Veronique de Rugy on Austerity Facts

Vero's austerity chart

First, I wish we would stop being surprised by what’s happening in Europe right now. Second, I wish anti-austerity critics would start acknowledging that taxes have gone up too–in most cases more than the spending has been cut. third, I wish that we would stop assuming that gigantic “savage” cuts are the source of the EU’s problems. Some spending cuts have been implemented in a few countries. Also, if this data were adjusted for inflation (which I would prefer but the data isn’t available) it would possibly show a slight decrease and certainly a flatter line for all countries. However, the overwhelming take away from the European experience is that a majority of governments haven’t really implemented spending cuts, large or small, and some have even continued to grow.

via Show Me the ‘Savage’ Spending Cuts in Europe, Please – By Veronique de Rugy – The Corner – National Review Online.

I suspect the entire debate hinges on a difference in assumptions about the relevant spending baseline. If your theory prescribes significantly ramping up spending during recession, low or flat spending growth can look perversely “austere,” even if absolute spending as a % of GDP is very high.


Veronique sends an updated PPP-adjusted chart:

She adds (via email):

I am not denying that spending has been cuts in Greece, Italy and Spain. But I don’t agree that the spending cuts were savage or that’s all that’s going on in Europe. For instance these guys never talk about the impact of tax increases. Yet, Avent is willing to say that VAT props up inflation. That makes any cuts, even the smallest ones much more painful. I think there is a misplaced obsession with spending cuts and spending cuts alone being the source of all EUzone problems.

What Does Geography Explain?

 Daron Acemoglu and James Robinson on Jared Diamond:

Another major problem for Diamond’s argument is that it has little to say about inequality within continents, which is an essential part of modern world inequality. For example,  the orientation of the Eurasian landmass might explain how England managed to benefit from the innovations of the Middle East without having to reinvent them. But it doesn’t explain why the Industrial Revolution happened in England rather than in Eastern Europe or in the Ottoman Empire.More critically, as Diamond himself also recognizes, China and India benefited greatly from very rich suites of animals and plants, and from the orientation of Eurasia. But most of the poor people of the world today are in those two countries.

via What Does Geography Explain? – Why Nations Fail – Why Nations Fail by Daron Acemoglu and James Robinson.

Renting Prosperity

Daniel Gross :

The U.S. economy needs the dynamism that renting enables as much as—if not more than—it needs the stability that ownership engenders. In the current economy, there are vast gulfs between the employment pictures in different regions and states, from 12% unemployment in Nevada to 3% unemployment in North Dakota. But a steelworker in Buffalo, or an underemployed construction worker in Las Vegas, can't easily take his skills to where they are needed in North Dakota or Wyoming if he's underwater on his mortgage. Economists, in fact, have found that there is frequently a correlation between persistently high local unemployment rates and high levels of homeownership.

An Experiment

Okay. Until we move to Houston, I'm trying to pick up the blogging pace. I've been collecting lots of links as I hunt for bloggable items, and it occurred to me that link-blogging, with a quick comment now and again, might be a good use of this space, which I would like to keep alive. So I'm gonna try it for the next week and see how it goes. If it's a hassle or a time-suck, I'll quit. If it's no sweat, maybe I can make some beer money. The smart bet is on quitting, but sometimes I surprise myself.

James Galbraith on Inequality

Galbraith interviewed by Brad Plumer:

Between the end of World War II and 1980, economic growth in the United States is mostly an equalizing force, and job creation isn’t dependent on rising economic inequality. But after 1980, economic booms and rising inequality go hand in hand. So what’s going on? In 1980, we really went through a fundamental transformation. We stopped being a wage-led economy with a growing public sector that was providing new services. Programs like Medicare and Medicaid were major drivers of growth in the 1970s.

Instead, we became a credit-driven economy. What the evidence in the U.S. shows is that the rise in inequality is associated with credit booms, which are often periods of sometimes great prosperity. One was in the late 1990s with information technology and one in the 2000s with housing, before everything fell apart. But this is also a sign of instability — the crash that follows is very ugly business. If we’re going to go forward with growth on a more sustainable basis, then controlling inequality and controlling instability are the same issue. One is an expression of the other.

via How economists have misunderstood inequality: An interview with James Galbraith – The Washington Post.

Morten Høi Jensen on Martin Amis

Irving Howe wrote of Saul Bellow's prose that it was sometimes “strongly anti-literary,” that it tried to “break away from the stateliness of the literary sentence.” Amis, in turn, credited Bellow (his literary mentor and surrogate father) with attempting to find a voice appropriate to the twentieth century, and his own fiction is an extension of this ambition. In London Fields the writer-narrator Samson Young muses that, “perhaps because of their addiction to form, writers always lag behind the contemporary formlessness. They write about an old reality, in a language that's even older.” Contrary to this tendency, Amis risks form in the pursuit of a language that mirrors the contemporary formlessness. His best novels — Money, London Fields, The Information — are oddly shaped and (with the exception of the nearly-perfect Money) very uneven. But unlike your run-of-the-mill Booker contenders, routinely jettisoning their cargos of contemporary speech in order to stay afloat on a sea of polite style, Amis' novels go right into the currents and whirlpools of modernity, surging and hoarding without constraint.

via Los Angeles Review of Books – Mr. Amis's Planet.


According to Oakley and her colleagues, excessive kindness and empathy can generate “a slew of (results), including genocide, suicide bombing, self-righteous political partisanship and ineffective philanthropic and social programs.”

“It is almost heretical to suggest kindness and empathy can cause harm,” they explained. “But helpful behaviour taken to extremes blinds us to its harms.”

Misguided altruism can, indeed, result in genocide, war and political upheaval, but also to heroism and sainthood, Haidt reported. Its practitioners feel physically and psychologically “elevated.”

“But, altruism can bleed into misplaced, self-righteous and self-serving pathologies,” cautioned Paul Zak at Claremont Graduate University.

According to Elkhonon Goldberg at New York University, excessive kindness toward others can take the form of “self-sacrifice in the name of some delusional cause.”

Scott Atran at the University of Michigan concludes excessive humanitarianism can cause a schism in society by sacrificing “in-group solidarity in favour of concerns for out-groups.”

via When doing good is bad – Winnipeg Free Press.