“a numerical index [attached to each kind of scarce resource] which cannot be derived from any property possessed by that particular thing, but which reflects, or in which is condensed, its significance in view of the whole [economic] means-end structure.”—Hayek’s unbelievably brilliant description of the price system in his famous and equally brilliant essay “The Use of Knowledge in Society.”
More automatic stabilizers
What the automatic stabilizers easily show us is how foolish things like the Euro “growth & stability” pact is. The pact in a nutshell is a set of rules governing the fiscal policy of the Eurozone nations, the most important one being: max 3% deficits.
The automatic stabilizers showed us that a growing economy will impose less spending on the government and bring increased income, while a shrinking economy will cause more spending and decrease tax revenue.
Budget deficits don’t have to be caused by “irresponsible fiscal policies” or “poor fiscal discipline”. The automatic stabilizers will turn a balanced budget outcome to a deficit if the economy is shrinking! So punishing nations for running deficits, to “encourage” them to try and shrink them can in some (read many) cause even bigger deficits as decreased government spending will shrink the economy further and the automatic stabilizers will magnify the effects of any government spending decreases.
High unemployment means that a nation isn’t running a big enough deficit!
Also this blog is about
- The fallacy of composition
- The paradox of thrift
- How extremely fucking stupid Austrian Economics is
- How it’s all quite simple
- What’s the deal with sovereign spending
- The catastrophe of the Euro (and similar cases in history)
- DEBT (and why you shouldn’t be scared of it)
- DEBT through out history, the good and bad parts
- Why this is a SOCIAL SCIENCE