A Tutorial On Economic Policy At Oxford And Financial Reporting

Simon Wren-Lewis describes a short tutorial which he would have delivered to one of his students at Oxford.  The Financial Times  had published an article which argued that the modest economic recovery in the UK justified the austerity policies of the Cameron government.  The recovery is just what macroeconomic theory that is taught at Oxford suggests.  Economies don't stay in recession forever.  In the medium term supply side factors lead to positive growth in output.  In the short term, however, the economy suffers from inadequate demand and a negative growth rate.  The austerity imposed by the Cameron regime decreased aggregate demand and deepened the recession.  It caused a lot of unnecessary unemployment and hardship.  The article published by the FT could have been written by one of the government's speech writers.  It would not have been written by anyone familiar with macroeconomic theory.

His student then asked why he was told that he should make a habit of reading articles about the economy in the financial press.  Wasn't he told to read the Wall Street Journal and the Financial Times?  Lewis gagged after the mention of the WSJ,  but he had to hesitate about the FT.  There are well trained economists who write for the FT but its readers have not been affected by the recession like most of the public in the UK.  Sometimes even reputable papers can be tempted to appeal to the prejudices of its customer base.