09 August 2012

Fallacies of austerity explained

Dr Mark Blyth, a professor of political science at the Watson Institute at Brown University, explains the so-called ‘commonsense’ logic of austerity, how it confuses virtue with vice, how it engages in fallacies of composition and how it is a masquerade for class politics in this very clever and very accessible video. Enjoy!


  1. Great video. So much for "common sense." Nothing annoys me more than barstool economics.

  2. Hi John! Glad you approve! :D

  3. I understand the logic behind his argument, but you should avoid the idea that austerity is a 'fallacy' or 'nonsense'. It is a financial tool useful for a specific set of circumstances where neither borrowing can be increased nor further taxes raised.

    Much has been made of the fact that so-called 'socialist' tax rises in the US actually only raise the level of taxation to where it was in the recent past. The same should also be pointed out about cuts in government spending being brought in, say, the UK. Actually the cuts of the UK's ruling coalition have only reduced government spending to a percentage of GDP similar to that seen in the early years of the last decade.

  4. Hi Gil! Thanks for the comment!

    Your analogy of austerity as a tool for use in a specific set of circumstances is apt, but perhaps you should pay close attention to the argument Dr Blyth makes in the video. Austerity, as a tool, has the function of paying down public debt, and consists of both raising taxes and slashing public spending. However, in times when everyone is paying down the debt, austerity becomes counterproductive because it depresses aggregate demand when it is most needed to bring in revenue in the private sector. The people preaching austerity now are indeed engaging in fallacious, nonsensical thinking because the problem is that demand has been depressed by private debt. To use the tool analogy, if we liken private debt to a misplaced nail, what the austerity-preachers are doing is yelling at us to pound it in deeper rather than pry it up.

    The question is not one of degree, though, but of timing. The government should only use austerity measures when the public is prosperous and private debts are low and manageable.