Tuesday, February 5, 2019

Richard Murphy — The political economy of Labour’s fiscal rule

Good one. Worth reading in full. Richard Murphy gives his summary of the state of the his argument with Jonathan Portes and Simon Wren Lewis.
Richard Murphy


Ralph Musgrave said...

Murphy is clueless. Indeed, Tim Worstall sometimes refers to him as “Murpha-loon”, I think quite rightly.

In particular, Murphy accuses Wren-Lewis and Portes of advocating a balanced budget (despite the fact that Wren-Lewis has devoted tens of thousands of words to attacking the balanced budget idea over recent years). That’s where Murphy says “governments should balance budgets, with the logic used being based on the microeconomic theory of the firm, even if that is wholly inappropriate in this case.”

What probably INDUCED Murphy TO THINK Wren-Lewis advocates a balanced budget is the first three sentences of Labour’s fiscal rule which do indeed pretty much advocate a balanced budget. But it’s blindingly obvious to anyone with any political insight that those three sentences were inserted by Labour politicians, and for the obvious reason that the balanced budget plays well with the average voter. Indeed Wren-Lewis has confirmed on Twitter (in response to Tweets from me and others) that those first three sentences were not put there by Wren-Lewis or Portes.

Incidentally, Murphy is a member of the merry band of small minded individuals who ban people from their blog if they have the temerity to disagree with the omniscient author of blog articles in too blunt a fashion.

AXEC / E.K-H said...

Thinking about economic policy for future PM Corbyn
Comment on Richard Murphy’s ‘The political economy of Labour’s fiscal rule’

What is the unique selling proposition of MMT vis-a-vis good old Keynesianism? Keynesianism stands for temporary deficit spending with budget balancing over the business cycle, MMT stands for permanent deficit-spending/money-creation.

However, with regard to the current situation in the UK with the interest rate close to the ZLB, this amounts to the same anti-Austerity policy. In practical policy terms, the fuss between Simon Wren-Lewis/Jonathan Portes and Richard Murphy over the relative merits of monetary and fiscal policy seems a bit overblown.

So let us look at politics. For political planers, the main issue is to make provisions for their worst-case-scenario that Jeremy Corbyn becomes the next PM. There are two groups who compete for the role of Mr. Corbyn’s economic policy adviser. The Wren-Lewis/Portes group attempts to keep Mr. Corbyn on the old path of monetary/fiscal policy albeit with a more active employment and social policy, the Murphy group tries to get a handle on the treasury/central bank for a permanent MMT deficit policy that spends on everything from the NHS to a Green New Deal. The common denominator, though, is to prevent a potential PM Corbyn from pursuing a genuine socialist policy.

Because of Public Deficit = Private Profit, there is some perverse humor in the idea that Mr. Corbyn either adopts a temporary or a permanent free-lunch program for the Oligarchy.#1

Egmont Kakarot-Handtke

#1 Keynes, Lerner, MMT, Trump and exploding profit