1 thought on “Low interest rates are not an argument for more government borrowing”

  1. Posted 07/03/2017 at 17:56 | Permalink

    “Where the lay public and its politicians might be excused for warming to the idea, others ought to know better”. The preceding phrase could quite aptly be applied to this piece. The objections to government borrowing in the form of the “Zimbabwe”, government failure, and crowding out arguments are to some extent fair (although the suggestion that additional borrowing is a slippery slope to Venezuelan levels of fiscal irresponsibility is simply a fallacy). The crucial flaw in this piece, however, is its casual assumption of Ricardian equivalence. This might be a credible assumption in the confines of an economics textbook, but to apply it to a real-world issue without defending its (contested) assumptions is an oversight.

    The title of this piece would read better as “Low interest rates are not an argument for more government borrowing, assuming that taxpayers have rational expectations (among other assumptions)”.

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