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This article discusses the importance of the intertemporal constraint on the government budget for financially integrated market economies, and emphasizes the need for governments to ensure the sustainability of their liabilities as a precondition for the effective use of fiscal policy for anti-cyclical purposes. The paper concludes discussing the implications of the budget constraint for Italy’s fiscal policy, including under the hypothesis of the country exiting the euro.
The view that public debt is a burden on future generations and it must be subject to institutional constraints is based on the notion of public debt as an inflationary overhang. This, on its turn, rests upon a quantity-theoretic view of monetary policy that the past decade has empirically disproved. A deep rethinking of fiscal policy rules is needed.
Il libro di Salvatore Biasco (Regole, Stato, Uguaglianza, ed. LUISS, 2016) non parla solo della crisi intervenuta nel 2007, si presenta come un grande progetto culturale che investe la teoria e la politica economica,...
Nowadays, basic income is acclaimed as the main example of a progressive idea of society, free from poverty and exploitation. However, as emerges provocatively by Polanyi and Hayek’s analysis, basic income could easily become an economic policy alternative to full employment. But when unemployment is accepted as a natural order in a situation of unsatisfied basic needs, we are facing a regressive vision of economic system.
Following Neo-Classical theories, developed countries continue to adopt austerity measures or too modest expansionary policies. However, their concern about the effects of public debt on economic growth found conflicting results in the empirical literature.
Most economists believe that the economic crisis is due to a structural excess of saving on investment. However, if we admit that production decisions follow the effective demand, it is easy to show that S and I are always equal. We suggest instead that crisis is due to the lack of demand that causes a high degree of unused capacity. The resulting sunk costs could be transferred to wages, further reducing demand. So, increasing investment, without raising wages, would worsen the effect of the crisis.