Someone told me (little economy-fiction exercise)

Medium- or long-term forecasting, politics or fiction-economics are dangerous exercises

The best economists have seen their reputation damaged by unfortunate predictions. Three days before the crash of 1929, Irving Fisher wrote that “the price of shares have reached what appears to be a permanently high plateau.” This led him to write in 1932 one of the reference articles on business cycles (” Booms and Depressions: some first principles ” PDF). Many people remember Malthus and Marx, whose long-term pessimistic predictions have not been realized, which would invalidate all their thinking.

There is also a particular form of a prediction: the one that its author does not want to be realized. Thus, in his recent book, Capital in the Twenty-first Century, Thomas Piketty shows that, according to current dynamics, a patrimonial society comparable in some respects to that of the end of the 19th century will be reconstituted by the end of the 21st century. century. He offers this perspective for a resolute action to be adopted, the establishment of a global tax on capital, and so the catastrophe in germ will never occur in a position that recalls that of Jean-Pierre Dupuy in For an enlightened catastrophism.

The OFCE forecasts on the consequences of austerity can be interpreted in the same way. These forecasts underline that budgetary consolidation measures implemented simultaneously in European countries, at a time when business investment choices are constrained by their short-term incomes, lead to an increase in unemployment, a recession which is prolonged, and therefore growing doubts about the possibility of reducing fiscal deficits as well as a risk of deflation which will further prolong the crisis. At the same time, the OFCE with European partners proposes an alternative scenario of the exit of crisis ( Independent Annual Growth Survey 2014: from austerity to stagnation ) so that the European public decision-makers react and that these pessimistic predictions do not come true not.

If the economy-fiction is perilous, it may be more striking than growth forecast scenarios

These scenarios tell us that if European countries simultaneously follow their commitments to reduce the structural deficit (which represents, for France, 50 billion euros by 2017), then France would be in 2017 with a high unemployment rate, very close to its peak, a deficit certainly low but a debt still high, and, above all, a rebound capacity preserved by having driven the economy on the brake for seven years.

From there, it will be enough for the president and the next government to do nothing (to stop the fiscal consolidation) for the growth to restart, the debt will be reduced and unemployment will fall quickly. Better, it will have room for maneuver to reduce the tax – say 50 billion euros. The growth and decline of unemployment will then be all the faster, which will allow it to remain in the nails of the 3% of fiscal deficits and still reduce the debt made a post.

As in the days of the Reaganomics, some economists will see a confirmation of supply policy and of Say’s famous law (Mankiw, who replaced Krugman as economic editorialist at the New York Times, will write a column entitled ” In the Long Run, Keynes is dead but Say is still alive ” ). The president can then announce bonuses for pre-class teachers and a change of status for midwives. Unable to represent in 2022, the president’s wife presents himself in his place. The first woman president of the French Republic is elected in May 2022. The evening of her election, she flew to Washington to meet Hillary Rodham Clinton, President of the United States. In 2036, his story is adapted in Broadway musical then film. His title: Someone told me.