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20 января, 19:00

Williston, ND's Debt Troubles Mock Keynesian Delusions, and Deficit 'Hawks' Too

Government spending is the ultimate tax. Deficits are a sideshow. To grow the economy, limit the amount of tax revenue governments collect.

19 января, 22:08

Без заголовка

**Should-Read**: I think Skidelsky gets it closer to right here than Krugman did in the piece Skidelsky is critiquing: **Robert Skidelsky**: [How Economics Survived the Economic Crisis](https://www.project-syndicate.org/commentary/why-no-intellectual-shift-in-economics-by-robert-skidelsky-2018-01): "Unlike the Great Depression of the 1930s, which produced Keynesian economics, and the stagflation of the 1970s, which gave rise to Milton Friedman's monetarism... >...the Great Recession has elicited no such response from the economics profession. Why?... There are serious problems with Krugman’s narrative.... Krugman’s... response is that the New Keynesians... [had] a failure not of theory, but of “data collection.” They had “overlooked” crucial institutional changes in the financial system.... Faced with the crisis itself, the New Keynesians had risen to the challenge. They dusted off their old sticky-price models from the 1950s and 1960s, which told them... budget deficits would not drive up near-zero interest rates... increases in the monetary base would not lead to high inflation... and... there would be a positive... multiplier... from changes in government spending and taxation.... [But] the success of New Keynesian policy had the ironic effect of allowing “the more inflexible members of our profession [the New Classicals from Chicago] to ignore events in a way they couldn’t in past episodes.” So neither school–sect might...

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18 января, 16:03

How Economics Survived the Economic Crisis

Unlike the Great Depression of the 1930s, which produced Keynesian economics, and the stagflation of the 1970s, which gave rise to Milton Friedman's monetarism, the Great Recession has elicited no such response from the economics profession. Why?

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16 января, 15:25

Modern Principles, 4th ed!

Tyler and I are thrilled to announce the release of the 4th edition of our principles of economics textbook, Modern Principles. In the new edition we have fully integrated the microeconomics and macroeconomics videos that we have been producing for MRUniversity. No other textbook has anything like this wealth of supplementary material–putting it all together […] The post Modern Principles, 4th ed! appeared first on Marginal REVOLUTION.

14 января, 23:59

In Which World Would You Rather Live?

(Don Boudreaux) TweetYesterday, Craig Walenta sent to me this e-mail (the text of which I share here, in full, with his kind permission): Good afternoon Professor, Quick question. Discussing tax cuts generally somebody says to me, “Well if rich people get a tax cut, their marginal propensity to consume is lower.” I responded that he’s not putting […]

28 декабря 2017, 16:58

The Economists Who Stole Christmas

How might opposing schools of economic thought – from neoclassical and Keynesian to Libertarian and Marxist, view Christmas presents? Levity aside, the answer reveals the pompousness and vacuity of each and every economic theory.

