Joseph Stiglitz has a Nobel prize in economics. To be pedantic, he received the Swedish National Bank’s Prize in Economic Sciences in Memory of Alfred Nobel in 2001.
About a week ago, Stiglitz wrote a piece in Project Syndicate titled – How Costa Rica Gets It Right. Given the author and the subject matter, this article was not surprisingly picked up in the Guardian.
In this article Stiglitz writes about the utopia that is Costa Rica:
The country is a beacon of Enlightenment – a world leader in democratic, sustainable, and inclusive economic growth.
Except that Costa Rica’s GDP per capital is kinda middling. Spart-dunno. Perhaps less than 10% of those authoritarian cesspools of Luxembourg and Switzerland and perhaps 20% of that of Australia. But hey. Joe has a Nobel in economics. Maybe he knows something we mere mortals don’t. Here he writes:
Like citizens of a few other countries, Costa Ricans have made clear that inequality is a choice, and that public policies can ensure a greater degree of economic equality and equality of opportunity than the market alone would provide.
That’s right. Costa Ricans perhaps made a choice that they can be equal. Equally un-rich (as in poor). But hang on. Is not a “a greater degree of economic equality” code for equality of outcome? Equality of opportunity and equality of outcome. Maybe Costa Rica is a Utopia.
But this is the best part of Stiglitz’s analysis:
But for all of its successes, Costa Rica faces two critical problems: a persistent, structural fiscal deficit and a gridlocked political system. The economics of fiscal deficits are easy: boost economic growth, raise taxes, or lower expenditures.
Yes. The persistent structural fiscal deficits clearly have no relation to the public policy goal of equality of outcome. But to fix the budget by boosting economic growth and raising taxes (or cutting taxes)? Really? Maybe they can get Wayne Swan to advise? Does the NAB have a subsidiary in Costa Rica? Perhaps Ken Henry can write them a report.
Sparty knows. How about a Parliamentary study delegation. It’s a bit chilly in Canberra now and one hears that the beaches of Costa Rica are lovely.
Now Sparticus is not a Keynesian, but when he was studying economics, he seems to recall that increasing taxes and/or lowering expenditures was considered “contractionary fiscal policy”. Can someone please explain how you can concurrently boost economic growth while enacting contractionary fiscal policy?
First reply gets a Nobel Prize.
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