By email, and now on the Wolf Forum, Tim Leunig and I have had a running debate about how frequently we should expect fiscal collapses of the sort we’ve recently seen.

Tim’s view – which you can read on that link – is that they may take place every 10 years – in which case the government needs to plan for a huge fiscal surplus in the good years to make up for the bad.

I pulled out a log of Angus Madison data to show that since 1920, the non-War years have seen 3% falls about one in every 50 (going off Western European countries).  So 1 in 10 seems a tad bearish.

But it is not that straightforward, as different historical epochs produce different conditions.  Inflation – a favourite cause of Tim’s – was a predominant feature of the post War period.  Low inflation may mean more asset booms, financial volatility, panic, collapsing fiscal revenues.

I’m more optimistic – follow the reasons on the Wolf Forum, but basically because I have a liberal belief in institutional change and learning improving economic outcomes over time.  But Malthusian and geopolitical developments can derail the greatest optimist.

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