20 декабря 2017, 07:40

How Government Inaction Ended The Depression Of 1921

Authored by Lew Rockwell via Mises Canada, As the financial crisis of 2008 took shape, the policy recommendations were not slow in coming: why, economic stability and American prosperity demand fiscal and monetary stimulus to jump-start the sick economy back to life. And so we got fiscal stimulus, as well as a program of monetary expansion without precedent in US history. David Stockman recently noted that we have in effect had fifteen solid years of stimulus — not just the high-profile programs like the $700 billion TARP and the $800 billion in fiscal stimulus, but also $4 trillion of money printing and 165 out of 180 months in which interest rates were either falling or held at rock-bottom levels. The results have been underwhelming: the number of breadwinner jobs in the US is still two million lower than it was under Bill Clinton. Economists of the Austrian school warned that this would happen. While other economists disagreed about whether fiscal or monetary stimulus would do the trick, the Austrians looked past this superficial debate and rejected intervention in all its forms. The Austrians have very good theoretical reasons for opposing government stimulus programs, but those reasons are liable to remain unknown to the average person, who seldom studies economics and who even more seldom gives non-establishment opinion a fair hearing. That’s why it helps to be able to point to historical examples, which are more readily accessible to the non-specialist than is economic theory. If we can point to an economy correcting itself, this alone overturns the claim that government intervention is indispensable. Possibly the most arresting (and overlooked) example of precisely this phenomenon is the case of the depression of 1920–21, which was characterized by a collapse in production and GDP and a spike in unemployment to double-digit levels. But by the time the federal government even began considering intervention, the crisis had ended. What Commerce Secretary Herbert Hoover deferentially called “The President’s Conference on Unemployment,” an idea he himself had cooked up to smooth out the business cycle, convened during what turned out to be the second month of the recovery, according to the National Bureau of Economic Research (NBER). Indeed, according to the NBER, which announces the beginnings and ends of recessions, the depression began in January 1920 and ended in July 1921. James Grant tells the story in his important and captivating new book The Forgotten Depression — 1921: The Crash That Cured Itself. A word about the author: Grant ranks among the most brilliant of financial experts. In addition to publishing his highly regarded newsletter, Grant’s Interest Rate Observer, for more than thirty years, Grant is a frequent (and anti-Fed) commentator on television and radio, the author of numerous other books, and a captivating speaker. We’ve been honored and delighted to feature him as a speaker at Mises Institute events. What exactly were the Federal Reserve and the federal government doing during these eighteen months? The numbers don’t lie: monetary policy was contractionary during the period in question. Allan Meltzer, who is not an Austrian, wrote in A History of the Federal Reserve that “principal monetary aggregates fell throughout the recession.” He calculates a decline in M1 by 10.9 percent from March 1920 to January 1922, and in the monetary base by 6.4 percent from October 1920 to January 1922. “Quarterly average growth of the base,” he continues, “did not become positive until second quarter 1922, nine months after the NBER trough.” The Fed raised its discount rate from 4 percent in 1919 to 7 percent in 1920 and 6 percent in 1921. By 1922, after the recovery was long since under way, it was reduced to 4 percent once again. Meanwhile, government spending also fell dramatically; as the economy emerged from the 1920–21 downturn, the budget was in the process of being reduced from $6.3 billion in 1920 to $3.2 billion in 1922. So the budget was being cut and the money supply was falling. “By the lights of Keynesian and monetarist doctrine alike,” writes Grant, “no more primitive or counterproductive policies could be imagined.” In addition, price deflation was more severe during 1920–21 than during any point in the Great Depression; from mid-1920 to mid-1921, the Consumer Price Index fell by 15.8 percent. We can only imagine the panic and the cries for intervention were we to observe such price movements today. The episode fell down the proverbial memory hole, and Grant notes that he cannot find an example of a public figure ever having held up the 1920–21 example as a data point worth considering today. But although Keynesians today, now that the episode is being discussed once again, assure everyone that they are perfectly prepared to explain the episode away, in fact Keynesian economic historians in the past readily admitted that the swiftness of the recovery was something of a mystery to them, and that recovery had not been long in coming despite the absence of stimulus measures. The policy of official inaction during the 1920–21 depression came about as a combination of circumstance and ideology. Woodrow Wilson had favored a more pronounced role for the federal government, but by the end of his term two factors made any such effort impossible. First, he was obsessed with the ratification of the Treaty of Versailles, and securing US membership in the League of Nations he had inspired. This concern eclipsed everything else. Second, a series of debilitating strokes left him unable to do much of anything by the fall of 1919, so any major domestic initiatives were out of the question. Because of the way fiscal years are dated, Wilson was in fact responsible for much of the postwar budget cutting, a substantial chunk of which occurred during the 1920–21 depression. Warren Harding, meanwhile, was philosophically inclined to oppose government intervention and believed a downturn of this kind would work itself out if no obstacles were placed in its path. He declared in his acceptance speech at the 1920 Republican convention: We will attempt intelligent and courageous deflation, and strike at government borrowing which enlarges the evil, and we will attack high cost of government with every energy and facility which attend Republican capacity. We promise that relief which will attend the halting of waste and extravagance, and the renewal of the practice of public economy, not alone because it will relieve tax burdens but because it will be an example to stimulate thrift and economy in private life.   Let us call to all the people for thrift and economy, for denial and sacrifice if need be, for a nationwide drive against extravagance and luxury, to a recommittal to simplicity of living, to that prudent and normal plan of life which is the health of the republic. There hasn’t been a recovery from the waste and abnormalities of war since the story of mankind was first written, except through work and saving, through industry and denial, while needless spending and heedless extravagance have marked every decay in the history of nations. Harding, that least fashionable of American presidents, was likewise able to look at falling prices soberly and without today’s hysteria. He insisted that the commodity price deflation was unavoidable, and perhaps even salutary. “We hold that the shrinkage which has taken place is somewhat analogous to that which occurs when a balloon is punctured and the air escapes.” Moreover, said Harding, depressions followed inflation “just as surely as the tides ebb and flow,” but spending taxpayer money was no way to deal with the situation. “The excess of stimulation from that source is to be reckoned a cause of trouble rather than a source of cure.” Even John Skelton Williams, comptroller of the currency under Woodrow Wilson and no friend of Harding, observed that the price deflation was “inevitable,” and that in any case “the country is now [1921] in many respects on a sounder basis, economically, than it has been for years.” And we should look forward to the day when “the private citizen is able to acquire, at the expenditure of $1 of his hard-earned money, something approximating the quantity and quality which that dollar commanded in prewar times.” Thankfully for the reader, not only is Grant right on the history and the economics, but he also writes with a literary flair one scarcely expects from the world of financial commentary. And although he has all the facts and figures a reader could ask for, Grant is also a storyteller. This is no dry sheaf of statistics. It is full of personalities — businessmen, union bosses, presidents, economists — and relates so much more than the bare outline of the depression. Grant gives us an expert’s insight into the stock market’s fortunes, and those of American agriculture, industry, and more. He writes so engagingly that the reader almost doesn’t realize how difficult it is to make a book about a single economic episode utterly absorbing. The example of 1920–21 was largely overlooked, except in specialized treatments of American economic history, for many decades. The cynic may be forgiven for suspecting that its incompatibility with today’s conventional wisdom, which urges demand management by experts and an ever-expanding mandate for the Fed, might have had something to do with that. Whatever the reason, it’s back now, as a rebuke to the planners with their equations and the cronies with their bailouts. The Forgotten Depression has taken its rightful place within the corpus of Austro-libertarian revisionist history, that library of works that will lead you from the dead end of conventional opinion to the fresh air of economic and historical truth.

14 декабря 2017, 04:35

Brad DeLong and Charlie Deist on Austrian Economics

**Charlie Deist**: [**Brad DeLong** on Austrian Economics](https://medium.com/@rzadek/the-keynesian-critique-of-abct-ed46daf70d2a): **Charlie Deist**: Good morning everyone, and welcome to the Bob Zadek Show. I’m Charlie Deist, Bob’s producer, once again filling in for Bob, who will be back next week to discuss the topic of morality and capitalism. Are the two compatible? Is a moral citizenry required for a capitalist system, or is it the inverse? Is capitalism the only system that does not require a moral citizenry? I also want to wish our listeners a “seasonally-adjusted greetings.” The adjustment is both my filling in, and my special series here on the business cycle. When we talk about economics, we often refer to seasonally-adjusted statistics—business cycles fluctuate up and down, not only in these longer boom and bust cycles, but also throughout the year. Around Christmas time, consumers are running off to the store to buy the latest gadgets and gizmos, so we see a temporary spike in spending. Last week I was joined by Robert Wenzel, who is a self-described Austrian economist. That does not mean that he is of Austrian nationality—it means he follows the ideas of libertarian economists such as Friedrich Hayek, and Ludwig von Mises. These were 20th-century economists who...

