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Here's the wisest economic saying I have ever heard: governments should run the economy like a housewife runs her household budget. That was Margaret Thatcher.

Here's the wisest economic saying I have ever heard: governments should run the economy like a housewife runs her household budget. That was Margaret Thatcher. The second-most insightful saying on economics I have ever heard: The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. -- Friedrich August von Hayek Forget the AI, forget the experts, forget the professors with their PhDs in economics. They're all just guessers, making guesses that are as likely to be wrong as they are to be right. Got that?

admax88q 6y ago
I strongly disagree with running the government like a household budget. It seems like a nice simple reduction but they're very different things. Corporations don't run as household budgets, neither should governments. Two main differences, growth and taxation. Growth means that economically you can outspend your "budget" every year and still come out ahead because that spend this year makes next year's budget larger. Taxation means your can spend money on any one initiative and if it increases economic activity in any way you can make it back via unrelated taxes without increasing any tax rates or fees. Households have neither of these options.
- luckylion 6y ago
  A household could also just spend money hoping to increase next year's income (because you bought a bigger car or a new suit/dress). If that works, you'll also "come out ahead". But it usually doesn't, I guess. For taxation, you might consider stock market investments a similar thing "oh sure, I spend money here, but by doing so I stimulate the economy and I get dividends from my shares". Of course, they can't just declare themselves shareholders of other companies and send in the cops to collect money, that's a state-level privilege.
- winstonewert 6y ago
  It seems to me that its not really that different from a household. A household can also end up ahead if it outspends in ways that contribute to future growth. In fact, most people do to get an education, buy a house, etc. It seems to me that it's not a really question of whether or not its a household, its whether the spending actually contributes to growth. Fundamentally, that depends on how its spent. If you spend the money bombing countries in the middle east, probably not.
  - asgard1024 6y ago
    Nation is very different from a household. There is lot more people, they are anonymous. You need money to track who owns to whom, in household everybody knows. The worker specialization is much more relevant in the national economy. There is labor and trade and different political interests. I could go on and on. Addendum: It might be true that in the nation as in the household, you should be aware if you are entering an external contract with someone, like borrowing money. But the question of internal debt between the citizens of the nation cannot be reduced to household economy, there is no such thing as an austere husband lending money to his wife.
    - winstonewert 6y ago
      Obviously, a nation is very different from a household. But they aren't different in the way that the post I was responding to suggested, that a household couldn't possibly overspend for future benefit whereas a nation could.
      - asgard1024 6y ago
        No, that's not what the quote was about, the quote was saying that their economies should be managed the same way. Your interpretation of that quote is much narrower and in particular, it only applies to foreign debt.
        winstonewert 6y ago
        I don't know what quote you are referring to as no quotations are involved in this discussion. The post I was responding to said: > Growth means that economically you can outspend > your "budget" every year and still come out ahead > because that spend this year makes next year's budget > larger." I pointed out that's not different between a household and a nation, both can do this. Yes, nations are very different from households. And yes, you shouldn't run their economies the same way. But to make that point you really need to point to criteria that differ between households and nations, and not to things which aren't actually fundamentally different.
pjmorris 6y ago
The US would've never been a country had it followed Thatcher's advice. It took borrowing to fund the Revolutionary war. It also misses or misunderstands the value of a central bank and a reserve currency.
clavalle 6y ago
You just described science if, after the guess, they test the guess and observe the results.
mcguire 6y ago
Thatcher's government also required the assistance of a third-world military dictatorship to recover a group of near-uninhabitable rocks in the south Atlantic from another third-world dictatorship, in part because they had severely cut military spending. "British people still believe in loyalty to their friends." (https://www.theguardian.com/world/1999/oct/06/pinochet.chile https://www.theguardian.com/world/1999/oct/06/pinochet.chile)
antimaggie 6y ago
That wasn't wisdom at all, it was just a folk tale to justify a right-wing government pushing forward a slew of unnecessary budget cuts. After all, a household does not have to invest in jobs, fund healthcare, maintain infrastructure and so on, as governments do. And it's been repeatedly demonstrated that there are damaging second-order effects from not doing this, which particularly hit the poorest and most vulnerable in society. Not that your average selfish right-winger would give a shit about that, of course. Unfortunately, fans of right-wing politics tend to be too ideologically blinkered or just too stupid to realize how much of a fallacy it is, and the deleterious effect this has on governance.
neilwilson 6y ago
That belief is only held by those who are hard of accounting. The government's red ink is our black ink. Treasuries are savings assets for the private sector. It's the desire the save in aggregate and be in the black that drives the red ink on the other side of the balance sheet, not the other way around. So to balance the budget you have to prevent anybody saving in aggregate, which is impossible to do without completely collapsing the economy 2008 style via an unsustainable private debt bubble. People like to save. That has to be accommodated by the currency issuer.
pessimizer 6y ago
> governments should run the economy like a housewife runs her household budget. This is such a bad way to think about the economy, and cited as such so often, that I'd started to think of it as a strawman. Housewives don't print their own currencies.

