The judgements of our financial and political leaders are breathtakingly narrow. Nobel Prize-winning economist Amartya Sen considers the alternatives.
- If failing to understand some basic Keynesian relations is a part of the explanation of what happened, there was also another, and more subtle, story behind the confounded economics of austerity. There was an odd confusion in policy thinking between the real need for institutional reform in Europe and the imagined need for austerity – two quite different things. ... [T]he real (and strong) case for institutional reform has to be distinguished from an imagined case for indiscriminate austerity, which does not do anything to change a system while hugely inflicting pain. Through the bundling of the two together as a kind of chemical compound, it became very difficult to advocate reform without simultaneously cutting public expenditure all around. And this did not serve the cause of reform at all.
Thanks for posting this. Sen is my favorite living academc economist. I rarely read anything by him now that I'm not in school. Both Sen and Bhagwattie explain economics in clear and occasionally enjoyable prose, I miss having to read their writing. I wonder why India has turned out not just so many fine economist but a few who are immensely talented and able to write clearly for laymen. Might be the influence of the socialist Bengali economist, or maybe just happenstance. I wish fellow Nobel winner Paul Krugman wrote with half of Sen's focus on economic theory instead of the meally mouth partisan murrmurs he does spin.
Here's your new favourite real-world economist: https://mises.org/library/lessons-young-economistSen is my favorite living academic economist. [..] Both Sen and Bhagwattie explain economics in clear and occasionally enjoyable prose
No matter how good I have to ask myself how much do I really want to read another intro to economics intro textbook? I keep meaning to read Capitalism and Freedom and The Theory of Moral Sentiments, been sitting on the shelf for over a year, I'd be surprised if an into text book can beat either. You read it? It's that good? Edit: It's not really for me. I was an econ major in college, seems like a great basic econ book but it's seems pretty basic. It seems awesomely basic actually looked it over as it's online in PDF form.
I really like his argument that austerity as it is being used in the Greek sense is not the right path. It especially makes sense when he argues for reforms of the public welfare system, proper retirement age, and lower government spending on the person while saying that cuts made there would have been a better version of 'austerity' instead of the blanket cuts that were made in Greece. When you cut public spending and it removes people from the labor market, then you're also cutting government revenue. Not just once, but on every taxable transfer of that person's money. This is the government money multiplier. You have to balance that cut with the effects that removing government spending has on the market. However, the Greek people are not making this easy on the politicians and financiers, and it's not their job to, but it will be their consequence to live with. They joined the EU and the Eurozone for a reason. I think it's likely that cuts to the social welfare program made in an effort to reform spending in Greece would have been met very similarly with anger, because most Greeks are angry with reduced spending in social programs, rather than in economic programs.
How do you feel about the referendum that Tsipras has proposed? I think it's terribly misguided. For better or worse, the government was elected to negotiate on behalf of the people. The people aren't policy experts and have had no say in the negotiations. It seems irresponsible to me to make them the arbiters of where this saga is going to end up. Of course, there is an argument that the people should have the ultimate say, but to me this decision feels more like a way for the government to wash their hands of the consequences of a bad decision.However, the Greek people are not making this easy on the politicians and financiers, and it's not their job to, but it will be their consequence to live with.
Honestly, the referendum is just a way for Tsipras to get out of being the bad guy to his European counterparts. He was elected by the people to negotiate on their behalf, but they (and I say this as a 3rd party outsider) seem to want only an end to the austerity measures without a firm understanding of the consequences that will bring. He, if he didn't before, at least now knows better. Greece doesn't have any weight to swing around in this arena, and the Eurozone doesn't need them as much as they need the Eurozone. The bottom line is that Greece owes a lot of people a lot of money that Greece can't pay. The lenders shouldn't have lent the money because it was a bad bet, and they should have negotiated sooner (2009) to cut their losses, but they didn't instead giving them even more money. And now it's crazy. Greeks won't accept austerity, and lenders have finally learned the lesson to stop lending to Greece until they prove they can pay it back, or at least treat their debts to outsiders as more important than the debts that they have promised to their people. If I tell my son I'm taking him to Disneyland, but I can't pay my mortgage, at a certain point it becomes necessary to admit that I can't afford Disneyland or I'll lose my house. My son will dislike me, but I'll have a house to live in.