14 декабря 2017, 00:24

Tyler Cowen and the Four Blind Men, by Scott Sumner

Tyler Cowen has an excellent new video out that looks at four schools of thought in business cycle theory, with application to the Great Recession. I agree with most of the specifics in the video, but differ in how to interpret the bigger picture. I'll try to explain why. Tyler starts with the metaphor of 4 blind men trying to understand the nature of an elephant, each touching a different part of the beast. The implication is that each of these four perspectives offers something useful, and we should not confine our view to just one perspective. The wise man takes an eclectic view of things. I see the video as mixing up very different types of disagreement. Consider his description of the 4 views: 1. Keynesian: Focus on shortfall in aggregate demand, look at C+I+G factors. 2. Monetarist: Also look at AD, but see unstable monetary policy as the root cause. 3. Real Business Cycle: Slowing productivity growth before the 2008 recession helps explain the instability of AD. Taxes and subsidies slowed the recovery. 4. Austrian: Government programs encouraged home lending, led to malinvestment. Fed policy was too stimulative before the recession. To some extent, I agree with all four views. And yet I think monetarism is true and Keynesianism, RBC and Austrianism are false. So here's how I look at things: 1. One split is between nominal and real theories of the business cycle. I believe the AS/AD model is true. This model suggests that both nominal (AD) and real (AS) factors play a role in the cycle. I believe AD shocks are the biggest factor in the US, and AS shocks are the biggest factor in Venezuela. But each play a role in both countries. 2. What do RBC proponents believe? Some RBC models do incorporate sticky prices. But I recall Bennett McCallum arguing that if real business cycle theory was not a denial of the importance of nominal shocks, then it's hard to see how it's a distinctive theory at all. After all, even in textbook Keynesian AS/AD models you see AS shocks playing a role. Furthermore, prominent RBC theorists often tend to scoff at claims that high unemployment is caused by a lack of AD, and point to factors such as government programs and regulations that create a disincentive to work. Tyler suggests that slowing productivity growth in some way have contributed to a slowdown in AD during the Great Recession. I think that's true, although I see the mechanism in a way that may differ from his view. I believe slowing productivity growth lowered the equilibrium interest rate. The Fed tried to keep up by lowering actual rates, but did not do so rapidly enough, and money became tighter. So I don't see that as evidence in support of hard-core RBC theory, in which AD shocks are not very important because wages and prices are pretty flexible. Again, not all RBC proponents take that extreme view, but it's the only thing really distinctive about the theory. Otherwise it's two blind men both touching the trunk of the elephant, and assigning different names to the same appendage. So this is why I believe that while slowing productivity growth played a modest role in throwing monetary policy off course, and government programs like 99 week extended unemployment benefits slightly raised the natural rate of unemployment during the recovery, the RBC model is fundamentally wrong. It's simply not a useful model. It adds nothing useful to AS/AD analysis. We already knew that both real and nominal shocks matter---the RBC proponents differ in incorrectly exaggerating how much they matter. 3. Let's put aside the nominal/real argument, and think about different nominal theories. The Keynesians are right that a lack of AD led to the Great Recession. But that doesn't make the Keynesian theory true. The real question is: What caused AD to fall sharply. The Keynesian model suggests that the problem is the inherent instability of capitalism, especially the propensity to invest. That may be a useful theory under the gold standard, where the money supply can be thought of as stable. But it's not a useful theory under a fiat money system with monetary offset. The Fed is supposed to offset shocks to velocity, and in the vast majority of cases it does so. After the Soviet Union collapsed there was an increasing demand for US currency notes. If the Fed had failed to accommodate that demand then money would have become tighter, triggering a depression. No one would have blamed Russian hoarding of US dollars, nor should they have done so. The Fed would be expected to meet that extra demand for liquidity. Similarly, they should have met the extra demand for liquidity after the housing bubble burst, but instead they did just the opposite during mid-2007 to mid-2008. The Keynesian model is wrong under a fiat money system, because the cause of recessions is unstable monetary policy, not the inherent instability of capitalism. And that's true even though the Keynesians are right about declining AD being the proximate cause of the recession, and even about some of the factors that caused monetary policy to be thrown off course, such as a decline in housing investment after the "bubble" burst. I think Tyler is wrong in claiming that each view offers something valuable. Either their views overlap (the importance of AD shocks), or their views directly contradict and can't both be right (i.e. the cause of falling AD was the inherent instability of capitalism, vs. the view that the cause was bad monetary policy.) 4. The one area where I slightly disagree with Tyler is his claim that the Austrians de-emphasize AD, and prefer to let the market sort things out on its own. Maybe that's correct, but I have trouble seeing how. If Austrians believe that excessively expansionary Fed policy led to an unsustainable boom with lots of bad investment, then they clearly believe it's not enough to let the market sort things out, you need a stable monetary regime. (Which may or may not involve the Fed.) That's actually similar to the monetarist view. And of course many monetarists agree with the Austrians that government credit policies aimed at promoting housing were very misguided. I believe that Austrianism is wrong as a business cycle theory because the issues they point to (while correct) don't seem powerful enough to cause a sizable recession. To summarize, I don't like the way the video contrasts one wise man with four blind men (not surprisingly, as I am one of the blind men.) I believe it's possible to believe strongly in one view (monetarism in my case) while being completely aware of the other perspectives, and even agreeing that these factors play a role in the economy. My reasons for rejecting these alternative views differ from one case to another. In the case of Austrianism and RBC theory, I believe the factors cited are simply too weak to explain the Great Recession. They are grabbing the elephant's tail, not its body. In the case of Keynesianism, I see the theory as being non-useful, because while it correctly notes the importance of AD deficiency, it doesn't correctly diagnose the reason for that deficiency--unstable monetary policy. BTW, there is no such thing as passive and active monetary policies. Policies that are passive in one dimension (say interest rates) are active in another (say money supply.) So I'm not saying the Fed should have rescued the economy, I'm saying they should have refrained from destabilizing the economy. PS. Once again, I was given a supporting role in the video: PPS. My pants don't seem particularly stylish. I'd also like to point out that Milton Friedman was about 5'2", whereas I am close to 6'4". As far as intellectual stature . . . well that's a different story. HT: Pat Horan and Vaidas Urba (10 COMMENTS)

