What do you think?
Rate this book
Austerity: When It Works and When It Doesn't
A timely and incisive look at austerity measures that succeed―and those that don’t
Fiscal austerity is hugely controversial. Opponents argue that it can trigger downward growth spirals and become self-defeating. Supporters argue that budget deficits have to be tackled aggressively at all times and at all costs. In this masterful book, three of today’s leading policy experts cut through the political noise to demonstrate that there is not one type of austerity but many.
Looking at thousands of fiscal measures adopted by sixteen advanced economies since the late 1970s, Austerity assesses the relative effectiveness of tax increases and spending cuts at reducing debt. It shows that spending cuts have much smaller costs in terms of output losses than tax increases. Spending cuts can sometimes be associated with output gains in the case of expansionary austerity and are much more successful than tax increases at reducing the growth of debt. The authors also show that austerity is not necessarily the kiss of death for political careers as is often believed, and provide new insights into the recent cases of European austerity after the financial crisis.
Bringing needed clarity to one of today’s most challenging subjects, Austerity charts a sensible approach based on data analysis rather than ideology.
Fiscal austerity is hugely controversial. Opponents argue that it can trigger downward growth spirals and become self-defeating. Supporters argue that budget deficits have to be tackled aggressively at all times and at all costs. In this masterful book, three of today’s leading policy experts cut through the political noise to demonstrate that there is not one type of austerity but many.
Looking at thousands of fiscal measures adopted by sixteen advanced economies since the late 1970s, Austerity assesses the relative effectiveness of tax increases and spending cuts at reducing debt. It shows that spending cuts have much smaller costs in terms of output losses than tax increases. Spending cuts can sometimes be associated with output gains in the case of expansionary austerity and are much more successful than tax increases at reducing the growth of debt. The authors also show that austerity is not necessarily the kiss of death for political careers as is often believed, and provide new insights into the recent cases of European austerity after the financial crisis.
Bringing needed clarity to one of today’s most challenging subjects, Austerity charts a sensible approach based on data analysis rather than ideology.
296 pages, Hardcover
First published January 29, 2019
19 people are currently reading
620 people want to read
Ratings & Reviews
Friends & Following
Create a free account to discover what your friends think of this book!
Community Reviews
Displaying 1 - 19 of 19 reviews
June 22, 2019
I never took Alesina’s “Political Business Cycles” as an undergrad, a fact I truly regret. So when I picked up “Austerity,” I was not only reading up on a topic that both interests me and is central to the politics of my country, I was also making up for past mistakes.
It’s bloody good!
The summary is as follows: the authors of this book have combed through the data and, theory be damned, the fact is that when a country tries to cut down on its debt by decreasing spending it works. On the other hand, if a country tries to cut down on its debt by putting up taxes, it does not work.
More specifically, when a country cuts spending or transfers the impact on growth is minimal. When a country puts up taxes, the negative impact on growth can be substantial. So in the first case debt drops as a percentage of GDP, whereas in the second case it doesn’t, because the denominator also shrinks.
The authors control for a large number of variables and always arrive at the same conclusion. They lay out the data on the internet so you don’t have to take their word for it, you can do your own analysis:
“http://www.igier.unibocconi.it/folder...”
Inevitably, I went to the data and my reaction was “thank God I’m not a macroeconomist” because it simply is not terribly much data, much as they probably had to work like slaves to produce it. The art here is not in cranking out the regressions, basically, it is in piecing together 1. the various programs the 17 governments enacted and 2. their “ceteris paribus” impact on the economy.
This is guaranteed to be a very unpopular book, because it debunks a whole bunch of theories and directly assaults the assumptions (to say nothing of the conclusions) of some rather important people. Nobody is immune: Paul Krugman coined the “expansionary austerity” oxymoron; Alesina laughs in his face and makes that the very title of a section where he works one-by-one through a bunch of such historical occurrences. (All of them via cuts in government expenditure, of course). Similarly, Olivier Blanchard has written about miscalculated multipliers (indeed the IMF has issued mea culpas on the topic), but the authors here show that this is not borne out in the data. And authors like Summers and DeLong have written about how austerity does not work when monetary policy is constrained by the “zero bound” and again it really looks like this theory is not supported by the evidence.
