The IMF states the obvious (pdf) – even if we’ve not yet fully taken it on board.

First, and quite simply, governments should make sure that existing programs are not cut for lack of resources. In particular, central governments or sub-national governments that are facing balanced budget rules may be forced to suspend various spending programs (or to raise revenue). Measures should be taken to counteract the procyclicality built in these rules. For sub-national entities, this can be mitigated through transfers from the central government (suspending the rules for sub-national governments would not be appropriate as it will be difficult to reverse the suspension later.) In the U.S., for example, increased transfers from
the federal government would help states avoid cutting various spending programs.

Second, spending programs, from repair and maintenance, to investment projects delayed, interrupted or rejected for lack of funding or macroeconomi considerations, can be (re)started quickly. A few high profile programs, with good long-run justification and strong externalities, (for example, for environmental purposes) can also help, directly and through expectations. Given the higher degree of risk facing firms at the current juncture, the state could also take a larger share in private-public partnerships for valuable projects that would otherwise be suspended for lack of private capital.

Although people endlessly ask for predictions, they rarely really want the answers. It was only late too late in life that I realised that when people said, We really want you to challenge our ideas, they mostly did not. They wanted instead to be congratulated on their wisdom. Similarly, when they ask, What is going to happen? they seek reaffirmation and reassurance rather than insight into the future.

I’ve been rereading some parts of John Kay’s book The Truth about Markets which came out about three or four years ago. It’s a general discussion of what makes economies work well, and what buggers them up. I thought it was good at the time, but the bits I have re-read are really excellent. If you want a general introduction to economics it’s hard to go past it.

Anyway, in the light of a recent post by Damian Jeffree and because it’s a wise and witty column I’ve reproduced his latest column below the post. Continue reading →

Time for a bit of economic navel gazing.

What does the global financial crisis mean for the state of economics in the early part of the twenty first century? Pass? Conceded Pass? Fail?

Well at the end of 2008, for all the talk of the search for stability from economists we still do not have it, or anything like it. Continue reading →

Nostalgia. It just gets better with age.

Well, even reading against the grain of MSM reporting, the Archbishop of Canterbury seems to be throwing caution and Godwin’s Law to the winds auditioning for the role of turkey this Christmas.

Continue reading →