07 декабря 2017, 21:56

In Which I Find Myself Not So Much Pro-Nancy MacLean as Anti-Anti-Obvious and True Things Nancy MacLean Wrote..

Losing friends on Twitter: What can I do here? What should I have done differently? It is a matter of basic empirical historical fact that to a typical upper class white Virginian in the 1950s, "individual liberty" included, as principal and basic parts, the liberties: * not to be bullied by unions into paying your workers higher wages. * not to be forced by the federal government into integrating either state or state-funded services, or especially public accommodations. * not to be forced to join and then taxed to pay for a Social Security program. Empirical fact. Historical fact. A seamless web of "individual liberty". These were among its principal components. To deny that these were (a large) part of what "individual liberty" meant to a typical upper class white Virginian in the 1950s—to claim that you need "textual evidence" proving that this was how any particular one thought, for the "belief" that this was the case is a "slender reed"—that is a truly remarkable hill to choose to die on: **@henryfarrell**: @delong-perhaps you might say where exactly it is that we read Buchanan through an enormously generous hermeneutic? When someone is accused of looking to protect the Southern way...

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06 декабря 2017, 21:26

Central Banks, Governments & Keynesian Economists Are Losing Their $hit Over Bitcoin

Governments want to control everything, they don't like the idea of a decentralized currency which makes anonymous coins such as Monero and Deeponion (Tor Based) perfect for us.tired of being a tax slave. Doesn't matter if you sit on front of train or back, just get on the... [[ This is a content summary only. Visit http://FinanceArmageddon.blogspot.com or http://lindseywilliams101.blogspot.com for full links, other content, and more! ]]

19 ноября 2017, 23:04

Без заголовка

**Should-Read: Jo Mitchell**: [Dilettantes Shouldn’t Get Excited](https://criticalfinance.org/2017/11/19/dilettantes-shouldnt-get-excited/): "The Freshwater version of the model concluded that all government policy has no effect and that any changes are driven by an unexplained residual... >...The more moderate Saltwater version, with added Calvo fairy, allowed a rediscovery of Milton Friedman’s main results: an expectations-augmented Phillips Curve and short-run demand effects from monetary policy. The model has two basic equations.... >The first... aggregate demand... based on an... assumption about how households behave in response to changes in the rate of interest. Unfortunately, not only does the equation not fit the data, the sign of the main coefficient appears to be wrong. This is likely because, rather than trying to understand the emergent properties of many interacting agents, modellers took the short-cut of assuming that the one big person assumed to represent the economy would simply replicate the behaviour of a single textbook-rational individual—much like assuming that the behaviour of an ant colony would be the same as that of one big textbook ant. It’s hard to see how one can make an argument that this has advanced knowledge beyond what you could glean from a straightforward Keynesian or Modigliani consumption function.... >[The second,] the Phillips...

19 ноября 2017, 20:12

How much do government workers cost?, by Scott Sumner

Tyler Cowen directed me to an interesting question raised in his comment section (by "BC"): Do federal employees pay income tax on their wages? I know they do nominally, but that tax goes back to their employer, the federal government. So, doesn't that mean that, while their actual salary may be lower than their official nominal salary, they actually don't pay any tax? (NB: this is quite different from a private sector employee whose after-tax salary is less than the pre-tax salary. In that case, the difference between the two does *not* go to the employer, creating a gap between what the employer pays and what the employee receives.) For example, suppose a private firm and the federal government both value a worker's output at $100k/yr and the tax rate is 20%. The private firm offers the worker $100k and the worker receives $80k after paying taxes. The federal government, however, can offer the worker $125k in nominal salary, *knowing that it will receive $25k back in income tax*. The net result is that the federal government pays $100k and the worker receives $100k after taxes, i.e., the worker earns $100k tax free, $20k more than he or she would earn at the private firm. Another way of seeing this is to note that taxes paid by employees are economically equivalent to taxes paid by employers. So, if employers received rebates for income taxes paid by employees, then the net income tax would be zero. Well, the federal government *does* receive a rebate for all income taxes paid by employees! Doesn't this mean that taxes are doubly distortive? Not only do they discourage employment by creating a gap between what (private) employers pay and what workers receive -- the usual cited distortion -- they also distort the *composition* of the workforce by allowing the federal government to crowd out other employers. This is one of those cases where things look very different if you recall the macroeconomic linkages. Let's start by assuming that the government hires the worker away from a comparable private sector job. In that case, the tax paid by the newly hired government worker would be offset by the tax no longer paid on the job he left in the private sector. To make things simple, assume a flat rate tax system. Then total tax revenue is the tax rate times national income. Thus in order for the act of hiring a government worker to result in more total tax revenue, the act of hiring the worker would have to boost national income. Now we can see that the actual question being asked here is whether or not the act of hiring a government worker causes national income to be higher. Here are some models where that is generally not the case: 1. Monetarism 2. Austrianism 3. Real business cycle theory 4. New Keynesian models with a natural rate of output And here's one model where it may be the case: 5. Primitive Keynesian models of the sort that were discredited during the 1970s The wrong way to think about these sorts of issues is to look at accounting relationships at the individual level. "Follow the money". The correct way to approach the problem is to think in terms of aggregates such as "national income". Does government hiring cause national income to rise? If so, then you get more revenue. PS. In some New Keynesian (and RBC?) models you might get a rise in measured national income, as the government worker would make the country poorer, causing labor supply to increase as a way of preventing an excessively sharp fall in consumption. I'm abstracting from that (second order) issue, which gets into questions about the proper way to measure GDP. (10 COMMENTS)