The authors don’t stop there, they go ahead and build an explanation. In their view cuts in spending work better than expected because 1. Consumers spend more on account of the lower taxation they will face (a rational expectations argument I really don’t buy) 2. Businesses are more comfortable investing when they know that (i) they won’t be as crowded out by the state when they try to borrow and (ii) spending cuts have more permanent effects on the health of the economy 3. cuts in spending push down labor costs, both helping business and forcing people to participate in the labor force who may have chosen not to.
I must confess I’m more impressed by the empirical work of the authors than I am by their theoretical work. Regardless, the theory gets thrown in for free. You can skip it and the book loses none of its main impact!
Finally, I loved the chapter about my country, Greece. The authors are not shy about saying half the reason we all had to pretend the plan would work was that French and German banks could not take an immediate hit on our debt and do a fantastic job of putting our numbers in the context of everybody else’s.
Regardless, they’ve missed a trick: an important element of what happened in Greece is that taxes were collected that may well have been on the statute but had NEVER been collected before. Business was predicated on the non-collection of these taxes. In practice, therefore, the Greek plan actually was a “TB” rather than an “EB” to use the authors’ lingo.
My peeve notwithstanding, this is quite likely the first ever writeup of a regression paper to become a five-star book for laymen on the subject of political economy.
It’s bloody good!
The summary is as follows: the authors of this book have combed through the data and, theory be damned, the fact is that when a country tries to cut down on its debt by decreasing spending it works. On the other hand, if a country tries to cut down on its debt by putting up taxes, it does not work.
More specifically, when a country cuts spending or transfers the impact on growth is minimal. When a country puts up taxes, the negative impact on growth can be substantial. So in the first case debt drops as a percentage of GDP, whereas in the second case it doesn’t, because the denominator also shrinks.
The authors control for a large number of variables and always arrive at the same conclusion. They lay out the data on the internet so you don’t have to take their word for it, you can do your own analysis:
“http://www.igier.unibocconi.it/folder...”
Inevitably, I went to the data and my reaction was “thank God I’m not a macroeconomist” because it simply is not terribly much data, much as they probably had to work like slaves to produce it. The art here is not in cranking out the regressions, basically, it is in piecing together 1. the various programs the 17 governments enacted and 2. their “ceteris paribus” impact on the economy.
This is guaranteed to be a very unpopular book, because it debunks a whole bunch of theories and directly assaults the assumptions (to say nothing of the conclusions) of some rather important people. Nobody is immune: Paul Krugman coined the “expansionary austerity” oxymoron; Alesina laughs in his face and makes that the very title of a section where he works one-by-one through a bunch of such historical occurrences. (All of them via cuts in government expenditure, of course). Similarly, Olivier Blanchard has written about miscalculated multipliers (indeed the IMF has issued mea culpas on the topic), but the authors here show that this is not borne out in the data. And authors like Summers and DeLong have written about how austerity does not work when monetary policy is constrained by the “zero bound” and again it really looks like this theory is not supported by the evidence.
The authors don’t stop there, they go ahead and build an explanation. In their view cuts in spending work better than expected because 1. Consumers spend more on account of the lower taxation they will face (a rational expectations argument I really don’t buy) 2. Businesses are more comfortable investing when they know that (i) they won’t be as crowded out by the state when they try to borrow and (ii) spending cuts have more permanent effects on the health of the economy 3. cuts in spending push down labor costs, both helping business and forcing people to participate in the labor force who may have chosen not to.
I must confess I’m more impressed by the empirical work of the authors than I am by their theoretical work. Regardless, the theory gets thrown in for free. You can skip it and the book loses none of its main impact!
Finally, I loved the chapter about my country, Greece. The authors are not shy about saying half the reason we all had to pretend the plan would work was that French and German banks could not take an immediate hit on our debt and do a fantastic job of putting our numbers in the context of everybody else’s.
Regardless, they’ve missed a trick: an important element of what happened in Greece is that taxes were collected that may well have been on the statute but had NEVER been collected before. Business was predicated on the non-collection of these taxes. In practice, therefore, the Greek plan actually was a “TB” rather than an “EB” to use the authors’ lingo.
My peeve notwithstanding, this is quite likely the first ever writeup of a regression paper to become a five-star book for laymen on the subject of political economy.
