Thursday, March 24, 2011


Disclaimer: I certainly do not know everything there is to know about economics, or government policies, wouldn't pretend to, and hope that I don't ever come across that way to you.

Having said that, my official opinion, as a learning economist, is that austerity (no deficits) now is not the way to go. There are many reasons why I believe this and it is difficult to even summarize without giving long discourses of background information.

There seems to be a war going on within the economics profession, but the battle is being played out on different battlefields. Some want to battle over policies, others theory, others methodology; and many of these overlap and build off each other.

I think that any economist who claims to know for certain what is going on, probably doesn't. Economics is a social science (not a physical science as some want it to be) which means it studies people and people's behavior, making it extremely difficult to understand. Humans often do not act rationally or in consistent patterns. Capitalism hasn't been around that long and there is no reason to think that it is here to stay or that it is some mystically perfect or even superior socioeconomic system.

Economists with conservative ideologies are screaming for austerity and economists with liberal tendencies are screaming for more spending (or less taxes). The general public doesn't want higher taxes or spending cuts in programs where they receive assistance. Yet, there is tremendous political pressure to cut deficits. Why? Well there are economic theories out there that claim deficits will cause interest rates and inflation to skyrocket uncontrollably and will make our situation worse. They generally contend that leaving the economy alone is the best option, it will work itself out.

I am more of the camp that believes that market economies don't work the way that we would like them to, there is high probability of prolonged recessions, and that something can and should be done about it. I have good reasons for believing this and would love to discuss them with you sometime. It is easier to answer specific questions than go on a long diatribe about all my reasons, so if you have them ask away!

Unfortunately, deficits are a very contentious issue and are dividing the country and even families and friends. I am annoyed with politics and wish that economists would ditch bad theory and stop deceiving people purposefully at the behest of big banks and businesses (certainly not all do this, but there are some who do).

It is also not helpful that much of the public is following their politicians or favorite news outlets on this issue who may not know that much about economics. I've met many people who are very good at spitting out what they hear on the TV, but don't really understand what they are arguing. Politicians generally are not very good economists, lots of economists aren't very good economists or don't really know what they are talking about despite their "certainty."

So, I challenge you to discover for yourselves the arguments for and against deficits and austerity and not just go with the crowds or media outlets who claim to know. The truth is, in my opinion, we don't really know. It's difficult to know for sure and to claim to know is arrogant.

Part of the reason I am against austerity is that it is not working in Europe. Krugman, a very liberal economist who is often very sarcastic and full of himself, writes an article in the NY Times about it. If you can, look past his comments, and look at the data of what is going on in Europe. I like to read his blog and column because of the data he presents, and not so much for his sarcasm or arrogance.

Again, if you have questions please ask!

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