19 ноября 2017, 04:46

The third option, by Scott Sumner

Last week I attended the Cato Monetary conference in Washington. Jim Dorn always does a good job of finding interesting speakers. I couldn't help contrasting the event with the Peterson Institute conference that I attended last month. At the Peterson Institute, most speakers correctly noted that insufficient AD was a key problem over the past decade, but also argued (wrongly, in my view) that monetary stimulus was relatively ineffective at the zero bound. At Cato it was almost the exact opposite. I don't recall anyone doubting the effectiveness of monetary policy (I attended 3 of the 4 panels), but there was almost no concern about insufficient nominal spending. Indeed a number of speakers seemed worried that policy was too expansionary. This makes me feel really good about the prospects for market monetarism. Both logic and facts are overwhelming on our side. It seems absurd to claim a fiat money central bank could not debase its currency. Are the Zimbabweans really that much more talented than we are? And when countries like Japan have changed policy the yen has fallen sharply, even at the zero bound. That doesn't happen in the Keynesian model. As for the level of AD, during most of the past decade both inflation and employment have been well below the Fed's targets. It's the (conservative) opponents of monetary stimulus who have a difficult argument to make, not us. This recent article gives a good sense of the weakness of the arguments of our opponents: TOKYO (Reuters) - Premier Shinzo Abe's victory in last month's election may make it difficult for the Bank of Japan to dial back its radical stimulus next year despite the rising cost of prolonged monetary easing, former BOJ board member Sayuri Shirai said on Friday. . . . Shirai said the BOJ should start withdrawing stimulus by hiking its yield target and slowing asset purchases next year, given the rising cost and diminishing returns of its policy. "When the economy is in good shape like now, the BOJ needs to normalise monetary policy so it has the tools available to fight the next recession," Shirai told Reuters. "But the election result has made that difficult," she said. Raising the BOJ's 10-year government bond yield target could trigger an unwelcome yen rise by narrowing the interest rate differentials between Japan and the United States, Shirai said. This quote exhibits a basic lack of understanding of monetary economics. The speaker implies that tightening monetary policy gives the BOJ more "tools" to fight the next recession, whereas the exact opposite is true. When the BOJ tightens monetary policy the natural rate of interest falls. The speaker presumably believes that what matters is the gap between the actual rate of interest and zero, whereas what really matters is the gap between the natural rate of interest and zero. When the BOJ raises the actual interest rate with a tight money policy, the natural interest rate falls. If Shirai were correct, then the Fed could have raised interest rates to 20% in 2008, giving them lots of "tools" to later cut rates and spur the economy when the recession got severe. But that's about as effective as trying to pick yourself up by your bootstraps. This is why I insist that people appointed to the Fed should be experts on monetary economics. I don't care about credential---it makes no difference if they have a PhD---but they need to understand the basic principles of monetary economics. Does Japan need higher interest rates to pop asset prices bubbles? Consider the Japanese stock market, which is about 40% below the peak value in 1991, while the US market has risen almost 10-fold. Or take housing, where prices in Japan are down about 40% since 1990 (lavender line), while they have risen 140% in the US (blue) and 360% in Australia (light blue). Australia's had the highest interest rates over that period (among developed countries), and Japan has had the lowest. So no, rapid asset price increases are not caused by low interest rates, indeed asset prices tend to rise more rapidly in countries with very high nominal interest rates. Japan doesn't have to worry about asset price bubbles. Japan would benefit from higher nominal interest rates, but only if brought about by a more expansionary monetary policy. PS. I should emphasize that there was plenty that I agreed with at the Cato conference. A number of speakers were critical of the war on cash (as am I), and Charles Calomiris was skeptical of the view that China was a currency manipulator. PPS. David Beckworth presented me with a coffee mug. Market monetarism is right on target to becoming the dominant view in macroeconomics; just give us another 10 or 20 years. (10 COMMENTS)

