hard heads soft hearts

a scratch pad for half-formed thoughts by a liberal political junkie who's nobody special. ''Hard Heads, Soft Hearts'' is the title of a book by Princeton economist Alan Blinder, and tends to be a favorite motto of neoliberals, especially liberal economists.

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Thursday, November 11, 2010
1 more thought on money vs. time & energy. An individual can increase their economic security by accumulating cash. But a country as a whole cannot increase it's security by merely accumulating cash, it can only do so by producing real output.

As an individual, you can increase your ability to obtain medical care in 2020 by accumulating cash. But you can't increase a society's ability to provide medical care in 2020 by accumulating cash, you can only do so by training researchers, doctors and nurses. No amount of budget-cutting austerity will compensate for a policy that wastes the talents of its citizens, and right now we're wasting, big-time.

Or just read d-squared

. . .5. Households which successfully get out of debt, in general, do it by increasing their household income - either by having a non-working partner take on a job, or by doing overtime, or by changing career to something better paid. That's what Alan Johnson did, when he was on his uppers.

Unlike the rather sickening lectures Margaret Thatcher used to give about housewives and their clever domestic scrimping and saving, this is an analogy between the finances of a single household and those of a country which actually works. When you have a debt/GDP ratio which is too high, this is nearly always because the GDP is too low and needs to be increased, not because the debt has got too high and needs to be decreased. If you have a debt/GDP problem that can't be made better by investment and growth, then it's likely that you have a debt/GDP problem that can't be made better at all - ie, you need to default, a situation which the UK is not even nearly in. [or the US]

A few months in, I'd start showing my man a few straightforward back of the envelope calculations, and maybe even chucking a few debt dynamics finger exercises into his speeches, because I have a canny idea that the man in number 11 is not necessarily in command of his numbers and might be shown up if put in a position of having to do sums in his head (I am guessing that former postmen who have worked with the Byzantine schedule of overtime rates might be quite good at this, plus I seem to remember that Johnson as Work & Pensions Minister did a pretty good number on David Willetts over "the pension crisis", which was a similar combat of neoliberal platitudes versus arithmetic). But the key priority would be to a) get the central intuition lodged into his backbone, and b) set up a sensible and comprehensible counter-narrative to all this dreadful New Austerian nonsense about "money in the kitty" and so on. . .

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