May 5, 2022
Lmaooooooooo need I even press the spoiler button
October 28, 2019
In August 2008, economist Olivier J. Blanchard published a paper titled “The State of Macro.” In it, he wrote that
For a long while after the explosion of macroeconomics in the 1970s, the field looked like a battlefield. Over time however, largely because facts do not go away, a largely shared vision both of fluctuations and of methodology has emerged.
Does Federal Spending End Recessions?
According to The National Bureau of Economic Research (NBER), which published Blanchard’s paper, the US economy was, at that time, already nine months into a recession that would last another nine months, until June 2009. The same happened elsewhere as Britain and much of the eurozone also fell into deep and prolonged recessions. As economies shrank, budget deficits soared and government debt skyrocketed. And, when recovery came, it was the slowest on record.
Blanchard’s consensus shattered in the face of these events. Economists began shouting at each other in bitter terms. Some advocated for more government spending to boost aggregate demand, saying deficits and debt were problems for another day. Others argued that these explosions of red ink were a threat to the economy, not a cure.
Perhaps the most vocal proponent of the first view was Paul Krugman. In his 2012 book End This Depression Now!, he argued that “we don’t need to be suffering so much pain and destroying so many lives. Moreover, we could end this depression both more easily and more quickly than any imagines.” All we had to do, Krugman argued, was ramp up government spending. “A burst of federal spending is what ended the Great Depression,” he wrote, “and we desperately need something similar today.”
Krugman was scathing about the “Austerians,” those who argued that rapidly rising government debt posed a clear and present danger to the economy. Of the British government, which enacted “austerity” to get its deficit under control after the conservative takeover in 2010, he wrote:
The result is an economy that remains deeply depressed. As the National Institute for Economic and Social Research, a British think tank, pointed out in a startling calculation, there is a real sense in which Britain is doing worse in this slump than it did in the Great Depression: by the fourth year after the Depression began, British GDP had regained its previous peak, but this time around its still well below its level in early 2008.
And at the time of this writing, Britain seemed to be entering a new recession.
One could hardly have imagined a stronger demonstration that the Austerians had it wrong.
But economists on the other side of the battlefield kept working. A new book titled Austerity: When It Works and When It Doesn’t by economists Alberto Alesina, Carlo Favero, and Francesco Giavazzi both summarizes the subsequent research and makes new contributions of its own. Krugman’s argument does not fare well against this new evidence.
The Confidence Fairy
Krugman’s argument in favor of higher government spending to boost aggregate demand was based on the theory that fiscal multipliers were large. If a spending multiplier is greater than 1, an increase in government spending increases private expenditure so that total output rises by more than the increase in government spending. If a multiplier is smaller than 1, however, then increases in government spending are accompanied by decreases in private expenditure so that total output rises by less than the increase in government spending.
Krugman cited research on the impacts of military spending, particularly in wartime, to argue for large multipliers. The authors of Austerity examine a much broader range of estimates and note that in “a synopsis of studies estimating multipliers for government purchases…Most of the values range between 0.6 and 1.5.”
In other words: not much GDP bang for the deficit buck.
The argument that austerity could be expansionary—that government spending cuts could be followed by increased GDP growth—was pilloried by Krugman. “[E]xpansionary austerity was highly implausible in general, and especially given the state of the world as it was in 2010 and remains two years later,” he wrote. The belief that spending cuts would signal to individuals and businesses that better, more fiscally prudent times lay ahead was, Krugman claimed, like believing in “the confidence fairy.”
Is Austerity Expansionary?
But as Austerity’s authors show, in some cases austerity was expansionary. And, in large part, it happened for exactly the reason Krugman denigrated. Where austerity is based on spending cuts rather than tax increases, “private investment rises within 2 years,” and by the third year is above the previous level. Contra Krugman, Alesina, Favero, and Giavazzi attribute this to increased business confidence.
So, if spending is less effective and deficits and debts more onerous than Krugman argued and austerity can, in some circumstances, be expansionary, should it be based on tax increases or spending cuts?
The authors of Austerity are clear on this point.
Tax-based plans lead to deep and prolonged recessions, lasting several years. Expenditure-based plans on average exhaust their very mild recessionary effect within two years after a plan is introduced…
The component of aggregate demand that mostly drives the heterogeneity between tax-based and expenditure-based austerity is private investment
That “confidence fairy,” in other words. Investment responds positively to spending cuts and wilts in the face of tax hikes.
