海角大神

One thing about聽the article聽that聽I linked to yesterday聽that I didn't mention was that it contained some Austrian, or at least semi-Austrian, insights, expressed by聽Urmas Varblane, professor of economics at the University of Tartu:

In the boom years, says Varblane, 鈥淕DP growth was not real. It was artificial,鈥� fueled by cheap debt from abroad. The peak, Krugman鈥檚 point of comparison, was not 鈥渞eal,鈥� he says. That Estonia has not reached it again is a good thing, Varblane and Ligi say. It never should have been there in the first place.

I can't speak for Varblane, but this shouldn't be interpreted that it would be wrong if GDP rose back and unemployment fell back to the levels of 2007. Quite to the contrary, one should strive for GDP to be at least as high and unemployment at least as low as then. What it means is instead first of all that it shouldn't be done in the unsound and unsustainable way as then.聽

And secondly that because the 2007 level of production to such a high extent consisted of the production of malinvestments the level of genuine prosperity, production of things that were really wanted, was in fact much lower than GDP figures suggested. This in turn implies that using 2007 as a base year is misleading and that production of genuine prosperity has developed in a much stronger way.