My last post quoted Joe Stiglitz, indirectly, to refute Paul Krugman's fear mongering. Now the man himself has spoken in the Sunday Herald.
As Scotland contemplates independence, some, such as Paul Krugman, have questioned the "economics".
Would Scotland, going it alone, risk a decline in standards of living or a fall in GDP? There are, to be sure, risks in any course of action: should Scotland stay in the UK, and the UK leave the EU, the downside risks are, by almost any account, significantly greater. If Scotland stays in the UK, and the UK continues in its policies which have resulted in growing inequality, even if GDP were slightly larger, the standards of living of most Scots could fall.
Cutbacks in UK public support to education and health could force Scotland to face a set of unpalatable choices - even with Scotland having considerable discretion over what it spends its money on.
But there is, in fact, little basis for any of the forms of fear-mongering that have been advanced. Krugman, for instance, suggests that there are significant economies of scale: a small economy is likely, he seems to suggest, not to do well. But an independent Scotland will still be part of Europe, and the great success of the EU is the creation of a large economic zone.
Besides, small political entities, like Sweden, Singapore, and Hong Kong have prospered, while much larger entities have not. By an order of magnitude, far more important is pursuit of the right policies.
Another example of a non-issue is the currency. There are many currency arrangements that would work. Scotland could continue using sterling - with or without England's consent.
Because the economies of England and Scotland are so similar, a common currency is likely to work far better than the euro - even without shared fiscal policy. But many small countries have managed to have a currency of their own - floating, pegged, or "managed."