Crossposted from The Stars Hollow Gazette
At least the way many economists practice it. Instead it is a faith based Voodoo cult.
For one thing science is predictive and replicable.
Neo-classical synthesis predicts that reduction in Government spending, without increases in spending of other sectors of the overall economy like Business and Consumers, decreases Aggregate Demand. In the absence of Demand businesses stop producing now surplus goods and services (there’s no demand for them you see) and reduce marginal expenses (fire people and close factories) and hoard capital (money).
Pretty predictive huh?
And in terms of replicable- we have seen this same phenomena time after time ever since there have been economies and the end result is always the same. Voodoo economics believes in Tinkerbell and Pixie Dust.
How to Kill a Recovery
By PAUL KRUGMAN, The New York Times
Published: March 3, 2011
Republicans believe, or at least pretend to believe, that the direct job-destroying effects of their proposals would be more than offset by a rise in business confidence. As I like to put it, they believe that the Confidence Fairy will make everything all right.
(W)e have a lot of evidence from other countries about the prospects for “expansionary austerity” – and that evidence is all negative. Last October, a comprehensive study by the International Monetary Fund concluded that “the idea that fiscal austerity stimulates economic activity in the short term finds little support in the data.”
And do you remember the lavish praise heaped on Britain’s conservative government, which announced harsh austerity measures after it took office last May? How’s that going? Well, business confidence did not, in fact, rise when the plan was announced; it plunged, and has yet to recover. And recent surveys suggest that confidence has fallen even further among both businesses and consumers, indicating, as one report put it, that the private sector is “unprepared to fill the hole left by public sector cuts.”
Over the next few weeks, House Republicans will try to blackmail the Obama administration into accepting their proposed spending cuts, using the threat of a government shutdown. They’ll claim that those cuts would be good for America in both the short term and the long term.
But the truth is exactly the reverse: Republicans have managed to come up with spending cuts that would do double duty, both undermining America’s future and threatening to abort a nascent economic recovery.
I’m not taking any bets on whether Obama caves again or not, or what the results will be when he does, just over/unders on how long it will take.