[Analemma_]

Since it's The Economist, I'm surprised they didn't mention one of the most common misleading metaphors I see floating around: that of equating sovereign debt to credit card or household debt. It's used constantly by both Internet commentators and politicians, and it needs to die as soon as possible, because it's completely wrong and leads you to policy conclusions that are the exact opposite of what you need to do.

[trendia]

Can you provide an example of a policy decision that is (1) correct using sovereign debt analysis but (2) incorrect when using household debt analysis?

[mabub24]

This Reuters blog post points to one: refusing to invest in public universities. This leads private debt to grow, while austerity offers no offset for students who must take out large loans to enroll.

There are many others really. It's a pervasive metaphor (sovereign debt = household debt) that leads to fundamental confusions about how governments, individual citizens and private industry, and imports/exports, interact. Many austerity-hawks are sometimes unknowingly, sometimes very knowingly, repeating it ad nauseum.

Too much sovereign debt is bad, but that is in specific contexts. Most governemnts require debt in order to secure credit (as in the USA immediately after securing independence). It's MUCH more complicated and flexible than household debt. The flexible part is often what is lost in the metaphor.

http://blogs.reuters.com/great-debate/2013/01/14/why-public-...

[trendia]

It seems a better analogy would be business debt rather than household debt.

Business debt is used for productivity and not just consumption. However, in both the case of business debt and sovereign debt, the return on the extra capital would have to exceed the interest rate on the debt.

I disagree with your analysis of public universities, however. The cost of university has grown substantially over the last 50 years with no real change in education quality. That implies there is some underlying reason for that cost disease. Besides, if everyone in the US goes to university, and the government pays for university education, there really isn't a change in who pays for tuition -- people either pay for it with a loan or they pay for it with taxes. At least if they pay for it with a loan they aren't forced to pay for someone else's education without receiving any benefit from it.

[Analemma_]

Avoiding austerity.

[DenisM]

Seriously. Your reply is bordering on curt, but austerity is the root of much disaster. Paul Krugman wrote s lot about it, e.g. https://www.theguardian.com/business/ng-interactive/2015/apr...