I was recently asked to give an opinion on the economic impact of the austerity plans being introduced in the UK. Bluntly put, did I think that the result would be to push the UK back in to recession, or would the overall effect be positive for the economy.
My initial response was to start to answer from a political point of view. Unfortunately I had to quickly admit that the truth is that no one really knows what the effect of the austerity plan in the UK, or the stimulus plan in the U.S. will be.
That made me reflect for a moment. Each side of the discussion can show what the effects have been in the past of both austerity, as well as stimulus programs. There are historical precedents of where both have worked, and where neither has worked.
It is perhaps not as strange as that might sound. The initial studies of economics were actually called political economics. I am not sure when the term political was dropped. I have to assume it was to extricate the study of economics from the realm of politics, which is essentially a cross between social theory and some aspect of philosophy and moral thought.
Generally speaking, science is supposed to be free of moral and philosophical considerations. It is more difficult to maintain that distinction if the science intended is attached to politics. Hence the transition from 'political' economics to the 'science' of economics.
A clever move. It frees economists from any moral or ethical guilt. It provides a "best case" approach to a life where "all things being equal.....".
Even if for a moment in time all things were equal, they do not stay that way. Austerity plans and Stimulus spending will effect the economical and therefore the social health of a society.
And so I paused in my response, and rephrased the question. "What would I do if I were Chancellor of the Exchequer? That is a very different proposition which I shall endeavour to answer over the next couple of days. Not to write the full budget for the UK, but to think in terms of political economics.
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Krugman's column in today's NYT discusses the realities of gov't support-lack of new initiatives in the US at the Federal level. Political noise from the right notwithstanding, no real programs have been started. We are actually hewing to a conservative course in 'jump starting' the economy.
ReplyDeleteIt was brought to my attention that I wasn't clear enough in my post in my condemnation of the removal of the 'political' from the study of economics. For anyone who was concerned, I think it was a very dangerous move. Irony was never my strong suit.
ReplyDeleteI couldn't agree more with Krugman's column today. The stimulus was way too small. Maybe the reason the Administration has had such a hard time getting its message out is that it didn't want to crow about being half-pregnant. And as for "fact-free" assertions from the right-it should be a crime.
ReplyDeleteI'm still patiently waiting for the answer to "What would I do if I were Chancellor of the Exchequer?" Andrea
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