Tuesday, 19 October 2010

Understanding dynamics

Slí eile: a curious feature of what passes for informed economic commentary in recent times is the absence of any solid evidence to back up various assertions. Even just as worrying is an apparent lack of awareness of the most rudimentary points of economic analysis. Take for example the lazy assumption that an adjustment (read cut) of X billion equals a saving of X billion in borrowing and will translate into higher confidence and lower interest rates on monies borrowed abroad. There is a lack of acknowledgment of the dynamic interaction between spending changes, impacts on domestic demand, revenue receipts and triggered spending increases through higher unemployment. Surely, the ESRI or Dept of Finance can and do model these impacts and test the distributional and macro-economic impacts of severe fiscal shocks?

1 comment:

Eoin said...

With the budget pretty much sewn up in recent weeks, it's all that we're left with. All we have to decide now is how much to threaten RTE with their 'subsidy'.