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The magic money tree and other economic tales

door Lorenzo Forni

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Lorenzo Forni examines the tension between economics and politics and considers why so many mistakes in economic policy-making are made for political reasons. In an age of uncertainty, voters look to politicians for protection and support and politicians are all too eager to cater to those needs by using the state budget, trade policy and monetary policy to prop up labour markets and the wider economy and, in turn, enhance their own approval ratings. However, such short-term economic gains to ensure electoral success, Forni argues, frequently spell disaster. Ignoring budget constraints can result in longer-term recession and economic downturns, which can then incur painful austerity measures to bring the economy back into balance. Forni looks at the many unsustainable economic policies that have been implemented to create more wealth, greater well-being and to satisfy voters when the economic realities - there is no magic money tree! - would recommend a different and more prudent economic course.… (meer)
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"Budget constraints matter. This is true for private households and businesses. It is also true for governments. Those that forget this simple lesson of history will get into a mess. This is the theme of this little book by Forni of the University of Padua. He takes the reader through the basic realities of budgeting, credit and money. It is the job of governments and central banks to stabilise economies through fiscal and monetary policy, as Keynes taught us. But one cannot create long-term growth simply by creating vast amounts of money. If one forgets this truth, one is likely to end up looking rather like contemporary Argentina."
toegevoegd door ndara | bewerkFinancial Times, Martin Wolf (betaal website) (Nov 17, 2021)
 
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Lorenzo Forni examines the tension between economics and politics and considers why so many mistakes in economic policy-making are made for political reasons. In an age of uncertainty, voters look to politicians for protection and support and politicians are all too eager to cater to those needs by using the state budget, trade policy and monetary policy to prop up labour markets and the wider economy and, in turn, enhance their own approval ratings. However, such short-term economic gains to ensure electoral success, Forni argues, frequently spell disaster. Ignoring budget constraints can result in longer-term recession and economic downturns, which can then incur painful austerity measures to bring the economy back into balance. Forni looks at the many unsustainable economic policies that have been implemented to create more wealth, greater well-being and to satisfy voters when the economic realities - there is no magic money tree! - would recommend a different and more prudent economic course.

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