Leithner Letter Nos. 171-174
26 February 2014 - 26 May 2014

I favour the policy of economy not because I wish to save money, but because I wish to save people. The men and women of this country who toil are the ones who bear the cost of the government. Every dollar we carelessly waste means that their life will be so much the more meagre. Every dollar that we prudently save means that their life will be so much the more abundant. Economy is idealism in its most practical form.

U.S. President Calvin Coolidge
Inaugural Address
(4 March 1925)

… in the short run, [it] seems to me that any reasonable cost-benefit judgment suggests that further steps into austerity have growth costs that very substantially exceed any debt reduction benefits, … So the right path – and this, it seems to me, has been the right view for several years – has been that relative to the path we’re on, we need more action … And it seems to me – and this is one of the points I stress in my testimony – that if you accept that diagnosis, the ideal fiscal policies are measures which pull subsequent expenditures forward.

Larry Summers on Austerity
The Wall Street Journal
(4 June 2013)

Austerity, What Austerity?

In early January, when I typed “austerity” into Google, I received this response: “(1) sternness or severity of manner or attitude (‘he was noted for his austerity and his authoritarianism’); (2) difficult economic conditions created by government measures to reduce public expenditure (‘the country was subjected to acute economic austerity’).” It’s probably not coincidental: today’s Oxford Dictionary uses almost exactly the same words to define austerity. Equally interestingly, this current definition differs significantly from one that was commonly used decades ago. The Webster’s Collegiate Dictionary (5th ed., 1948), for example, defines austerity as “the quality or state of being austere.” Austere, in turn, means “(1) sour and astringent; rough to the taste; harsh; bitter (‘austere wine’); (2) rigorous; stern; (3) severe or strict; ascetic (‘austere mode of life’); (4) unadorned, severely simple (‘austere religion’); (5) grave, sombre (‘austere mood’).”
Notice how the definition has changed: the earlier conception possesses no strand that’s equivalent to the contemporary definition’s second strand. Behind this later addition I detect the evil hand of Keynesian economics (see in particular Hans-Hermann Hoppe, The Misesian Case Against Keynes). Specifically, Keynesians, who’ve long influenced bureaucrats, journalists and politicians, who in turn have influenced the public at large, have (a) conflated a particular trait (austerity) and a cardinal virtue (prudence); (b) confused cause and effect (as we’ll see, austerity today doesn’t, as Keynesians assert, create difficult economic conditions tomorrow; quite the contrary, profligacy today necessitates austerity tomorrow); and (c) rebadged austerity-prudence as a vice. Consequently, “austerity” has become a favourite term of abuse hurled by people (or their masters) who indignantly refuse to stand on their own two feet. But if you refuse to live within your own means then you must necessarily live within somebody else’s means – whether that “somebody” likes it (or even knows it) or not. That’s not courageous, just, prudent or temperate (i.e., virtuous).

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Chris Leithner


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