17 ноября 2017, 20:25

Manhattan Retail: The New Rust Belt

Via Global Macro Monitor, Bleecker Street, said Faith Hope Consolo, the chairwoman of the retail group for the real estate firm Douglas Elliman, “had a real European panache. People associated it with something special, something different.” Ms. Consolo, who has negotiated several deals on the street, added: “We had visitors from all over that said, ‘We’ve got to get to Bleecker Street.’ It became a must-see, a must-go.”   Early on, Ms. Consolo said, rents on the street were around $75 per square foot. By the mid-to-late 2000s, they had risen to $300. Those rates were unaffordable for many shop owners like Mr. Nusraty, who was forced out in 2008 when, he said, his lease was up and his monthly rent skyrocketed to $45,000, from $7,000.    – NY Times Retail is not just being Amazoned in Manhattan, retailers are being priced out of business by exorbitant rents. Note to commercial landlords:  Lower your rents!  But,  God forbid, that would be deflationary! Empty Retail Storefronts – Midtown & Upper Manhattan Empty Retail Storefronts – Lower Manhattan Source:  Donut Shorts One response to the neoclassical argument is that, in fact, prices are not perfectly flexible (they exhibit “stickiness”). For this reason, the economy is not self-correcting, at least not in the short run. Wages and prices may be “too high” (and, therefore, result in suppliers offering larger quantities for sale than demanders are able and willing to buy), but not come down quickly and eliminate the market surplus. This view has been widely attributed to John Maynard Keynes, and is, in fact, a key argument in what is known as “New Keynesian” economic theory. –  Dollars & Sense During its incarnation as a fashion theme park, Bleecker Street hosted no fewer than six Marc Jacobs boutiques on a four-block stretch, including a women’s store, a men’s store and a Little Marc for high-end children’s clothing. Ralph Lauren operated three stores in this leafy, charming area, and Coach had stores at 370 and 372-374 Bleecker. Joining those brands, at various points, were Comptoir des Cotonniers (345 Bleecker Street), Brooks Brothers Black Fleece (351), MM6 by Maison Margiela (363), Juicy Couture (368), Mulberry (387) and Lulu Guinness (394). Today, every one of those clothing and accessories shops is closed. Mr. Sietsema, the senior critic at Eater NY, has watched with mild schadenfreude but greater alarm as his neighborhood has undergone yet another transformation from a famed retail corridor whose commercial rents and exclusivity rivaled Rodeo Drive in Beverly Hills, Calif., to a street that “looks like a Rust Belt city,” with all these empty storefronts, as a friend of Mr. Sietsema’s put it to him recently. In the heart of the former shoppers’ paradise — the five-block stretch running from Christopher Street to Bank Street — more than a dozen retail spaces sit empty. Where textured-leather totes and cashmere scarves once beckoned to passers-by, the windows are now covered with brown construction paper, with “For Lease” signs and directives to “Please visit us at our other locations.”– NY Times

17 ноября 2017, 18:45

Без заголовка

**Comment of the Day**: I have evoked some rants from Robert Waldmann... **Robert Waldmann**: [Monday Smackdown: Oh Dear!](http://www.bradford-delong.com/2017/11/monday-smackdown-oh-dear.html?cid=6a00e551f08003883401b8d2bf205d970c#comment-6a00e551f08003883401b8d2bf205d970c): "It isn't exactly Robert Waldmann's critique... >...In 1982 someone told me that he thought macroeconomics had taken a wrong turn and commenced a sterile research program which would last decades and be fruitless. That's a lot more impressive than saying such a thing now. >Who was that guy? Oh yeah, his name was Brad DeLong. >He was explaining why he had chosen history and econometrics as fields. >Experiments? Bah, humbug! >I don't know where to put this, but I have a theory as to why people call simulations experiments: If you are dealing with something you don't understand, you attempt to learn how it works with experiments. The perception that theoretical work assisted by computers is experimental is due to the fact that no one understands what drives the behavior of modern DSGE models. >This is one of their defects. One use of a model is to clarify thought. A model which is mysterious like a cell (or an economy) can't clarify thought. If you need to do numerical experiments to understand the behavior of your model, it has failed one of...

16 ноября 2017, 20:33

Six Faces of Right-Wing Chain-Forging Economist James Buchanan...

Six Faces of Right-Wing Chain-Forging Economist James Buchanan... Steven Teles inquired why I liked Will Wilkinson's essay [How Libertarian Democracy Skepticism Infected the American Right](https://niskanencenter.org/blog/libertarian-democracy-skepticism-infected-american-right/) much more than I liked **Henry Farrell** and **Steven Teles's** essays [When Politics Drives Scholarship](http://bostonreview.net/class-inequality/henry-farrell-steven-m-teles-when-politics-drives-scholarship) and [Even the intellectual left is drawn to conspiracy theories about the right. Resist them](https://www.vox.com/the-big-idea/2017/7/14/15967788/democracy-shackles-james-buchanan-intellectual-history-maclean) as takes on **Nancy McLean's** Democracy in Chains ... I must confess that I **was** struck by the contrast between the, on the one hand, enormously generous hermeneutic through which [Steve Teles and Henry Farrell] read James Buchanan and the, on the other hand, ungenerous hermeneutic through which [they] read Nancy McLean.... I see at least six James Buchanans: 1. The brilliant academic thinker behind the genius insights of Calculus of Consent . It is worth noting that the framework underlying _CoC_ with its emphasis on unanimity at the constitutional stage for _any_ regime that can be just or justified, has a profoundly egalitarian and even Rawlsian bent—a bent that becomes stronger the thinner you make the veil of ignorance and the more averse to risk you make the people behind it. Thus the fact that Buchanan deduces a profoundly anti-egalitarian politics and built from...

13 ноября 2017, 17:13

Без заголовка

**Comment of the Day: Robert Waldmann**: [Monday Smackdown: Oh Dear!](http://www.bradford-delong.com/2017/11/monday-smackdown-oh-dear.html?cid=6a00e551f08003883401b8d2bdc1ea970c#comment-6a00e551f08003883401b8d2bdc1ea970c): "I object to another word in the sentence—'only'"... >...I will modify it to answer your objection: "The only place that we can do [thought] experiments is in dynamic stochastic general equilibrium (DSGE) models." The assertion is that all models are general equilibrium models. >Now back when I was a student, general equilibrium models were Walrasian models with price taking agents. Perfect competition was one of the assumptions. That's what the phrase meant. Now the equilibrium which is general is Nash equilibrium. Imperfect competition is a standard assumption. The triumph of imperfect competition was the Eichenbaum, Cristiano and Evans model and it was a triumph because it meant that people who worked next to great lakes had admitted that people who worked nearer to the Atlantic Ocean were more nearly correct. >But nothing has ever supported the argument that anything is gained by assuming the world is in Nash equilbrium. There are two problems. By itself the assumption of Nash equilibrium implies nothing at all—it can't impose discipline on our theory. Only if you require plausible assumptions about tastes and technology does it imply anything. Yet, standard models have confessedly implausible...

