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SUMMARY:Why Do Rich People Love Austerity? - Dan M. Hausman  (University o
 f Wisconsin-Madison)
DTSTART:20171010T110000Z
DTEND:20171010T130000Z
UID:TALK88801@talks.cam.ac.uk
CONTACT:59961
DESCRIPTION:The vast majority of economists accept an idealized model of e
 conomic outcomes arising from the rational choices of consumers and produc
 ers. Although this model is an almost unanimous starting point\, economist
 s differ greatly on whether they find the model useful largely to help to 
 identify the most important factors it leaves out or whether the model can
 \, with few modifications directly guide policy. The former economists are
  more likely to be democrats in the U.S. or members of the Labour Party in
  the U.K. while the latter economists are more likely to be Republicans an
 d Tories. What explains in part the surprising fact that members of differ
 ent political parties differ in their purportedly scientific beliefs conce
 rning how economies operate is that the differences in positive theory lea
 d to differences in policy prescriptions. Those economists who see the fun
 damental model as accurately depicting how economies work trace failures i
 n actual economies – phenomena such as financial crises and recessions 
 – to government interferences with the market. The cure is to stop inter
 fering. Those who look to the fundamental model for help in diagnosing the
  causal factors that prevent economies from running smoothly are more incl
 ined to address economic problems with calls for more rather than less int
 erference with the market.\n\nThe recent “Great Recession” illustrates
  the point. Many prominent economists argued that to restore prosperity go
 vernment needed to follow a policy of austerity that would reassure econom
 ic agents that government would limit its interference in economic life. O
 ther prominent economists argued that what was needed were monetary and fi
 scal policies that would stimulate the economy\, mainly by putting money i
 n consumer’s pockets to thereby enhance demand\, and make investments pr
 ofitable again. Nobel laureates lined up on both sides\, but after the ini
 tial emergency passed\, austerity won the political battles in the U.S. an
 d the U.K.\, and in most of the rest of the world\, too.\n\nWhy? Was it th
 e strength of the arguments? Was austerity particularly attractive to thos
 e with greater political power? This talk attempts to sketch some answers\
 , which have distressing implications concerning economic policy.\n\n
LOCATION:Seminar Room SG2\, Alison Richard Building
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