“Austerian” economics: Does the Vienna school favor
fiscal deficit reduction even in a subpar economy?
Lawrence H. White
Published online: 4 July 2014
Springer Science+Business Media New York 2014
Abstract Does the economic analysis associated with the modern Austrian school
favor a policy of restraining the government’s fiscal deficit even in a subpar economy,
as suggested by those who (pejoratively) label such a policy “austerian”?Because
resources are not superabundant even in a subpar economy, the answer is yes, unless
(implausibly) the return on the last (lowest-payoff) dollar of government expenditure
exceeds the return on private investment.
The term “austerian” has become a favorite of Keynesian commentators in recent years,
most notably Paul Krugman. From 2010 onward Krugman has used the term more than
once a month on his blog. He uses it as a dismissive label for anyone who favors so-
called austerity, i.e. wants to restrain a government’s budget deficit even when output is
below its estimated full-employment potential. (By contrast, the Fiscal Keynesian
position calls for larger deficits in a recession, smaller deficits as the economy
approaches full employment, on the grounds that a larger deficit helps to boost
depressed output toward its potential level.) The online Urban Dictionary
austerian, n.; pl. austerians. Pejorative. A person who advocates austerity, that is,
the cutting [of] government expenditures, particularly social expenditures, in an
effort to cut governmental deficits. (A comic formation based on the word
Rev Austrian Econ (2014) 27:351–358
http://www.urbandictionary.com/define.php?term=austerian. Accessed 18 June 18, 2014.
SDAE Presidential address, 24 November 2013. I thank Patrick Newman for research assistance.
L. H. White (*)
George Mason University, 4400 University Dr., MS# 3G4, Fairfax, VA 22030, USA