining forward the upswing. This time commodity prices shot up in 2010. The main reason is that the west is not as large a part of the world's economy as it was. Increased demand, particularly in China, made this time different.<br /><br />The two other differences were firstly the eurozone and its disastrous attempt to rerun the gold standard policies of the 20s, second the tightening of bank regulation which operated as a de facto sharp monetary tightening. <br /><br />Osborne was not alone in thinking that the pattern of past recoveries would repeat itself, and normality return. See also the ECB's raising of rates in 2011. What evil surreptitious motive did they have?<br /><br />As to his words now, the motive is transparent: votes. This is a sign of weakness not strength. Crackpot policies from parties with no hope of gaining a majority are commonplace (see Ukip and the Greens). For the Tories to have sunk so low (see also Cameron's crazy pledge to get the other member states to agree to treaty changes for his convenience) is shocking. But the words have little relation to what will happen.SHugonoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-54917677194818519802015-01-25T12:10:20.463+00:002015-01-25T12:10:20.463+00:00"A bit surprising of course as the Times'..."A bit surprising of course as the Times' leader writer is a long term Labour supporter."<br /><br />Only to the extent that he can drag them as far to the right as possible. He's disingenuous.<br />gastro georgenoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-69908128220570713992015-01-25T11:55:21.372+00:002015-01-25T11:55:21.372+00:00That's an interesting analogy because of the d...That's an interesting analogy because of the degree of complexity and uncertainty in the modelling. But no I wouldn't make the argument because, despite the complexity, there are objective physical certainties involved in climate science (Heisenberg notwithstanding) that I don't believe have parallels in economics. I don't think that the first law of thermodynamics and subjective utility maximisation are on a par.Anonymoushttps://www.blogger.com/profile/10394992651930572597noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-11975928610084911492015-01-25T11:37:49.798+00:002015-01-25T11:37:49.798+00:00Would you make the same argument about climate cha...Would you make the same argument about climate change science?Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-89452060528598620102015-01-25T11:28:19.343+00:002015-01-25T11:28:19.343+00:00I am interested in the reasons as to why such a vi...I am interested in the reasons as to why such a view would generate hostility. Is it not partially due to the insistence of most academic economists of drawing a sharp dividing line between the allegedly objective scientific approach of economics and the messy world of politics? What this does is to generate a smokescreen for politicians to implement ideologically-motivated economic policies without economists being able to call them out. This touches on recently debated deeper issues of how economics is taught, the role of history of economic thought and history in learning, and so on.Anonymoushttps://www.blogger.com/profile/10394992651930572597noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-3596977034167755342015-01-25T11:24:52.845+00:002015-01-25T11:24:52.845+00:00As I have pointed out before, the net change in ta...As I have pointed out before, the net change in taxes over the last five years is very small - probably over 90% of the deficit reduction that has taken place since 2010 has been on spending. The slowdown in austerity from 2012 was mainly because of lower than expected tax receipts rather than less spending cuts. The deficit reduction from 2015 is all on spending (plus further cuts to fund tax cuts).<br /><br />Of course there may be many who support Osborne's proposals who are not small state people. As you say, people make mistakes. But Osborne is no ordinary person, and certainly no undergraduate. He has been doing this job for 5 years, and gets expert advice. You could maybe get away with the mistake argument plus being a politician and not wanting to admit mistakes if he was not proposing to do it all again. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-9028888817386188052015-01-25T10:56:30.035+00:002015-01-25T10:56:30.035+00:00Oliver Kamm, the person you were debating with in ...Oliver Kamm, the person you were debating with in Prospect presumably also has this hidden motive?<br /><br />A bit surprising of course as the Times' leader writer is a long term Labour supporter.<br /><br />Presumably Alistair Darling, who said "Cuts worse than Thatcher" were coming in 2010 was also another one with this hidden agenda.<br /><br />Every single policy maker in power in the eurozone, whether of left or right, is also in on it.<br /><br />My view is the same as Rentoul's. It is a better debating tactic to accuse those who disagree of being mistaken than dishonest. A lifetime of teaching undergraduates should teach someone how easy it is for intelligent people to get things wrong, but some are slow learners.<br /><br />Osborne is dishonest but in a quite different way. Taxes overall have gone up, although there have been some giveaways in the lead up to the election (outrageous, I know). His dishonesty takes the form of agreeing with you. Austerity was abandoned at the end of 2011. There hasn't been any further reduction in the size of the State. Labour cannot pounce on this uturn as Osborne did what they were urging him to do. Osborne's critics as a class failed to point out the change at the time it was made. He now announces that he will make some more in the next Parliament, but nobody serious thinks the plans remotely plausible.SHnoreply@blogger.com