Some very expensive lessons for us all at Catallaxy Files

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Some very expensive lessons for us all

This is the poor benighted James Callahan in 1979, England’s Prime Minister at the time who gave way to Margaret Thatcher, having learned a lesson or two along the way about just how much junk science Keynesian economics actually is:

We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists, and in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step.

I don’t wish to entirely absolve our own Treasurer but really, it’s economic theory and the misguided policies it keeps providing to governments. It’s those folks at Treasury and the faulty economic models they so wholeheartedly believe in and apply, theories which are taught across the world in virtually every introductory text, that is the problem.

Had Swan arrived to be told that we must sit tight and not try to spend our way to prosperity, perhaps just a bit of extra spending here or there but nothing massive, he might have done the right thing. Instead he was told to spend up to the hilt so that is what he did. That he is finding out, in just the same way as James Callahan, that the only way it can work is by ever greater doses of the same bad policy is merely a very very expensive lessons for him and for us all. One can only hope that the next Labor Treasurer, twelve or more years from now let us hope, will have internalised the lessons that have been so painfully taught.

Written by Steve Kates

February 16th, 2013 at 12:31 pm

Posted in Uncategorized

15 Responses to 'Some very expensive lessons for us all'

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“When the facts change, I change my mind. What do you do, sir?”

.

16 Feb 13 at 12:39 pm
“it’s economic theory and the misguided policies it keeps providing to governments”.
Keynes is not just an honest error, a wrong pick in the toy shop, Keynes is very attractive to the core requirement of the left, that of control via dependency.

Alfonso

16 Feb 13 at 12:39 pm
It sounds so familiar, his time it is different:

If there is one common theme to the vast range of the world’s financial crises, it is that excessive debt accumulation, whether by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom. Infusions of cash can make a government look like it is providing greater growth to its economy than it really is. Private sector borrowing binges can inflate housing and stock prices far beyond their long-run sustainable levels and make banks seem more stable and profitable than they really are. Such large-scale debt buildups pose risks because they make an economy vulnerable to crises of confidence, particularly when debt is short term and needs to be constantly refinanced. Debt-fueled booms all too often provide false affirmation of a government’s policies, a financial institution’s ability to make outsized profits, or a country’s standard of living. Most of these booms end badly.

Token

16 Feb 13 at 12:49 pm
Keynes is very attractive to the core requirement of the left, that of control via dependency.

I agree.

stackja

16 Feb 13 at 1:18 pm
Don’t forget the socialist goal, that of spreading socialism by creating revolutions fuelled by civil unrest, is still in play. I don’t think any of the old guard socialists have entirely given up on that method of implementing their goals for society.

Louis Hissink

16 Feb 13 at 1:27 pm
Is there any university economics department in Australia that does not teach this failed orthodoxy ? I would be interested to know.

daggers

16 Feb 13 at 1:39 pm
Back to microeconomics as usual.

Rodney

16 Feb 13 at 2:11 pm
One can only hope that the next Labor Treasurer, twelve or more years from now let us hope, will have internalised the lessons that have been so painfully taught.

Steve, the lesson that Labor Treasurers learn is the Treasury can be looted ad infinitum.
They don’t realise there are others.

Winston SMITH

16 Feb 13 at 2:23 pm
daggers, Notre Dame uni in Fremantle may do so, there is a lot of cooperation between them and Ron Manners organisation.

Louis Hissink

16 Feb 13 at 2:30 pm
It’s those folks at Treasury and the faulty economic models they so wholeheartedly believe in and apply, theories which are taught across the world in virtually every introductory text, that is the problem.

What economic model was used to support the stimulus? None as far as I can tell. The problem is not that the model is wrong; the problem is that they have no model.

Milton von Smith

16 Feb 13 at 3:09 pm
“is that they have no model.”
They’ve got lots of climate models and they’re all junk science tuned to maximise funding for grubby little self-interested smunks whi wouldn’t recognise scientific method if it burned their children.
So forgive me for thinking that if the gaggle of smackheads passing themselves off as treasury had a model, that they could neither use it nor comprehend its limits.

Whalehunt Fun

16 Feb 13 at 4:11 pm
And these same incompetent self-administerers of interesting pharma have been overseas telling people in the third world how to run their economies better. Telling poor bastards in the Cook islands who catch fish eat, no catch fish no eat, where they’re going wrong. They obviously are telling them to find some part of the economy that produces wealth and tax the bejusus out of it and use the capital thus gained to leverage bigger overseas debt. No wonder the Afghanis want us gone, we’ve probably been helping their Treasury.

Whalehunt Fun

16 Feb 13 at 4:17 pm
I doubt if the Treasurer was ever going to do anything but spend …..it’s Playtex politics …..LIFT the money being given to a identified specific electorate and then SEPERATE that group because they are special and “enriched” …..

Gerry

16 Feb 13 at 11:07 pm
“One can only hope that the next Labor Treasurer, twelve or more years from now let us hope, will have internalised the lessons that have been so painfully taught.”

