Austerity Foolishness

There's an important point that Paul Krugman's been making lately, that a lot of people don't seem to get.

If everyone slashes spending at the same time, it's a problem.  Similarly, if the private sector implements its own "austerity" measures because it feels like it's racked up too much debt, and the government concomitantly does the same thing, there's going to be a surplus of available human capital (too many workers who can't find jobs) and a lot of money that's invested sub-optimally.  What that means is that a big spender (i.e. the government) needs to give the economy the push it needs. That's the only way markets are going to be able to recover.

Having a car to get from place A to place B may be necessary, but it's obviously not sufficient.  You also have to have gas, you need a driver, and you need someone willing to turn the key. Same logic.

Of course, there's an important relationship between economic downturns and the environment (there's an excellent paper by Stern and Bowen on this). Basically, environmental initiatives need a big player (again, the government) to get them rolling, and since economic depressions demand government spending, there's a huge opportunity during a depression (cough *now* cough) to make some substantial green investments.

Also, if anyone says Solandrya to me, I'll slap a...