Daily Archives: February 8, 2012

economics (Photo credit: Sean MacEntee)

By Warwick McKibbin – As we now know from decades of government failure in Europe, much is at stake if Australian politicians get the economics wrong. The crisis in Europe (the region of choice for what not to do economically) was caused by a number of bad policy choices made over many decades. It has come to a head because of large-scale, macro-economic mismanagement, but this was a result of a wide series of policy errors over time which have merely been exposed by a sudden unexpected shock.

Some of these mistakes include: too much government focus on redistributing wealth rather than generating wealth; a focus on large-scale intervention to meet environmental goals set by the emergence of the green parties rather than serious assessment of the costs and benefits of policies; wasteful industry support through massive subsidies that badly distorted markets over many years; the idea that governments drive the economy and create jobs rather than the idea that governments provide the conditions through markets and transparent regulations that enable the private sector to create jobs; a reliance on Keynesian economics that led governments to create an enormous overhang of government debt generated by spending on activities that did not generate sufficient return to service that debt; and labour market rigidities preventing real wage flexibility when an economic shock occurs. more> http://tinyurl.com/847jxoe

Related articles

• Father of Europe contemplates his broken family, EurActiv.com
• Merkozy duo plan Greek trusteeship, EurActiv.com
• Berlin, Athens in sovereignty row over Greek rescue, EurActiv.com
• Merkel: ‘My vision is political union’, EurActiv.com
• Keynesian and Pseudo-Keynesian Propositions (krugman.blogs.nytimes.com)
• The Keynesian School of Economics Leads to Violence (lettingfreedomring.com)
• Paul Krugman Is Much too Kind: Keynesian and Pseudo-Keynesian Propositions (delong.typepad.com)
• When Keynesian Economics ‘Fix’ Things (thewesternexperience.com)
• Why Old Keynesianism is looking worse these days, and other thoughts (marginalrevolution.com)
• Macroeconomic Theory and Practice Has Failed Us Miserably (pilogic.net)
• Keynesians on austerity – predictably wrong (samizdata.net)