Sunday, October 26, 2008

UK economists reject big Keynesian spend up

In a letter to the Sunday Telegraph, 16 economists oppose plans by the British government to spend its way out of recession, by borrowing from future taxpayers.

The letter states:

"It is misguided for the Government to believe that it knows how much specific sectors of the economy need to shrink and which will shrink "too rapidly" in a recession. Thus the Government cannot know how to use an expansion in expenditure that would not risk seriously misallocating resources. Furthermore, public expenditure has already risen very rapidly in recent years, and a further large rise would take the role of the state in many parts of the economy to such a dominant position that it would stunt the private sector's recovery once recession is past."

Indeed, the state is too arrogant to know it doesn't know best and that what it does crowds out the private sector. Now these economists are clearly not of the small state Austrian school kind, but they do come to one conclusion:

"If this recession has features that demand more active fiscal policy, which is highly disputable, taxes should be cut. This would allow the market to determine which parts of the economy shrink and which flourish to replace them".

Indeed. Politicians of all persuasions and parties may think about that.

Oh and if you continue to believe that all of this is about the failure of free market capitalism, then you might read George Reisman's response to this (Hat Tip: Not PC)

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