Krugman's Prediction Was Wrong
Britain, Krugman’s “demonstration that the Austerians had it wrong,” has, in fact, shown the opposite.
The Conservative government implemented a program of budget cuts. Over a 5-year period exogenous fixed measures amounted to almost three percent of GDP, two-thirds expenditure cuts, and one-third tax hikes. It was harshly criticized by the IMF, which predicted a major recession. The latter did not materialize and the IMF later publicly apologized. The UK grew at respectable rates.
Austerity is less reader-friendly than End This Depression Now! and is unlikely ever to have “New York Times Bestseller” emblazoned across its cover. This is a shame because it is a far more meticulous bit of work. It is, simply, the best and most in-depth book on this subject.
Over time, the main subject of economic debate shifts here and there. In the early 2000s, people worried about globalization. Then it was the crash and slow recovery. Now, the focus has moved on to income and wealth inequality. But the topics covered in Austerity will be back. They were, indeed, largely retreads of the debates between Keynes and Hayek in the 1930s and between Malthus and Say a century before that. And when the subject does return to austerity, we will be able to thank Alesina, Favero, and Giavazzi for such a thorough treatment.
For a long while after the explosion of macroeconomics in the 1970s, the field looked like a battlefield. Over time however, largely because facts do not go away, a largely shared vision both of fluctuations and of methodology has emerged.
Does Federal Spending End Recessions?
According to The National Bureau of Economic Research (NBER), which published Blanchard’s paper, the US economy was, at that time, already nine months into a recession that would last another nine months, until June 2009. The same happened elsewhere as Britain and much of the eurozone also fell into deep and prolonged recessions. As economies shrank, budget deficits soared and government debt skyrocketed. And, when recovery came, it was the slowest on record.
Blanchard’s consensus shattered in the face of these events. Economists began shouting at each other in bitter terms. Some advocated for more government spending to boost aggregate demand, saying deficits and debt were problems for another day. Others argued that these explosions of red ink were a threat to the economy, not a cure.
Perhaps the most vocal proponent of the first view was Paul Krugman. In his 2012 book End This Depression Now!, he argued that “we don’t need to be suffering so much pain and destroying so many lives. Moreover, we could end this depression both more easily and more quickly than any imagines.” All we had to do, Krugman argued, was ramp up government spending. “A burst of federal spending is what ended the Great Depression,” he wrote, “and we desperately need something similar today.”
Krugman was scathing about the “Austerians,” those who argued that rapidly rising government debt posed a clear and present danger to the economy. Of the British government, which enacted “austerity” to get its deficit under control after the conservative takeover in 2010, he wrote:
The result is an economy that remains deeply depressed. As the National Institute for Economic and Social Research, a British think tank, pointed out in a startling calculation, there is a real sense in which Britain is doing worse in this slump than it did in the Great Depression: by the fourth year after the Depression began, British GDP had regained its previous peak, but this time around its still well below its level in early 2008.
And at the time of this writing, Britain seemed to be entering a new recession.
One could hardly have imagined a stronger demonstration that the Austerians had it wrong.
But economists on the other side of the battlefield kept working. A new book titled Austerity: When It Works and When It Doesn’t by economists Alberto Alesina, Carlo Favero, and Francesco Giavazzi both summarizes the subsequent research and makes new contributions of its own. Krugman’s argument does not fare well against this new evidence.
The Confidence Fairy
Krugman’s argument in favor of higher government spending to boost aggregate demand was based on the theory that fiscal multipliers were large. If a spending multiplier is greater than 1, an increase in government spending increases private expenditure so that total output rises by more than the increase in government spending. If a multiplier is smaller than 1, however, then increases in government spending are accompanied by decreases in private expenditure so that total output rises by less than the increase in government spending.
Krugman cited research on the impacts of military spending, particularly in wartime, to argue for large multipliers. The authors of Austerity examine a much broader range of estimates and note that in “a synopsis of studies estimating multipliers for government purchases…Most of the values range between 0.6 and 1.5.”
In other words: not much GDP bang for the deficit buck.