13 ноября 2017, 08:18

Monday Smackdown: Oh Dear!

A correspondent asks whether or not this is unfortunate: **Lawrence J. Christiano, Martin S. Eichenbaum, and Mathias Traban**: [On DSGE Models](http://faculty.wcas.northwestern.edu/~lchrist/research/JEP_2017/DSGE_final.pdf): "Macroeconomic policy questions involve trade-offs between competing forces in the economy... >...The problem is how to assess the strength of those forces for the particular policy question at hand. One strategy is to perform experiments on actual economies. Unfortunately, this strategy is not available to social scientists. **The only place that we can do experiments is in dynamic stochastic general equilibrium (DSGE) models.** This paper reviews the state of DSGE models before the financial crisis and how DSGE modelers have responded to the crisis and its aftermath. In addition, we discuss the role of DSGE models in the policy process... It is, the **bolded** sentence especially. For one to, in one's fifth sentence, demonstrate that one is unclear about what the meaning of scientific "experiment" _a la_ Galileo is, is, as the Fish in the Pot in _The Cat in the Hat_ would say, "not a good game". Look: new Keynesian models were constructed to show that old Keynesian and old Monetarist policy conclusions and rules of thumb were relatively robust, and were not blown out of the water...

Выбор редакции
11 ноября 2017, 15:24

Quotation of the Day…

(Don Boudreaux) Tweet… is from pages 9-10 of my late Nobel-laureate colleague Jim Buchanan‘s 1966 paper “Economics and Its Scientific Neighbors,” as this paper is reprinted in Moral Science and Moral Order (2001), Vol. 17 of The Collected Works of James M. Buchanan: The physical scientist can, I think, learn much from the economist.  Essentially, he can […]

03 сентября 2016, 06:00

Antoniusaquinas.com: Джон Мейнард Кейнс “Общая теория”: Восемьдесят лет спустя

2016 год ознаменовал восьмидесятилетнюю годовщину публикации одной из самых влиятельных книг по теме экономики когда-либо увидевших свет. Эта книга – “Общая теория занятости, процента и денег” Джона Мейнарда Кейнса – нанесла непоправимый экономический и политический ущерб Западному миру и другим… читать далее → Запись Antoniusaquinas.com: Джон Мейнард Кейнс “Общая теория”: Восемьдесят лет спустя впервые появилась .

28 ноября 2014, 11:37

Владимир Мау, Алексей Улюкаев: Глобальный кризис и тенденции экономического развития

