Journal Article

The four fallacies of contemporary austerity policies: the lost Keynesian legacy

Robert Boyer

in Cambridge Journal of Economics

Published on behalf of Cambridge Political Economy Society

Volume 36, issue 1, pages 283-312
Published in print January 2012 | ISSN: 0309-166X
Published online January 2012 | e-ISSN: 1464-3545 | DOI: https://dx.doi.org/10.1093/cje/ber037
The four fallacies of contemporary austerity policies: the lost Keynesian legacy

More Like This

Show all results sharing these subjects:

  • Public Economics
  • History of Economic Thought (1925 onwards)
  • Economywide Country Studies
  • Money and Interest Rates
  • International Finance
  • National Budget, Deficit, and Debt
  • General Aggregative Models
  • Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
  • Macroeconomic Aspects of International Trade and Finance

GO

Show Summary Details

Preview

The contemporary wide-scale austerity measures are likely to fail in most countries. The first fallacy derives from the false diagnosis that the present crisis is the outcome of lax public spending policy, when it is actually the outcome of a private credit-led speculative boom. The second fallacy assumes the possibility or even the generality of the so-called ‘expansionary fiscal contractions’: this neglects the short-term negative effects on domestic demand and overestimates the generality of Ricardian equivalence, the importance of ‘crowd in’ effects related to lower interest rates and the positive impact on trade balances. The third fallacy ‘one size fits all’ is problematic since Greece and Portugal cannot replicate the hard-won German success. Their productive, institutional and political configurations differ drastically and, thus, they require different policies. The fourth fallacy states that the spill over from one country to another may resuscitate the inefficient and politically risky ‘beggar my neighbour’ policies from the interwar period.

Keywords: Austerity policy; European union; Keynesian theory; New classical theory; B22; E12; E44; E62; F34; F36; F42; H12; H63; O52

Journal Article.  11726 words.  Illustrated.

Subjects: Public Economics ; History of Economic Thought (1925 onwards) ; Economywide Country Studies ; Money and Interest Rates ; International Finance ; National Budget, Deficit, and Debt ; General Aggregative Models ; Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook ; Macroeconomic Aspects of International Trade and Finance

Full text: subscription required

How to subscribe Recommend to my Librarian

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content. subscribe or login to access all content.