macro-economic falsification

Here are three intriguing insights from economic conservatives:

Positive economics is in principle independent of any particular ethical position or normative judgments. As Keynes says, it deals with "what is," not with "what ought to be." Its task is to provide a system of generalizations that can be used to make correct predictions about the consequences of any change in circumstances. Its performance is to be judged by the precision, scope, and conformity with experience of the predictions it yields.

Milton Friedman, The Methodology of Positive Economics [pdf] (1953)

 

We should cut early, as deep as is feasible given time-tabling constraints. We need growth, and early cuts are likely to promote growth, even in the short term. There are three reasons why. First, at lower levels of public spending the economy is likely to grow faster. If the economy grows faster, then wages will grow faster. So households today will feel safe to borrow and consume more and to save less, knowing that their (pre-tax) incomes will be higher later, allowing them to pay off their debts. Investors will also expect better returns if growth is faster...

Andrew Lilico, Chief Economist, Policy Exchange, The Observer, June 2010

 

[The Office for Budget Responsibility] expect GDP in Britain to grow this year by 0.9% – and by 0.7% next year...The OBR have significantly reduced their assumptions about the spare capacity in the economy – and the trend rate of growth. And this increases their estimate of the proportion of the deficit that is structural – in other words, the part of the deficit that doesn’t disappear even when the economy recovers. So our debt challenge is even greater than we thought because the boom was even bigger, the bust even deeper, and the effects will last even longer.

George Osborne, Chancellor of the Exchequer, Autumn Statement, November 2011

I trust that any followers of Milton Friedman will have the good grace to accept when an economic hypothesis has been disproven.

Update: The New Statesman points towards a speech David Miliband made from the back benches yesterday, dismantling Osborne's claims about the sources of growth.

Further update: Andrew Lilico has explained why his theory hasn't yielded the expected results. It rather confirms IanC's intuition in his first comment below.

Comments

[IanC]

I think you'll find they won't.

Followers of St Milt are distinguished by the conviction that if it doesn't work in practice as it is said to work in theory, you clearly aren't cutting taxes and public spending fast and deep enough.
They also go to expensive and contorted efforts to conceal their recourse to statist policies. See for example G. Osborne, who has set the Government up as a bank ('credit easing') while strenuously resisting the logical policy of actually nationalising the semi-nationalised banks and the new Green Investment Bank. Anything to save the appearances of neoliberal economics.

[Will Davies]

I suppose what irks me is that 'cuts create growth' was such an implausible claim in the first place, but that it was offered in scientific terms. At least Sadam's WMDs were a) a plausible reality and b) in the realm of known unknowns, bordering on unknown unknowns. But the Right probably knew that they were lying about growth all along. Of course they now blame it on Europe and everything else (economists can always hide behind the notion of 'x=y, all things being equal'). But it really is atrocious that people such as Lilico can call themselves 'economists'.

[Dick Pountain]

One of the more sinister political developments since the '70s has been the Right's discovery of lying - that they can get away with it, and that they can shrug it off when uncovered. Politicians have never been angels, but the level of falsehood routinely practiced now used to be confined to totalitarian states.

[IanC]

Dick is on to an important point here, and there is a totalitarian undertone to it. This is very clear in the American hard right, now busy taking over the Republican Party. The sight of the lamentable line-up of candidates for 2012 publicly recanting their thought crimes (eg over climate change) is straight out of a neoliberal version of '1984'. Totalitarianism is the political expression of total intolerance for rival worldviews, and thus not confined to communism and fascism by any means. Neoliberals of the US right have been drinking from the same poisoned well for some time.