The argument that austerity could be expansionary—that government spending cuts could be followed by increased GDP growth—was pilloried by Krugman. “[E]xpansionary austerity was highly implausible in general, and especially given the state of the world as it was in 2010 and remains two years later,” he wrote. The belief that spending cuts would signal to individuals and businesses that better, more fiscally prudent times lay ahead was, Krugman claimed, like believing in “the confidence fairy.”
Is Austerity Expansionary?
But as Austerity’s authors show, in some cases austerity was expansionary. And, in large part, it happened for exactly the reason Krugman denigrated. Where austerity is based on spending cuts rather than tax increases, “private investment rises within 2 years,” and by the third year is above the previous level. Contra Krugman, Alesina, Favero, and Giavazzi attribute this to increased business confidence.
So, if spending is less effective and deficits and debts more onerous than Krugman argued and austerity can, in some circumstances, be expansionary, should it be based on tax increases or spending cuts?
The authors of Austerity are clear on this point.
Tax-based plans lead to deep and prolonged recessions, lasting several years. Expenditure-based plans on average exhaust their very mild recessionary effect within two years after a plan is introduced…
The component of aggregate demand that mostly drives the heterogeneity between tax-based and expenditure-based austerity is private investment
That “confidence fairy,” in other words. Investment responds positively to spending cuts and wilts in the face of tax hikes.
Krugman's Prediction Was Wrong
Britain, Krugman’s “demonstration that the Austerians had it wrong,” has, in fact, shown the opposite.
The Conservative government implemented a program of budget cuts. Over a 5-year period exogenous fixed measures amounted to almost three percent of GDP, two-thirds expenditure cuts, and one-third tax hikes. It was harshly criticized by the IMF, which predicted a major recession. The latter did not materialize and the IMF later publicly apologized. The UK grew at respectable rates.
Austerity is less reader-friendly than End This Depression Now! and is unlikely ever to have “New York Times Bestseller” emblazoned across its cover. This is a shame because it is a far more meticulous bit of work. It is, simply, the best and most in-depth book on this subject.
Over time, the main subject of economic debate shifts here and there. In the early 2000s, people worried about globalization. Then it was the crash and slow recovery. Now, the focus has moved on to income and wealth inequality. But the topics covered in Austerity will be back. They were, indeed, largely retreads of the debates between Keynes and Hayek in the 1930s and between Malthus and Say a century before that. And when the subject does return to austerity, we will be able to thank Alesina, Favero, and Giavazzi for such a thorough treatment.
March 7, 2021
This is not a light read but worth the time. The lead author and his collaborators do a survey of the effects of austerity programs (what happens when a government to reign in deficits either raises taxes or cuts spending). They create a useful data base of austerity measures in the US and the EU to understand what kinds of multipliers happen as a result of various actions.
Here are the basic conclusions. When you raise taxes, you dampen economic growth by multipliers of 1-3 and those negative results stay around for a relatively long period. When you reduce expenditures to deal with a deficit there is also a negative hit to growth but the effects are temporary and milder.
The book also lays out the equations and offers some databases to test their hypotheses. (NOTE I did not consult the databases).
I understand this book is not for the average reader - but if you are concerned about the rising deficits in the US and the increasing share of GDP being taken by national debt - look at the conclusions again.
Here are the basic conclusions. When you raise taxes, you dampen economic growth by multipliers of 1-3 and those negative results stay around for a relatively long period. When you reduce expenditures to deal with a deficit there is also a negative hit to growth but the effects are temporary and milder.
The book also lays out the equations and offers some databases to test their hypotheses. (NOTE I did not consult the databases).
I understand this book is not for the average reader - but if you are concerned about the rising deficits in the US and the increasing share of GDP being taken by national debt - look at the conclusions again.
August 9, 2020
Эдийн засгийн хямрал нүүрлэх нь ганц цаг хугацааны ажил биш аж. Хэдий томоор харах хэрэгтэй ч бидний сэтгэл зүй улсын эдийн засгийн ирээдүйн чиг хандлагыг тодорхойлдог. Иймд эрх баригчдын гаргаж буй шийдвэр тэр дундаа татвар нэмэх, улсын төсвөө танах зэрэг нь ард иргэдээр дамжуулан буцаад эдийн засагтаа хүчтэй нөлөөлдөг болохыг 1990 оноос хойш дэлхийн өндөр хөгжилтэй 16 орны тайлан тооцоон дээр үндэслэн гаргажээ. Хамгийн сонирхолтой төсвөө танах, татварын хувь хэмжээ буурахад ард иргэдэд ирээдүйг өөдрөгөөр харах хандлага ажиглагдаж дунд хугацаандаа эдийн засгийн өсөлтийг бий болгож байжээ.
