Wednesday, October 31, 2012

Bill Mitchell— Fiscal austerity violates basic economic efficiency requirements

Economists like to tell students about efficiency. The concept – which really distils down to – zero waste (even though that term is loaded) – is drilled into undergraduates and graduates alike as a dogma that should not be violated. Most of the attacks on government intervention by the mainstream economists are couched in terms of efficiency – or the alleged lack of it. The seemingly objective framework that defines the orthodox approach to efficiency allows all the ideological indisposition towards government involvement in the economy to be discreetly hidden. But even then the mainstream do not consistently apply their own constructs. And when the empirical world violates the utopian vision (for example, when there is mass unemployment), the response is to either blame the government some more or redefine the violation away and continue on as if nothing was amiss. This sort of intellectual dishonesty has never been more apparent than in the current period as nations struggle with a deep and enduring crisis. This blog is about two examples of that – health care and youth unemployment.

Mainstream economics does not have a monopoly over concern about efficiency. Modern Monetary Theory (MMT) is also concerned about efficiency except the MMT approach provides a consistent conceptualisation of what zero waste actually means.
You will not be surprised to learn that the MMT appraoch is significantly different, in part because it is consistent, from the approach taken by the mainstream.
Bill Mitchell — billy blog
Fiscal austerity violates basic economic efficiency requirements
Bill Mitchell

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