Wednesday, 10 August 2011

Joseph Stiglitz has a bright idea.

One of our main economic problems is economists who are household names, perhaps because they won a Nobel Prize twenty years ago, but who now well past retirement age, and totally devoid of any ideas as to how to get out of the current mess. Indeed it is these economists who are part responsible for the system that gave us the credit crunch and the tens of millions who are now unemployed in consequence.

Three of the main perpetrators are Joseph Stiglitz, Kenneth Rogoff and Martin Feldstein.

Stiglitz’s “bright” idea in a recent article in the Financial Times for curing our problems is to make “high-return investments”. Wow! Well if the private sector could see any potential “high-return investments” the private sector would be making such investments!

As to the public sector, if these bizarre “high-return investments” exist, they presumably existed before the crunch. Why weren’t those investments being made then?

Put another way, a public sector investment should be made if it makes sense. The fact of being in a recession or boom is almost immaterial. Moreover, the sort of labour and equipment needed to make public sector investments (education, road building, etc) is pretty specialised. You just cannot produce a thousand economics teachers, or experienced highway construction engineers at the press of a button.


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