This entire review has been hidden because of spoilers.
August 30, 2019
A thought provoking study, albeit dense reading.
The book's general conclusion is that fiscal consolidation is best achieved through expenditure reduction rather than via tax increases, due to the contribution the former makes to economic confidence (no expectation of tax increases), which produces superior output, consumption and investment outcomes over time. Whilst the data analysed covers 16 countries and 150+ episodes of fiscal consolidation over a long time frame, it is still challenging to disentangle the causes. In each case, was there something else at play to explain the outcome? How to translate the conclusions in to actual policy in the real world?
When looking at the aftermath of the GFC, it is challenging to conclude the book's conclusions translated into sound policy for the newly unemployed....................
The book's general conclusion is that fiscal consolidation is best achieved through expenditure reduction rather than via tax increases, due to the contribution the former makes to economic confidence (no expectation of tax increases), which produces superior output, consumption and investment outcomes over time. Whilst the data analysed covers 16 countries and 150+ episodes of fiscal consolidation over a long time frame, it is still challenging to disentangle the causes. In each case, was there something else at play to explain the outcome? How to translate the conclusions in to actual policy in the real world?
When looking at the aftermath of the GFC, it is challenging to conclude the book's conclusions translated into sound policy for the newly unemployed....................
December 21, 2025
This book is based on a series of research articles published in top economic journals, which in some respects guarantees its quality. However, since this research is now presented as a book, I will review it as one. While the authors clearly must have the writing skills required for top journals, simply gluing these articles together and hiding the seams does not make the whole greater than the sum of its parts.
The content is a sequence of chapters with some narrative linking, but it lacks the feeling of serving a larger agenda or focusing on a theoretical framework explaining why spending cuts are better than tax increases. This of course would have required another chain of research to go deeper into the question of what components of spending or taxes are the main drivers of the mechanism. But a strong narrative arc is essential to keep the reader engaged and, crucially, to help attach new messages to the reader's existing knowledge. In my view, this book – perhaps slightly truncated – would serve better as the empirical section of a broader work on austerity and its transmission to economic activity. I believe a skilled economic journalist or historian could have knitted this evidence much more effectively into the historical evolution of austerity measures. As it stands, I might consider just reading the corresponding articles in the future for a recap of this evidence.
As for the core message, I found it very interesting, though not conclusive. Policymakers cannot simply cite this book to argue for spending cuts over tax increases. However, evidence like this helps guide researchers in formulating theory and identifying where to look for the next best evidence. For example, the data here contradicts standard old Keynesian models (and simple New Keynesian ones), which imply via multipliers that spending cuts are more costly – even recessionary – than tax increases.
The authors do not take a stance on whether the European crisis countries would have been better off by postponing austerity. However, they do claim that the relative success of spending-based versus tax-based austerity still holds. To summarize, the proposed mechanism relies heavily on expectations and business confidence driving private investment – an outcome rarely achieved through tax increases. The key takeaway for policymakers is that austerity is not necessarily a "kiss of death"; in fact, successful austerity can be rewarded by voters.
I give it three stars. I enjoyed it largely because I've been very much into this literature for the past three months, but a general reader might find the structure lacking.
The content is a sequence of chapters with some narrative linking, but it lacks the feeling of serving a larger agenda or focusing on a theoretical framework explaining why spending cuts are better than tax increases. This of course would have required another chain of research to go deeper into the question of what components of spending or taxes are the main drivers of the mechanism. But a strong narrative arc is essential to keep the reader engaged and, crucially, to help attach new messages to the reader's existing knowledge. In my view, this book – perhaps slightly truncated – would serve better as the empirical section of a broader work on austerity and its transmission to economic activity. I believe a skilled economic journalist or historian could have knitted this evidence much more effectively into the historical evolution of austerity measures. As it stands, I might consider just reading the corresponding articles in the future for a recap of this evidence.
