Monday, April 08, 2013

Natural Experiment

Economists, especially macro economists, are forced to rely on natural experiments for the study of various theories. Europe, and to a lesser extent the US, are currently conducting big experiments in fiscal austerity. The results have been catastrophic at the human scale for many of the Southern economies but Germany and friends remain dedicated to that old Castor Oil purge. Meanwhile, Japan, after decades of somnolent deflation, has chosen a monetarist/Keynesian try to pump up inflation in order to stimulate the economy.

We shall see how it works.