Глобальный кризис формирует экономико-политическую повестку. Она требует переосмысления многих выводов экономической теории и практики, которые до сих пор считались общепринятыми. В статье ректор Российской академии народного хозяйства и государственной службы при Президента РФ и Владимир Мау и Министр экономического развития РФ Алексей Улюкаев, опубликованной в журнале "Вопросы экономики" (11/2014) анализируют ключевые вопросы экономического развития на среднесрочную перспективу. В числе важных для формирования новой модели экономического поста проблем рассматриваются: темпы роста и вероятность долгосрочной стагнации, новые вызовы макроэкономической политики в связи с широким распространением ее нерадиационных инструментов, неравенство и экономический рост, контуры нового социального государства, перспективы глобализации,а также реиндустриализация в развитых странах. В. Мау , А. Улюкаев[1] Глобальный кризис и тенденции экономического развития* Аннотация на русском, ключевые слова, коды JEL Глобальные кризисы – общее и особенное Экономическое развитие ведущих стран определяется прежде всего предпосылками и характером глобального кризиса, который начался в 2008 г. и продолжается по настоящее время. Это кризис особого рода: он не описывается одним-двумя параметрами (например, спадом производства и ростом безработицы), а является многоаспектным, охватывая разные сферы социально-экономической жизни, и, как правило, имеет серьезные социально-политические последствия. Это системный кризис, и в этом отношении он аналогичен кризисам 1930-х и 1970-х годов (Мау, 2009). Разумеется, здесь не может быть прямых аналогий. Структурные кризисы уникальны, то есть опыт, накопленный в ходе преодоления каждого из них, практически нельзя использовать в новых условиях. Тем не менее есть ряд качественных характеристик, которые позволяют относить их к одному классу, то есть эти кризисы можно сравнивать, учитывать их особенности, но не прилагать рецепты антикризисной политики, эффективные в одном случае, к другому. Можно выделить следующие черты системных кризисов. Первое. Такой кризис одновременно и циклический и структурный. Он связан с серьезными институциональными и технологическими изменениями, со сменой технологической базы (некоторые экономисты используют термин «технологические уклады»). Эти изменения выводят экономику на качественно новый уровень эффективности и производительности труда. Системное обновление технологической базы на основе новейших достижений науки и техники – важнейшее условие успешного выхода из кризиса[2]. Второе. Существенным элементом системного кризиса выступает финансовый кризис. Именно наложение последнего на собственно экономический кризис (спад производства и падение занятости) затрудняет выход из него, обусловливает необходимость проведения комплекса структурных и институциональных реформ для выхода на траекторию устойчивого роста. Третье. Неизбежным результатом кризиса выступает формирование новой модели экономического роста: она предполагает структурную модернизацию как развитых, так и развивающихся стран, что связано с созданием новых технологических драйверов. Возникновение новых отраслей и секторов реального производства, их географическое перемещение по миру определяют новую глобальную экономическую реальность и одновременно создают предпосылки для появления новых вызовов и инструментов экономической политики. Эту тенденцию хорошо отражает появившийся в 2009 г. термин «новая нормальность» – newnormal (Улюкаев, 2009). Четвертое. Отметим серьезные геополитические и геоэкономические сдвиги, формирование новых балансов сил (отдельных стран и регионов) в мировой политике. В начале кризиса можно было предположить, что он приведет к закреплению двухполярной модели, на сей раз основанной на противостоянии США и Китая, которых иногда обозначают как G2 – «большую двойку» (Brzezinski, 2009), а Н. Фергюсон назвал «Кимерикой» (Chimerica = China + America; см.: Ferguson, 2008). Однако постепенно все отчетливее проступают контуры многополярного мира, который хотя и не отрицает наличия двух-трех ключевых экономических центров, на практике означает возврат к хорошо известной по XIX в. модели «концерта стран», балансирующих интересы друг друга. С поправкой на нынешние реалии речь может идти, скорее, о балансе интересов ключевых региональных группировок. Пятое. В ходе системного кризиса происходит смена модели регулирования социально-экономических процессов. В 1930-е годы завершился переход к индустриальной стадии развития и закрепились идеология и практика «большого государства», сопровождаемого ростом налогов, бюджетных расходов, государственной собственности и планирования, а в некоторых случаях – и государственного ценообразования. Напротив, кризис 1970-х годов привел к масштабной либерализации и дерегулированию, к снижению налогов и приватизации – словом, к тому, чего требовал переход к постиндустриальной технологической фазе. В начале последнего кризиса создавалось впечатление, что мир вновь вернется к модели, основанной на доминирующей роли государства в экономике (появился даже термин «примитивное кейнсианство» – Crass-Keynesianism). Практика, впрочем, пока не подтверждает такую тенденцию. Роль государственного регулирования действительно возрастает, однако это относится преимущественно к сфере регулирования финансовых рынков на национальном и глобальном уровнях. Действительно, в настоящее время важнейшим противоречием выступает конфликт между глобальным характером финансов и национальными рамками их регулирования. Важно выработать механизм регулирования глобальных финансов в отсутствие глобального правительства. Шестое. Системный кризис ставит на повестку дня вопрос о новой мировой финансовой архитектуре. В результате кризиса 1930-х годов сформировался мир с одной резервной валютой – долларом. После 1970-х годов сложилась бивалютная система (доллар и евро). Направление эволюции валютных систем после новейшего кризиса пока не определилось. Можно предположить усиление роли юаня, а также региональных резервных валют, если значение региональных группировок в мировом балансе сил возрастет. Множественность резервных валют могла бы поддержать тенденцию к многополярности мира и способствовать росту ответственности денежных властей соответствующих стран (поскольку резервные валюты будут конкурировать между собой). Седьмое. Начнет формироваться новая экономическая доктрина, новый мейнстрим в науке (по аналогии с кейнсианством и неолиберализмом в ХХ в.). Из всего сказанного вытекают важные выводы относительно перспектив преодоления системного кризиса и соответствующих механизмов. Во-первых, системный кризис связан с масштабным интеллектуальным вызовом, требующим глубокого переосмысления его причин, механизмов развертывания и путей преодоления. Как генералы всегда готовятся к войнам прошлого,  так и политики и экономисты готовятся к прошлым кризисам. До поры до времени это срабатывает, пока приходится иметь дело с экономическим циклом, то есть с повторяющимися проблемами экономической динамики. Поэтому сначала для борьбы с системным кризисом пытаются применить методы, известные из прошлого опыта. Применительно к 1930-м годам – это стремление правительства Г. Гувера (прежде всего его министра финансов Э. Меллона) не вмешиваться в естественный ход событий, жестко балансировать бюджет и укреплять денежную систему, основанную на золотом стандарте. Как свидетельствовал опыт предшествующих 100 лет, кризисы обычно рассасывались примерно за год и никакой специальной политики для этого не требовалось. Аналогично в 1970-е годы с началом кризиса попытались задействовать традиционные для того момента методы кейнсианского регулирования (бюджетное стимулирование в условиях замедления темпов роста и даже государственный контроль за ценами в исполнении республиканской администрации Р. Никсона), но это обернулось скачком инфляции и началом стагфляционных процессов. К системным кризисам плохо применимы подходы экономической политики, выработанные в предыдущие десятилетия. Возникает слишком много новых проблем, изначально не ясны механизмы развертывания кризиса и выхода из него, его масштабы и продолжительность. В ХХ в. на преодоление системных кризисов требовалось порядка десяти лет. Именно на это обстоятельство указывал П. Волкер, когда в июле 1979 г., в разгар предыдущего системного кризиса, вступил в должность руководителя ФРС: «Мы столкнулись с трудностями, которые до сих пор еще не встречались в нашей практике. У нас больше нет эйфории…, когда мы возомнили, что знаем ответы на все вопросы, касающиеся управления экономикой». Во-вторых, системный кризис не сводится к рецессии, росту безработицы или панике вкладчиков банков. Он состоит из ряда эпизодов и волн, охватывающих отдельные секторы экономики, страны и регионы. Это предопределяет его продолжительность – примерно десятилетие, которое можно назвать турбулентным. Более того, статистические данные могут неточно или даже неадекватно отражать происходящие в экономике процессы. Сам факт технологического обновления может искажать (причем существенно) динамику производства, поскольку новые секторы сначала плохо учитываются традиционной статистикой. Проблемы создает и статистика занятости. Если в ходе циклического кризиса одним из важных показателей его преодоления выступает рост занятости, то при системном кризисе этот критерий действует лишь в конечном счете. Технологическое обновление предполагает качественно новые требования к трудовым ресурсам, то есть серьезные структурные изменения на рынке труда. Поэтому для выхода из системного кризиса характерно запаздывающее восстановление занятости, когда высокая безработица сохраняется на фоне экономического роста. Возникает своеобразный конфликт между новой экономикой и старой статистикой, и для его разрешения требуется определенное время. В-третьих, нельзя преодолеть системный кризис лишь мерами макроэкономической политики, макроэкономического регулирования при всей важности бюджетных и денежно-