As for the core message, I found it very interesting, though not conclusive. Policymakers cannot simply cite this book to argue for spending cuts over tax increases. However, evidence like this helps guide researchers in formulating theory and identifying where to look for the next best evidence. For example, the data here contradicts standard old Keynesian models (and simple New Keynesian ones), which imply via multipliers that spending cuts are more costly – even recessionary – than tax increases.
The authors do not take a stance on whether the European crisis countries would have been better off by postponing austerity. However, they do claim that the relative success of spending-based versus tax-based austerity still holds. To summarize, the proposed mechanism relies heavily on expectations and business confidence driving private investment – an outcome rarely achieved through tax increases. The key takeaway for policymakers is that austerity is not necessarily a "kiss of death"; in fact, successful austerity can be rewarded by voters.
I give it three stars. I enjoyed it largely because I've been very much into this literature for the past three months, but a general reader might find the structure lacking.
Read
August 12, 2020Data is not deterministic but definitely more promising than other literal historical research on austerity. This book nailed it, showing you as much scenarios and contexts as possible, we should not inherent the same fear for Greek crashed as this book has brought us solid insights.
While data is becoming the metric for empirical research, it is interesting to read it on post covid recession, where data becomes a tool to perform Modern Monterey Theory (MMT) for novel way of spending. While we will be relying on data, we should keep scrutinising philosophical queries to prepare a better crisis response.
While data is becoming the metric for empirical research, it is interesting to read it on post covid recession, where data becomes a tool to perform Modern Monterey Theory (MMT) for novel way of spending. While we will be relying on data, we should keep scrutinising philosophical queries to prepare a better crisis response.
December 19, 2020
- Austerity isn't always bad, it's also not an automatic death sentences to politicians. There are 2 types of austerities: spending cuts or tax increases
- Spending cuts typically leads to better result than tax increases
- While spending cut would initially yield drop in the GDP (typically only 1 year), GDP per capita usually rises in 2 years
- Tax increase austerity on the other hand pushes the economy downwards much longer than spending cut austerity
- Tax increase often also don't accomplish what it sets to accomplish: reduce government debt burden. Rather, tax increases with no significant cutting of government expenditure often increased government debt at the end
- Spending cuts typically leads to better result than tax increases
- While spending cut would initially yield drop in the GDP (typically only 1 year), GDP per capita usually rises in 2 years
- Tax increase austerity on the other hand pushes the economy downwards much longer than spending cut austerity
- Tax increase often also don't accomplish what it sets to accomplish: reduce government debt burden. Rather, tax increases with no significant cutting of government expenditure often increased government debt at the end
October 13, 2022
Basically an extended journal article attempting to rehabilitate the (rightly) much-maligned idea of austerity.
The inherent benefit of austerity — policies which involve increases in taxes and/or cuts in governmental spending with the aim of decreasing government fiscal deficits and stabilising the debt — is never really explained or argued by the authors. They clearly take it as a self-evident good.
Avoid.
The inherent benefit of austerity — policies which involve increases in taxes and/or cuts in governmental spending with the aim of decreasing government fiscal deficits and stabilising the debt — is never really explained or argued by the authors. They clearly take it as a self-evident good.
Avoid.
August 9, 2020
Interesting take on austerity. Stands out from the common narrative. However, it doesn’t fully explain why exactly reducing spending creates less of a cumulative downward effect on GDP than raising taxes does (the inverse of Keynesian economic theory). It kind of just gives a few examples that fit their narrative. Lots of unexplained assumptions
August 9, 2020
Austerity has a bad reputation, but, according to the authors’ carefully compiled data, it can be good for a country’s economy. Of the two types of austerity, expenditure-based austerity generally leads to far better results than tax-based austerity. Spending cuts can even lead to the economy expanding, while tax hikes generally have a decidedly negative impact.
August 8, 2020
According to the authors’ data, austerity can be good for a country’s economy. Between the two, expenditure-based austerity works better and therefore better results than tax-based austerity. Spending cuts could even expand the economy, while tax hikes generally have a decidedly negative impact.
February 10, 2020
The theory is explained clearly and with ample evidence. It's a convincing argument for optimal taxation policy. Society seems to be going in a different direction though....
December 25, 2021
Informative but convulsions could be better
October 15, 2024
Bottom line? Austerity is a bitch! :)
Blinkist
Blinkist
This entire review has been hidden because of spoilers.