admax88q 6y ago

I strongly disagree with running the government like a household budget. It seems like a nice simple reduction but they're very different things. Corporations don't run as household budgets, neither should governments. Two main differences, growth and taxation. Growth means that economically you can outspend your "budget" every year and still come out ahead because that spend this year makes next year's budget larger. Taxation means your can spend money on any one initiative and if it increases economic activity in any way you can make it back via unrelated taxes without increasing any tax rates or fees. Households have neither of these options.

luckylion 6y ago
A household could also just spend money hoping to increase next year's income (because you bought a bigger car or a new suit/dress). If that works, you'll also "come out ahead". But it usually doesn't, I guess. For taxation, you might consider stock market investments a similar thing "oh sure, I spend money here, but by doing so I stimulate the economy and I get dividends from my shares". Of course, they can't just declare themselves shareholders of other companies and send in the cops to collect money, that's a state-level privilege.
winstonewert 6y ago
It seems to me that its not really that different from a household. A household can also end up ahead if it outspends in ways that contribute to future growth. In fact, most people do to get an education, buy a house, etc. It seems to me that it's not a really question of whether or not its a household, its whether the spending actually contributes to growth. Fundamentally, that depends on how its spent. If you spend the money bombing countries in the middle east, probably not.
- asgard1024 6y ago
  Nation is very different from a household. There is lot more people, they are anonymous. You need money to track who owns to whom, in household everybody knows. The worker specialization is much more relevant in the national economy. There is labor and trade and different political interests. I could go on and on. Addendum: It might be true that in the nation as in the household, you should be aware if you are entering an external contract with someone, like borrowing money. But the question of internal debt between the citizens of the nation cannot be reduced to household economy, there is no such thing as an austere husband lending money to his wife.
  - winstonewert 6y ago
    Obviously, a nation is very different from a household. But they aren't different in the way that the post I was responding to suggested, that a household couldn't possibly overspend for future benefit whereas a nation could.
    - asgard1024 6y ago
      No, that's not what the quote was about, the quote was saying that their economies should be managed the same way. Your interpretation of that quote is much narrower and in particular, it only applies to foreign debt.
      - winstonewert 6y ago
        I don't know what quote you are referring to as no quotations are involved in this discussion. The post I was responding to said: > Growth means that economically you can outspend > your "budget" every year and still come out ahead > because that spend this year makes next year's budget > larger." I pointed out that's not different between a household and a nation, both can do this. Yes, nations are very different from households. And yes, you shouldn't run their economies the same way. But to make that point you really need to point to criteria that differ between households and nations, and not to things which aren't actually fundamentally different.

pjmorris 6y ago

The US would've never been a country had it followed Thatcher's advice. It took borrowing to fund the Revolutionary war. It also misses or misunderstands the value of a central bank and a reserve currency.

clavalle 6y ago

You just described science if, after the guess, they test the guess and observe the results.

mcguire 6y ago

Thatcher's government also required the assistance of a third-world military dictatorship to recover a group of near-uninhabitable rocks in the south Atlantic from another third-world dictatorship, in part because they had severely cut military spending. "British people still believe in loyalty to their friends." (https://www.theguardian.com/world/1999/oct/06/pinochet.chile https://www.theguardian.com/world/1999/oct/06/pinochet.chile)

antimaggie 6y ago

That wasn't wisdom at all, it was just a folk tale to justify a right-wing government pushing forward a slew of unnecessary budget cuts. After all, a household does not have to invest in jobs, fund healthcare, maintain infrastructure and so on, as governments do. And it's been repeatedly demonstrated that there are damaging second-order effects from not doing this, which particularly hit the poorest and most vulnerable in society. Not that your average selfish right-winger would give a shit about that, of course. Unfortunately, fans of right-wing politics tend to be too ideologically blinkered or just too stupid to realize how much of a fallacy it is, and the deleterious effect this has on governance.

neilwilson 6y ago

That belief is only held by those who are hard of accounting. The government's red ink is our black ink. Treasuries are savings assets for the private sector. It's the desire the save in aggregate and be in the black that drives the red ink on the other side of the balance sheet, not the other way around. So to balance the budget you have to prevent anybody saving in aggregate, which is impossible to do without completely collapsing the economy 2008 style via an unsustainable private debt bubble. People like to save. That has to be accommodated by the currency issuer.

pessimizer 6y ago

> governments should run the economy like a housewife runs her household budget. This is such a bad way to think about the economy, and cited as such so often, that I'd started to think of it as a strawman. Housewives don't print their own currencies.