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Review: Fiscal Policy for Eternity: Review of Olivier Blanchard’s Fiscal Policy Under Low Interest Rates

Kovacs, O. (2023): Fiscal Policy for Eternity – Public Debt: Devil or Messiah? /in Hungarian/ Review of Olivier Blanchard’s Fiscal Policy Under Low Interest Rates, MIT Press, US, 2022/2023, p. 176, Economic Review, Vol. 70., No. 1, pp. 103-110

The opinion canon of mainstream economics is being broken by more and more dissonant voices, the source of which is the mainstream itself. Therefore, we can attribute special importance to the research from a mainstream thinker who undertakes to analyze in depth the secular trends of systemic economic-social movements, and to formulate their economic policy consequences. One such systemic trend is the policy of persistently low central bank base interest rates.
Olivier Blanchard’s latest volume is about this trend and its fiscal policy consequences. As a long-time driver of mainstream economics, Blanchard has earned timeless merits, and his statements have always received great attention (see, for example, his statements as the chief economist of the International Monetary Fund between 2008 and September 2015), and his presence at certain events is also symbolic and telling. For example, at the Budapest conference organized in honor of János Kornai’s 90th birthday, Blanchard himself gave a presentation, thereby indicating that he was one of those who, together with Kornai, contributed significantly to the formation and subsequent development of the discipline of transition. The present book is therefore written by a highly influential economist who obtained his doctorate at MIT in 1977 together with the Nobel laureate Paul Krugman, and who, in addition to remaining a mainstream economist, left the ivory tower of simplifying models and advanced science very often, and, more importantly, he took the risk of making mistakes when formulating important policy proposals and lessons.
For us, the implicit summation of the book may sound like we should not be afraid of debt but rather of politicians,  who use the debt for a variety of purposes, because they can lead to really bad things. And, of course, the aggregate value of debt does not say anything either (its high value does not mean that indebtedness itself is the devil or the messiah predicting a solution), we have to look at the change in composition and its complex and often non-linear interaction with other socio-economic phenomena before we pronounce the verdict. This is the point that suggests that mainstream macroeconomic thinking must be expanded almost inevitably. And the reviewed book points exactly in this direction, so all of its contents can be an excellent travel companion for all those who wish to follow the formation of budget policy, or indeed work on the renewability of mainstream economics.
The review is available only in Hungarian.