Image credit: TEXample.net
Yes, the day is an hour old, but I doubt I'll find a better one that explains so much about where we are. This gem is from Paul Krugman, trying to find a way of explaining why a nation isn't like a family when it comes to how to deal with tough economic times. After admitting he was stymied for the moment, he discusses Europe's latest laboratory experiment in austerity:
[Y]ou might argue that slashing government spending doesn’t actually cost jobs — that is, you might argue that if you spent the past few years in a cave or a conservative think tank, cut off from any information about how austerity is working in practice. For the results of austerity policies in Europe have been as good a test as you ever get in macroeconomics, and without exception big cuts in government spending have been followed by big declines in GDP.I'm on record as thinking that theory doesn't typically mean a whole heck of a lot in economics, because it's so often not accompanied by data that confirms it absolutely. Here is a case, though, where it does.
Losing The Belt
There are two lessons we can learn from this quote:
- Austerity doesn't work in these circumstances. It's as simple as that.
- Sometimes an analogy isn't necessary to understand something.