Policy Research in Macroeconomics

Paul Krugman and the case against austerity

By Victoria Chick and Ann Pettifor

Paul Krugman’s recent lecture at the LSE (29th May) has made headlines; it rightly put the Government’s austerity policies under the spotlight again.

But Krugman appears content to operate within a debate concerning merely the extent and timing of deficit reduction, which in the UK is the framework of the debate between the Government and the Opposition. The debate we should be having is about how the deficit can be reduced. We argue that at present the only means to do so is to expand expenditure. In effect, the Government argues the reverse.

In our ‘Economic Consequences of Mr Osborne’, we attempted to marshal an empirical and theoretical case against austerity. We owe thanks to the editor of the ‘Newsletter’ of the Royal Economics Society for initiating a lively debate on this and similar work.

We offer the following links to various contributions on both sides of this debate.

The original RES Newsletter article:

‘New LSE blog questions UK budgetary policy: Support for deficit fetishism on the wane?’ (pages 18 to 20):


‘Are we really suffering from ‘deficit fetishism’?’ (17-18):


Our response (13-14):


And various other subsequent contributions:





Even Mark Harrison, who vigorously opposes our views, accepts the distinction between “borrow[ing] our way out of recession” and “spend[ing] our way [sic] of debt”. Much more still needs to be said, but wider debate will be better served if this distinction is understood and pursued. We commend these links to our readers.

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