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Economics in the news

A number of items caught my eye this past week and will be the basis of some blogging in the next few days. Thomas Edsall’s Age of Austerity makes the case that Americans will have to begin to choose. My problem is that there would not have been a discipline of economics without an assumption of scarcity. If everything is in infinite abundance, then why bother with economics?Mark Schmitt’s review in the NYT Book Review was right, I think, to distinguish exogenous scarcity of the sort from an energy shortage from endogenous austerity as imposed by Germans on the rest of Europe. He was also right to point out that those who cry austerity are the one’s who want to keep all available goodies for themselves such as Medicare and Social Security. Interestingly, Schmitt sees the shortage of suitable jobs as a true scarcity that we are facing.  (More on the jobs question later!)

Counterposed to this article is one by Julie Creswell about private-equity funds and the role that they serve. Marc Leder, the hero/villain, of the story is portrayed as a hard-working profit maximizer who has destroyed jobs (the Friendly chain) in order to improve productivity. (Again, more on the jobs question later!)

The Economist, meanwhile, has produced a fascinating briefing on state capitalism. Their example is mostly China but it could equally have been South Africa where state capitalism is posed as a way to solve the jobs question. Private capitalists, so the argument goes, feather their own nests at the expense of workers so why not let the workers, through the government that they elected, own the business? Unfortunately, in practice, government officials are as likely to feather their own nests as the most rapacious capitalist and elections in these countries border on the status of a myth. (Which again brings us back to the jobs question — on which more later!)

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