Macroeconomic policies – a question of class war?

28 Jan, 2012 at 15:22 | Posted in Economics | Comments Off on Macroeconomic policies – a question of class war?

Stumbling and mumbling – Chris Dillow – has a thought-provoking piece on the austerity policies so often pursued nowadays by governments in Europe:

Macroeconomic policy, then, is not only made by rank amateurs – not one of the five Treasury ministers in the Commons has a postgraduate qualification in economics and only one has significant experience in financial work. It is made by amateurs who seem immune to feedback. Errors are only to be expected.

Which raises a paradox. The job of running the economy is entrusted to anyone.  But the job of running companies requires people of such rare and delicate talent that only multi-million salaries will attract and motivate them.

Why the inconsistency? I suppose you could argue – Robert Lucas style (pdf) – that the benefits of good macroeconomic stabilization policy are small, as are the costs of bad policy, so it doesn‘t matter much who runs macro policy …

An alternative argument is that fiscal policy is not meant to be competent, but is instead meant to reflect the preferences of voters, and democracy is an intrinsic good, not an instrumental one.

There is, though, a third possibility. The purpose of macroeconomic policy is not to stabilize the economy or to raise growth, but is instead merely an ideological cover for shrinking the state. And that justification for multi-million salaries is merely ideological cover for kleptocracy. It’s just class war.

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