The Magic Money Tree and Other Economic Tales

This lively and provocative look at the tension between economics and politics examines why so many mistakes in economic policy-making are made for political reasons and ignore the economic truths.

Using short-term economic gains to ensure electoral success, argues Lorenzo Forni, inevitably spells macroeconomic disaster. Using the state budget, trade policy and monetary policy to prop up labour markets and the wider economy in order to boost voter approval ratings, while ignoring budget constraints can only result in longer recessions and economic downturns. Which then can incur the painful austerity measures needed to bring the economy back into balance.

Forni looks at many unsustainable economic policies that have been implemented in parts of the world when the economic realities – there is no magic money tree! – would recommend a different and more prudent economic course.

Lorenzo Forni is Professor of Economic Policy at the University of Padua and Head of Prometeia Associazione. He has worked at the International Monetary Fund in Washington and at the Central Bank of Italy in Rome.