House Ad
House Ad

Economia Gli economisti (English version)

John Stewart Mill vs. the European Central Bank

Storia dell'articolo


Questo articolo è stato pubblicato il 30 luglio 2010 alle ore 14:20.

BERKELEY – One of the dirty secrets of economics is that there is no such thing as economic theory. There is simply no set of bedrock principles on which one can base calculations that illuminate real-world economic outcomes. We should bear in mind this constraint on economic knowledge as the global drive for fiscal austerity shifts into top gear.

Unlike economists, biologists, for example, know that every cell functions according to instructions for protein synthesis encoded in its DNA. Chemists begin with what the Heisenberg and Pauli principles, plus the three-dimensionality of space, tell us about stable electron configurations. Physicists start with the four fundamental forces of nature.

Economists have none of that. The economic principles underpinning their theories are a fraud – not fundamental truths but mere knobs that are twiddled and tuned so that the right conclusions come out of the analysis.

The right conclusions depend on which of two types of economist you are. One type chooses, for non-economic and non-scientific reasons, a political stance and a set of political allies, and twiddles and tunes his or her assumptions until they yield conclusions that fit their stance and please their allies. The other type takes the carcass of history, throws it into the pot, turns up the heat, and boils it down, hoping that the bones will yield lessons and suggest principles to guide our civilization’s voters, bureaucrats, and politicians as they slouch toward utopia.

Not surprisingly, I believe that only the second kind of economist has anything useful to say. So what lessons does history have to teach us about our current global economic predicament?

In 1829, John Stuart Mill made the key intellectual leap in figuring out how to fight what he called general gluts. Mill saw that excess demand for some particular set of assets in financial markets was mirrored by excess supply of goods and services in product markets, which in turn generated excess supply of workers in labor markets.

The implication of this was clear. If you relieved the excess demand for financial assets, you also cured the excess supply of goods and services (the shortfall of aggregate demand) and the excess supply of labor (mass unemployment).

L’articolo continua sotto

Tags Correlati: Assistant | Bce | California | Economics at the University | Istituzioni dell'Unione Europea | J. Bradford | John Stewart Mill | Peter Orszag | Research Associate at the National Bureau | Secretary | Ufficio Stampa | Yes


Now, there are many ways to relieve excess demand for financial assets. When the excess demand is for liquid assets used as means of payment – for money – the natural response is to have the central bank buy government bonds for cash, thus increasing the money stock and bringing supply back into balance with demand. We call this "monetary policy."

When the excess demand is for longer-term assets – bonds to serve as vehicles for savings that move purchasing power from the present into the future – the natural response is twofold: induce businesses to borrow more and build more capacity, and encourage the government to borrow and spend, thus bringing the supply of bonds back into balance with demand. We call the first of these restoring confidence, and the second fiscal policy.

When excess demand is for high-quality assets – places where you can park your wealth and be assured that it will still be there when you come back – the natural response is to have credit-worthy governments guarantee some private assets and buy up others, swapping them out for their own liabilities and thus diminishing the supply of risky assets and increasing the supply of safe assets. We call this banking policy.

Of course, no real-world policy falls cleanly into any one of these ideal types. Right now, the European Central Bank worries that continued expansionary fiscal policy will backfire. Yes, it argues, having governments spend more money and continue to run large deficits will increase the supply of bonds, and thus relieve excess demand for longer-term assets. But if a government’s debt emissions exceed its debt capacity, all of that government’s debt will become risky. It will have relieved a shortage of longer-term assets by creating a shortage of high-quality assets, and so be in a worse position than it was before.

The ECB contends that the core economies of the global North – Germany, France, Britain, the United States, and Japan – are now at the point where they need rapid fiscal retrenchment and austerity, because financial markets’ confidence in the quality of their debt is shaken, and may collapse at any moment. And policymakers are falling into line: in late July, Peter Orszag, Director of the US Office of Management and Budget said that the coming fiscal consolidation in the US over the next three years will be the country’s deepest retrenchment in 60 years.

Yet, as I look at the world economy, I see a very different picture – one in which markets’ trust in the quality of government liabilities of the global North’s core economies most certainly is not on the brink of collapse. I see production 10% below capacity, and I see unemployment rates approaching 10%. More importantly for near-term economic policy, I see a world in which investors have enormous confidence in core economies’ government debt – for many, the only safe port in this storm.

In these circumstances, we can be sure of what Mill would have recommended.

J. Bradford DeLong, a former US Assistant Secretary of the Treasury, is Professor of Economics at the University of California at Berkeley and a Research Associate at the National Bureau for Economic Research.

Copyright: Project Syndicate, 2010.www.project-syndicate.orgFor a podcast of this commentary in English, please use this link:


Da non perdere

Per l'Italia la carta del mondo

Mentre la crisi reale morde più crudelmente, mentre i mercati finanziari saggiano possibili

In Europa la carta «interna»

Batti e ribatti sui nudi sacrifici degli altri, sull'algido rigore senza paracadute e prima o poi

La commedia di Bruxelles

Al Parlamento europeo è andato in scena il terzo atto di una commedia dal titolo: Regole per le

Guarguaglini: ecco le mie verità

«Ho sempre detto che ero innocente, le conclusioni delle indagini lo dimostrano: nell'archiviazione

Una redistribuzione di buon senso

Arrivano dal ministero della Giustizia le nuove piante organiche dei tribunali. Un intervento

Casa, la banca non ti dà il mutuo? Allora meglio un affitto con riscatto. Come funziona

Il mercato dei mutui in Italia resta al palo. Nell'ultimo mese la domanda di prestiti ipotecari è

Jeff Bezos primo nella classifica di Fortune «businessperson of the year»

Dai libri alla nuvola informatica: Jeff Bezos, fondatore e amministratore delegato di Amazon,

Iron Dome, come funziona il sistema antimissile israeliano che sta salvando Tel Aviv

Gli sporadici lanci di razzi iraniani Fajr-5 contro Gerusalemme e Tel Aviv costituiscono una

Dagli Assiri all'asteroide gigante del 21/12/2012, storia di tutte le bufale sulla fine del mondo

Fine Del Mondo, Armageddon, end of the World, Apocalypse? Sembrerebbe a prima vista roba da