Anybody who claims to have 'consensus' should be treated with contempt

There is no consensus. I expect that many economists are at a loss what to do. Most did not foresee this crisis and are therefore ill advised to be believed whatever they say now.

Well let's put it this way churchill once said:
" put three economists in a room and you'll get three different opinions"
He later refers to lord keynes.

For the long run the budget deficit must be cut, which labours plans to do so work on such a time frame: stabilisation, a "kind of test the waters" cuts and then more cuts. Labour will probably hope to sell thier shares in the banks aswell at some point in the next5-10 years.

The tories look to make cuts as soon as they get in power however we just about emerged from recession earlier in january by a measly 0.1%. Cuts in the public sector will decrease aggregate(total) demand in the economy at a time when the private sector is barely growing and is fragile. Therefore it would be wise to make smal cuts in the next year at most and would also be wise to only make small cuts the following year. On the other side of governmnet fiscal policy taxation would be something to look at increasing such as alcohol, tobbaco and luxury good duties. Maybe create a new intermediate tax band at the 25,000 to 37,500 pound category of 27.5%. Or find a new and inventive tax on good which aren't produced domestically moving people onto goods or services in the country.
I should think that the tories are on the same old thatcherite neo-classical economics (or should be known as: neo-made-up-as-an-excuse-to-propogate-enhance-and-maintain the rich economics)

Economics is heavily subjective in a lot of aspects and I would also be vary wary of it as a reasoning since many people who write economic theory and propogate it are right wing and elitist hence neo classical economics. keynes is the way to go.

I would rather restore the capital gains tax ink to income so that there is no longer an incentive to manipulate property prices to get lower taxed gains. This would actually retrieve much of the past gains from those that benefited without the need to raise income taxes.

As for income taxes to simple rates are better than many little rates. Maybe one of 25% and a top rate of 50%, though to make things fairer much higher basic allowances so that for most people there are almost no differences in income tax paid.

Though the rates could be different, 30% and 60%, or 24%, 44% and 64%.

It could also be arranged with fully transferable allowances so that couples and families could transfer any unused allowances to anyone working This could be used by families instead of child benefit. So a person with a non working partner and two children could actually have a four sets of personal allowances before they paid income tax. This could work out better than tax credits which are a mess and result in real hardship when the department realise they made a mistake.

Also consider scrapping National Insurance as it is regressive for those at lowest incomes and since the government only really use it to account for pension entitlement then a better way could be years on tax record. Also by scrapping it, and incorporating it into tax then you also get rid of the top cap.

The objective should be a simple tax system which is fair and progressive, and then once any deficit is eliminated the surplus funds should be used to eliminate minor taxes that cost a lot to run but have little benefit.

The same should be done to benefits. There are too many and it is far too complex to or out if you would actually be better off working. Simplify them and make them personal rather than combined as a couple as now. That way if one person worked it does not effect the benefits of the other.

Simplifying and raising capital gains taxes and eliminating the private home exemption, which the MPs abused like crazy, would raise enough money to actually abolish inheritance tax, which only really hits the middle classes who had not got around to creating a tax dodge.

Also to discourage tax exiles there should be a rule like the US has which if it determines that you have left for tax reasons that it can ban you from ever travelling to the country again. Since many tax exiles actually have their businesses here that would either bring them back in to the tax net or force them to sell up. If they could never return then they would have to make drastic choices.

Does anyone buy into Keynesian economics any more? I thought everyone (particularly governments) bought into the Chicago School trail of thought (courtesy of Milton Friedman).

Personally I quite like the writings of Friedrich von Hayek, though personally I firmly believe in free state-funded healthcare, free education, the welfare state etc. I simply couldn't support a completely pro-market laissez-faire position.

Yes I am one. The problem is that neoclassical economics is only applicable within a narrow range. Once economies get into extreme circumstances such as now they are at a loss. Though they will never admit it. It was also why they never saw the problem in the first place, because such an event could never happen with perfect markets. A fundamental flaw with neoclassical economics is that it relies on the market having perfect knowledge and how did Goldman Sachs make such money when others were losing it was because they knew things that others did not such as during High Frequency trading. The Chicago school was reliant on mathematical models and these only work in narrow confines, as portrayed in the collapse of Long Term Capital Management (LTCM) in 1998.

Secondly when everything is in mathematical form then everyone else thinks that they know what everyone else will do, this means that only one person who does not follow the model with enough money can collapse the system, because he will not follow predicted behaviour and they will be at a loss what to do.


