Monday, July 23, 2012

Chris Dillow — Fiscal Policy: The Cognitive Biases

The fact that government borrowing has risen so far this year reminds us of a key truth about the public finances - that they are less amenable to government control than generally thought. This is because government borrowing is the counterpart of private sector lending. Borrowing will fall when and only when private sector investment rises and savings fall. And this is not happening yet.
This poses a question. Given this, Why do so many people pretend that governments can easily control borrowing? I suspect it is because of a number of cognitive biases:
Read it at Stumbling and Mumbling
Fiscal Policy: The Cognitive Biases
by Chris Dillow | Investors Chronicle

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