April 17, 2025
Lo leí al poco tiempo de que Milei entrara en la Casa Rosada. Cada día que pasa lo que decía Alesina se hace más cierto. 10/10
May 8, 2021
Tema de debates acalorados desde a grande depressão, a austeridade se tornou assunto recorrente na mídia e na política, normalmente em debates rasos, ideológicos, sem qualquer evidência e focados em seu tamanho e não em sua forma. Nesse livro, três acadêmicos buscam a melhor maneira de praticar a austeridade, qual o melhor momento para fazê la, além de suas implicações políticas.
Por meio de um extenso trabalho de busca e tratamento de dados, os pesquisadores concluem que a austeridade é menos recessiva (e em alguns casos até expansionista) quando feita majoritariamente pela redução de gastos públicos, diferente do que ocorre quando se utiliza o aumento de impostos.
Contrariando a teoria keynesiana básica, a redução de gastos possui um multiplicador menor do que a diminuir déficits através da elevação de receitas. Esse resultado se deve ao efeito das expectativas, que aumentam a confiança empresarial, busca por empregos e os investimentos.
Também concluem que austeridade é menos dolorosa em períodos de expansão ou de estabilidade, uma vez que é mais visível o efeito de crowding in do setor privado.
Além disso, questionam o senso comum sobre a relação causal entre políticas públicas expansionistas e resultados eleitorais.
Os autores não se propõe a buscar respostas sobre o tamanho ideal de Estado ou se é correto adotar a austeridade. O objetivo deles é identificar qual a melhor forma de se adotar essas medidas e em qual momento.
Em um cenário em que é provável que os países desenvolvidos tenham contratado planos de austeridade para o futuro, achei interessante ler um estudo sobre as melhores formas de faze-los.
Por meio de um extenso trabalho de busca e tratamento de dados, os pesquisadores concluem que a austeridade é menos recessiva (e em alguns casos até expansionista) quando feita majoritariamente pela redução de gastos públicos, diferente do que ocorre quando se utiliza o aumento de impostos.
Contrariando a teoria keynesiana básica, a redução de gastos possui um multiplicador menor do que a diminuir déficits através da elevação de receitas. Esse resultado se deve ao efeito das expectativas, que aumentam a confiança empresarial, busca por empregos e os investimentos.
Também concluem que austeridade é menos dolorosa em períodos de expansão ou de estabilidade, uma vez que é mais visível o efeito de crowding in do setor privado.
Além disso, questionam o senso comum sobre a relação causal entre políticas públicas expansionistas e resultados eleitorais.
Os autores não se propõe a buscar respostas sobre o tamanho ideal de Estado ou se é correto adotar a austeridade. O objetivo deles é identificar qual a melhor forma de se adotar essas medidas e em qual momento.
Em um cenário em que é provável que os países desenvolvidos tenham contratado planos de austeridade para o futuro, achei interessante ler um estudo sobre as melhores formas de faze-los.
January 8, 2024
La tesi centrale del libro postula che un certo tipo di consolidamento fiscale, basato su tagli alla spesa pubblica piuttosto che su un aumento dell'imposizione fiscale, agisca positivamente sulle aspettative degli operatori economici i quali, confortati dalla prospettiva di un minore debito pubblico nel medio-lungo periodo, spenderebbero e investirebbero di più. Il libro riporta alcuni esempi a supporto, dal Portogallo degli anni 2010-2014 a Belgio, Canada etc. Interessante excursus, in ogni caso trovo discutibile e rivedibile la tesi di questo libro, a fronte di ultimi findings IMF, per cui consolidamento nel lungo periodo mediamente non stabilizza ne riduce il debito/PIL ma deprime il denominatore, di fatto aumentando il debito stesso. Avrei apprezzato approfondimento su concetti quali "fiscal fatigue" e "reverse causality", e soprattuto focus su politiche austerity in aree valutarie non ottimali (zona €) per capire meglio incentivi ma anche necessità unione fiscale/budget centralizzato/creazione safe asset EU. In ogni caso il libro lo consiglio vivamente, partendo dal presupposto che gli autori fanno riferimento ad una precisa agenda di policy pro-mercato.
Displaying 1 - 19 of 19 reviews