Paul Samuelson’s balanced budget religion

15 Feb, 2017 at 12:17 | Posted in Economics | 2 Comments

paulI think there is an element of truth in the view that the superstition that the budget must be balanced at all times [is necessary]. Once it is debunked, [it] takes away one of the bulwarks that every society must have against expenditure out of control. There must be discipline in the allocation of resources or you will have anarchistic chaos and inefficiency. And one of the functions of old fashioned religion was to scare people by sometimes what might be regarded as myths into behaving in a way that the long-run civilized life requires. We have taken away a belief in the intrinsic necessity of balancing the budget if not in every year, [and then] in every short period of time. If Prime Minister Gladstone came back to life he would say “oh, oh what you have done” and James Buchanan argues in those terms. I have to say that I see merit in that view.

Paul Samuelson

Samuelson’s statement makes me come to think of the following passage in Keynes’ General Theory:

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is com­monly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authori­ty, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.

Wonder why …



    I strongly recommend Steve Randy Waldman’s Interfluidity blog. The link above is to a very smart post, titled “Tragedy of the technocrats”, which talks about the necessity of moral language in support of policy.
    Waldman doesn’t acknowledge it, but he takes as his examples the left-neoliberals, Brad DeLong and Paul Krugman, who like Paul Samuelson tipping his hat to the reactionary James Buchanan in your post, seem to lack a moral center of their own. Apparently, the superstition of a balanced budget is the only bulwark against “anarchistic chaos and inefficiency” he can imagine, so we cannot have nice things.
    With friends like Samuelson, progressive economics doesn’t need enemies.

  2. This was an issue in Canada’s last election. At the root of the problem is the silly notion that central banks should be autonomous. Here is what I wrote at the time.

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