Coral Gables Watch

The Power of Ideas

Wordle==Power of Ideas

I am interested in this quote from the book Great Transformations:  Economic Ideas and Institutional Change in the Twentieth Century, by Mark Blyth (Cambridge University Press, 2002), as follows:

“Ideas matter because they can actually alter people’s conception of their own self-interest.”  (p. vii)

and

“This  led me to the idea that so long as something about the economy is believed by a large enough group of people, then because they believe it, it becomes true.” (p. viii)

Thus people believe that the economic stimulus package didn’t work (even though it may have worked, but not as much as expected, or it was poorly managed or designed).

People believe that we are being overwhelmed by government spending and debt (although the spending is for social security, medicare, medicaid and war, mainly; and the debt is mainly from the fall in government income because of the economic recession).

What if these beliefs lead us to cut spending (not that likely) and cut taxes (more likely), and nothing happens to the economy, or worse, the economy declines, because of the minimal impact of both measures.

We are truly living in interesting times and we will see a great experiment.

The Republican Favor Deficit Financing (Is Marco Rubio a Keynesian?)

Some economics of the election.  Republican favor extending the Bush tax cut.  That will cause a large increase in the deficit (because the tax cut was approved to end now so the cost of reducing the taxes again is not included in the current government accounting–that was the original game).

The first item in Marco Rubio’s list of priorities is to extend the tax cut.  I would call him a Keynesian,  because the policy stimulates spending (somewhat and inefficiently) by increasing the deficit (that means more government borrowing).