Hayek was a neoclassical along the Austrian School which is similar to the Chicago school which got is into this mess.

A better influence is Hyman Minsky who actually studied unstable influences in economies. He was against the deregulation of the 80's. His attitude was recessions were good in that they rebalanced the economy. For the US with the Fed having responsibility to keep the economy growing that meant that the economy never rebalanced until it was beyond repair. Because his work was not in mathematical form he was ignored.

I am a believer in mixed economies with free education and decent welfare and health systems. If like many neoclassical economists, you want to live in a state with minimal government influence go and live in Somalia.

Brown does he championed the whole idea of deficit financing during this recession.
Milton friedman's works really in economical terms were tory erotic novels.
Brought you such works as "The Natural Rate of Unemployment"
And the 3 million unemployment rate in the 1980s
And with such lassiez faire economics that brought you the 2007-2010 (hopefully) recession.

But under his policies it would have become a depression, however thanks to Keynesian interventionist policy with the banks and economic stimulus it has hopefully been cut short.

From what I have seen Neo classical economics is elitist, republican and basic excuses for the wealthy to selfishly uphold inequity and gain more wealth.
As Samuel L Jackson says:

I think that we are still vulnerable to a depression. It was not until they raised taxes and cut spending that the depression took hold. We are at that point now, where some economists are calling for cuts in the deficit. If they get there way then we will have a depression. The Tories will guarantee a depression.


Oh totally. It is just that they have suckered so many to believe it is the only game in town.

I believe soundly that if we let one or two the banks go bust the rest would fall like dominoes with their finances being so interwoven. Then if we had not increased spending with stimulous we would be in avery deep and prolonged recession.
The problem with tory policy is the fact that it is the same policy of the past of the 1929-31 coalition labour government with policies of thrift or the policy of Herbert hoover who believed in self determination, rugged individualism etc.

we need to maintain spending at a fairly stable rate for at least 2 years ofcourse that will probably bring our national debt up to 70% of GDP. The lesser evil really is labour. As you say we are still vulnerable to another recession or prolonged stagnant economy
However what worries me more than that is regardless of what government is in is the long term there are no contols of finances such as those discussed in other topics and this will occur again on a similar scale in another 15 years.



That's what annoys me so much about economics, we are all expected to swallow this neo classical theory as gosbel.

I would have let all the banks collapse then taken them over. The state would then not have been ripped off as they have been. There would not have been any problems with Fred Goodwin's pension as it would have been wiped out, there would not have been any problems with bonuses as they would also have been wiped out. They could have sacked the entire boards of the banks and replaced them, probably at lower cost. That would have set a nasty precedent for any bank that did not collapse because they knew that as directors they would be wiped out if it happened to them. Moral hazard restored. Any gains would then accrue straight to the tax payer. The government could have been adventurous and broken up the banks. We could have ended up with a dozen more banks. RBS could have been broken up into RBS, Nat West, Coutts, and the merchant banking could have been separated as well. Lloyds could have been broken up into Lloyds, Williams & Glyns, TSB, Halifax, Bank of Scotland and many others. The new smaller banks would then be re-capitalised by the government and allowed to operate for a few years to generate profits in preparation for a series of sell offs. They could also be be encouraged to maintain branches, while this may effect profitability it will keep local communities going. They could have restored the building societies dominance of the mortgage market by mutualising a new set of building societies, and stripping banks of residential mortgages. They could have been offered protection from take over so that community banking really gets a chance of taking off.

It would have obliterated the credit default swaps market which is still overhanging the market and provides perverse disincentives to the recovery of firms in trouble.


I agree that we need to maintain spending for a couple of years, a pay freeze on higher level staff will be good, and a ban on recruiting more staff. Though I doubt that the rest of the economy will be in a position to grow again because of debts that are still outstanding

I still think that we will be struggling along for the next decade because there is simply so much debt about and that needs to be paid off or written off. That will take time simple because of the scale of the problem.


Too few willing to look at alternative ideas. Neoclassical economics is almost like a cult. I studied Keynes and basic monetarism, but all the effects of monetarism could be explained by Keynes anyway. The dependence on mathematics has dominated the subject and is clearly flawed. People are irrational at times and as such that cannot be accounted for with mathematical models. Our appetites for risk differ and will affect how we react, that is not resolved in neoclassical economics. I am not closed to new ideas as the neoclassical economists are. I think that Minsky's work has a lot of merit as does Steve Keen.