Hubris of the hapless

By

Last week a group of economists called on Britain's Chancellor of Exchequer Gordon Brown to

follow the lead of the US Treasury and create an institution to look at the dynamic effects of tax cuts and include these in his public finances forecasts. Brown assumes at present that changes in tax rates have no impact on economic growth, investment behaviour or tax evasion.

In British — and indeed in European — politics the economy is viewed almost exclusively as a static entity. This despite the fact that it has been repeatedly demonstrated that tax cuts (if they are substantial enough) stimulate economic activity. This ignorance of a fundamental principle of economics is truly remarkable on the part of those who consider themselves a cut above everyone else.

It is well known that European elitists almost uniformly believe that we Americans are dunces. But on this point they are badly mistaken. In fact, the average American voter is a veritable wizard compared with even the brightest among them. After all, most of us know that economic activity is not a zero—sum—game.

Mr. Brown and his elitist friends could greatly benefit from a visit to Middle America. There they would surely find someone willing to enlighten them on the basic rules of economics, which is obviously something they don't teach at Oxford or at the The École Nationale D'administration these days. In addition they would also get a lesson in genuine goodwill and charity which makes most Americans loath to think of others badly no matter how hapless or confused they may be.

But self—assured in their hubris, the Europeans are not likely to reevaluate their views any time soon. This is truly unfortunate, since it is becoming increasingly evident that their misguided policies are pushing a number of Europe's economies toward collapse. Once things come crashing down, they will have nowhere to look for help but to those obtuse Americans. The question is whether the next time around they will be willing to bail them out.

Vasko Kohlmayer   7 3 06

Last week a group of economists called on Britain's Chancellor of Exchequer Gordon Brown to

follow the lead of the US Treasury and create an institution to look at the dynamic effects of tax cuts and include these in his public finances forecasts. Brown assumes at present that changes in tax rates have no impact on economic growth, investment behaviour or tax evasion.

In British — and indeed in European — politics the economy is viewed almost exclusively as a static entity. This despite the fact that it has been repeatedly demonstrated that tax cuts (if they are substantial enough) stimulate economic activity. This ignorance of a fundamental principle of economics is truly remarkable on the part of those who consider themselves a cut above everyone else.

It is well known that European elitists almost uniformly believe that we Americans are dunces. But on this point they are badly mistaken. In fact, the average American voter is a veritable wizard compared with even the brightest among them. After all, most of us know that economic activity is not a zero—sum—game.

Mr. Brown and his elitist friends could greatly benefit from a visit to Middle America. There they would surely find someone willing to enlighten them on the basic rules of economics, which is obviously something they don't teach at Oxford or at the The École Nationale D'administration these days. In addition they would also get a lesson in genuine goodwill and charity which makes most Americans loath to think of others badly no matter how hapless or confused they may be.

But self—assured in their hubris, the Europeans are not likely to reevaluate their views any time soon. This is truly unfortunate, since it is becoming increasingly evident that their misguided policies are pushing a number of Europe's economies toward collapse. Once things come crashing down, they will have nowhere to look for help but to those obtuse Americans. The question is whether the next time around they will be willing to bail them out.

Vasko Kohlmayer   7 3 06