Saving for a Rainy Day Post author By Philip Lane Post date April 24, 2009 Dani Rodrik highlights the success of Chile’s finance minister in preparing for the downturn: you can read it here. Categories In Fiscal Policy Tags Chile fiscal policy 9 Comments on Saving for a Rainy Day ← A Green View of NAMA → Unemployment among the Young 9 replies on “Saving for a Rainy Day” Proponents of Keynes will argue that his General Theory called for government spending to be counter-cyclical. Unlike the 2002-2009 Irish public expenditure which was so pro-cyclical that Public sector crowded out Private sector (wages, pensions etc.) to such an extent that school-leavers targeted Public sector jobs and in doing so altered their preference for third-level degree courses to such an extent that Ireland now has a dearth of IT/Engineering graduates at a time of ballooning unemployment. Remember the unanticipated budget surpluses: 2004 1bn, 2005 1.5bn & 2006 2.5bn (cumulatively e5bn). Look at Copper prices today – up $2000/tn since late-2008 – Chile not only prepared for the downturn, they’ll benefit enormously from the upturn when it arrives. I can see the exam question. “As thought experiment, how would you expect the policies of two Ministers for Finance in booming economies to differ depending on their professional training , where one is an accountant and the other is a macroeconomist? It would help to illustrate your answers with examples from pro-market countries during the during the period 2000-2009. ” It would be very interesting to see how the answers of students varied depending on whether they major in economics or accountancy/business studies or politics. For extra marks please discuss how replacing an accountant with a lawyer may be seen an insane move. Honours only – Please demonstrate how two lawyers in succession are the not the equal of one economist. Rational Choice Theory has been turned on its head! I believe that this is rather significant for the field of Macroeconomics, so rare is it that one of it’s models have a bona fide test case, of this nature. Unless there are others that I have not stumbles upon? Jeeze…its kinda depressing to compare and contrast. Chile and keynesianism… interestingly it was Chile that got Friedman a large part of his reputation, it is a result of pure Chicago school policy, and results speak for themselves i guess. +1 por todos los huevones que me estan escuchando! Do you think Joseph from the book of Genesis was the first economist? For those of you a little rusty on your theology Pharaoh had a dream which involved seven fat cows being eaten by seven scrawny cows. Joseph interpreted the dream telling Pharaoh there would be seven good years followed by seven years of famine in Egypt. Joseph told Pharaoh to take a fifth of the harvest in good times and save it for the lean years. Which is what they did and survived the famine. (Check out Genesis 41) It’s not really economics just common sense. By the way I majored in business studies and am an accountant. No right minded accountant would suggest to their employer or client to spend, spend, spend. We’re always expecting disaster. Economics might be described as the dismal science but we’re not far behind. Actually I don’t know any accountants who work in the public sector despite knowing a lot of accountants. Are they recruited from the general pool that get churned out of accountancy practices every year or are they internally grown. That’s a serious question by the way. @Stuart Blythman: there certainly are some accountants, and some are even recruited as such: see http://www.publicjobs.ie/en/civilservice/categories.asp. The specialist UK-based public-sector accountancy body CIPFA has been growing in Ireland, but I think it’s still pretty small and focused on local authorities: http://www.cipfa.org.uk/regions/roi/ (I’m open to correction on that). The other question is the extent to which accountants, and others in “professional and technical roles”, ever get to make the decisions. I suspect that generalists are more likely to get to run the show. The Irish public service is ruled not merely by generalists, that is to say persons who have no need for and often no professional qualifications, but by those who pass muster in the Dept of Finance. These are male, often single and very close to the Knights of Columbanus. Haughey had a vision for Ireland and devised this plan despite the obvious need for specialists urged in various reviews, ensured that his gang controlled the public service. Serving time in Finance during his tenure was part of the CV for most who control the public service. A survey of how powerful married women actually are would be interesting as their participation rates suggest that real decisions are being taken around them. Working very long hours is another badge of those on the inside of the shadow power structure in the civil service. Revenue recruited accountants but, as inspectors of taxes, they never became Revenue Commissioners. Inspectors of Taxes used to act in their own right, but that power has been diluted and now most act at the behest of their superiors. They are all far less rigorously trained and the last batches of accountants are understood to be concerned at some of the decisions of their superiors. Luckily, we will not be burdened by the details until the scandals break due to the Official Secrets Act and boycotting within the Revenue. Comments are closed.