July, 20th 2012, The Economist, Economic History, Muddled models. Key words: orthodox economics, rational individuals, paradox of thrift, behavioural economics.
Conclusion: The best we can say about economics is that we know what not to do; we have plenty of modern examples from African kleptocrats to totalitarian North Korea. A functioning modern economy needs respect for property rights; a government that is able to collect taxes and offer a social safety net; banks that allow the payment system to function; markets that allow businesses to raise capital and so on. Once those essentials are in place, whether the right top tax rate is 40% or 50%, the right interest rate is 1% or 5% is largely a matter of trial and error, and of political acceptability. Much is made of the difference between Britain’s “Anglo-Saxon” model and of France’s dirigiste approach, between the British government’s austerity drive, and France’s pro-growth approach. But for all the rhetoric, Britain’s GDP per head in 2011 was $36,090, according to the IMF, while France’s was $35,156, almost identical. Britain plans to balance its budget by 2017, and so does France. Despite the small differences in outcome, economists will continue to debate the merits of the competing systems as vigorously as Reformation clerics debated the difference between transubstantiation and consubstantiation.
Key Words: Nobel prize, fiscal theory of the price level
With this year’s picks, the Royal Swedish Academy of Sciences upholds its reputation of being less cloistered and distant from reality than some of the other Nobel selectors. It may well be a sign of the times that the Academy selected two economists so at odds with the recent Keynesian vogue, and in tune instead with the frustration with government fine-tuning that has dominated world economic policy since 2008.
(Published 1957) Contribution à la critique de l’économie politique, Traduit de l’allemand par Maurice Husson et Gilbert Badia