After years of mounting polemics against austerity policies, Keynesian dogma has become something close to a secular religion in popular economic-policy debates. But a new study of 16 advanced economies shows that, as with all dogmas, righteousness is no substitute for empirical facts.
CAMBRIDGE – In Austerity: When It Works and When It Doesn’t, the central conclusion reached by economists Alberto Alesina, Carlo Favero, and Francesco Giavazzi is one that most modern-day Keynesians and progressives will hate. In cases when circumstances have forced a country into fiscal retrenchment, the authors show, cutting government spending has cost less than tax increases in terms of foregone output and employment.
CAMBRIDGE – In Austerity: When It Works and When It Doesn’t, the central conclusion reached by economists Alberto Alesina, Carlo Favero, and Francesco Giavazzi is one that most modern-day Keynesians and progressives will hate. In cases when circumstances have forced a country into fiscal retrenchment, the authors show, cutting government spending has cost less than tax increases in terms of foregone output and employment.