A warning to any of you betting types – do NOT put money on them learning the lesson.

John A

17 Feb 13 at 10:01 pm
I think you are all focusing on the wrong issue. It doesn’t matter what the universities and introductary texts are teaching. Your problem is in assuming that those in Treasury have had any teachings in economics!

Welcome to the rise of ‘content-free’ managers. You’ll most likely find the most common degrees held by Treasury employees are Arts (sans economics), teaching and journalism. law is another big one.

More than half of the policy people I deal with do not have an educational or employment background in the area in which they develop policy. Legal areas are the biggest exception but that’s usually becasue they (at some point) had a position that required them to be a lawyer.

Luke

18 Feb 13 at 12:15 pm

“When the facts change, I change my mind. What do you do, sir?”

16 Feb 13 at 12:39 pm

“it’s economic theory and the misguided policies it keeps providing to governments”.
Keynes is not just an honest error, a wrong pick in the toy shop, Keynes is very attractive to the core requirement of the left, that of control via dependency.

Alfonso

It sounds so familiar, his time it is different:

If there is one common theme to the vast range of the world’s financial crises, it is that excessive debt accumulation, whether by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom. Infusions of cash can make a government look like it is providing greater growth to its economy than it really is. Private sector borrowing binges can inflate housing and stock prices far beyond their long-run sustainable levels and make banks seem more stable and profitable than they really are. Such large-scale debt buildups pose risks because they make an economy vulnerable to crises of confidence, particularly when debt is short term and needs to be constantly refinanced. Debt-fueled booms all too often provide false affirmation of a government’s policies, a financial institution’s ability to make outsized profits, or a country’s standard of living. Most of these booms end badly.

Token

16 Feb 13 at 12:49 pm

Keynes is very attractive to the core requirement of the left, that of control via dependency.

I agree.

stackja

16 Feb 13 at 1:18 pm

Don’t forget the socialist goal, that of spreading socialism by creating revolutions fuelled by civil unrest, is still in play. I don’t think any of the old guard socialists have entirely given up on that method of implementing their goals for society.

Louis Hissink

16 Feb 13 at 1:27 pm

Is there any university economics department in Australia that does not teach this failed orthodoxy ? I would be interested to know.

daggers

16 Feb 13 at 1:39 pm

Back to microeconomics as usual.

Rodney

16 Feb 13 at 2:11 pm

One can only hope that the next Labor Treasurer, twelve or more years from now let us hope, will have internalised the lessons that have been so painfully taught.

Steve, the lesson that Labor Treasurers learn is the Treasury can be looted ad infinitum.
They don’t realise there are others.

Winston SMITH

16 Feb 13 at 2:23 pm

daggers, Notre Dame uni in Fremantle may do so, there is a lot of cooperation between them and Ron Manners organisation.

16 Feb 13 at 2:30 pm

It’s those folks at Treasury and the faulty economic models they so wholeheartedly believe in and apply, theories which are taught across the world in virtually every introductory text, that is the problem.

What economic model was used to support the stimulus? None as far as I can tell. The problem is not that the model is wrong; the problem is that they have no model.

Milton von Smith

16 Feb 13 at 3:09 pm

“is that they have no model.”
They’ve got lots of climate models and they’re all junk science tuned to maximise funding for grubby little self-interested smunks whi wouldn’t recognise scientific method if it burned their children.
So forgive me for thinking that if the gaggle of smackheads passing themselves off as treasury had a model, that they could neither use it nor comprehend its limits.

Whalehunt Fun

16 Feb 13 at 4:11 pm

And these same incompetent self-administerers of interesting pharma have been overseas telling people in the third world how to run their economies better. Telling poor bastards in the Cook islands who catch fish eat, no catch fish no eat, where they’re going wrong. They obviously are telling them to find some part of the economy that produces wealth and tax the bejusus out of it and use the capital thus gained to leverage bigger overseas debt. No wonder the Afghanis want us gone, we’ve probably been helping their Treasury.

16 Feb 13 at 4:17 pm

I doubt if the Treasurer was ever going to do anything but spend …..it’s Playtex politics …..LIFT the money being given to a identified specific electorate and then SEPERATE that group because they are special and “enriched” …..

Gerry

16 Feb 13 at 11:07 pm

“One can only hope that the next Labor Treasurer, twelve or more years from now let us hope, will have internalised the lessons that have been so painfully taught.”

A warning to any of you betting types – do NOT put money on them learning the lesson.

John A

17 Feb 13 at 10:01 pm

I think you are all focusing on the wrong issue. It doesn’t matter what the universities and introductary texts are teaching. Your problem is in assuming that those in Treasury have had any teachings in economics!

Welcome to the rise of ‘content-free’ managers. You’ll most likely find the most common degrees held by Treasury employees are Arts (sans economics), teaching and journalism. law is another big one.

More than half of the policy people I deal with do not have an educational or employment background in the area in which they develop policy. Legal areas are the biggest exception but that’s usually becasue they (at some point) had a position that required them to be a lawyer.

Luke

18 Feb 13 at 12:15 pm

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