Governments left clueless by economic orthodoxy – Editor
Stephen Williams recently explained [1] how politicians of every persuasion have been led astray by mainstream economists, trapped in the delusion that federal government budget constraints are the same as those of households, businesses and state governments.
The reality is that the federal government has an unlimited ability to create money. And it should spend as much as the economy allows for achieving full employment, consistent with keeping a lid on inflation and avoiding ecological overshoot. It is also possible for the federal government to run deficits for- ever without needing to borrow from the private sector.
Williams draws on the work of Australian economists like Steven Hail and Philip Lawn, who say that increasing the size of high-GDP economies is now producing un-economic growth, as these economies are past their optimal size – as measured by marginal cost- benefit analyses. Economics, as now mostly practised, is largely self-reinforcing rather than self-correcting, as large vested interests dig in. The only way out is to re-examine first principles, which is what ecological economics, functional finance and MMT do.
1. Independent Australia, 27 Sept 2018 https://independentaustralia.net/politics/politics-display/how-mainstream-economics-has-led-to-clueless-governments,11933
