tag:blogger.com,1999:blog-2546602206734889307.post8159479444671275110..comments2024-03-28T04:29:22.717+00:00Comments on mainly macro: Austerity, journalists and the financial sectorMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger32125tag:blogger.com,1999:blog-2546602206734889307.post-71745299964401228062014-04-15T10:19:17.545+00:002014-04-15T10:19:17.545+00:00The recent FT survey asked "Has George Osborn...The recent FT survey asked "Has George Osborne’s “plan A” been vindicated by the recovery?" I cannot imagine any critic of austerity answering Yes to this question, while I can imagine many in favour of austerity still answering No. (After all, the right answer is No whatever!) The survey included many more city economists than academics. Chris Giles interpreted the results as a narrow majority saying yes. I think its not quite so clear, as I discuss here:<br /><br />http://mainlymacro.blogspot.co.uk/2014/01/on-city-economists-and-ft-survey.html<br /><br />but at best I think you would say city economists were split down the middle. And this question as an indicator of support for austerity is biased downwards.Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-51214490095985184992014-04-15T09:49:39.486+00:002014-04-15T09:49:39.486+00:00Can you provide any support for the assertion that...Can you provide any support for the assertion that the financial sector has favoured austerity? Seems to me that City opinion has not been in favour. Albert Edwards at SG very firmly against, Stephen King HSBC broadly against, Gerard Lyons (ex Standard Chartered) against. No time for a full survey but I don't think it's a well founded assertion. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-30883795882877093962014-04-12T19:59:29.015+00:002014-04-12T19:59:29.015+00:00Simon: the natural rate of interest at time t is a...Simon: the natural rate of interest at time t is a negative function of Gdot(t), and is independent of G(t). The time path of G(t) will deviate from the first best optimal if the ZLB constraint is binding, but the second best path will not involve G(t) always being above or equal to the first best path. Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-64991490769689587292014-04-12T17:17:34.044+00:002014-04-12T17:17:34.044+00:00AND it also has to be said here: It would have bee...AND it also has to be said here: It would have been so damn easy to turn the Eurozone crisis into a godsend for us liberals - especially with Greece and the fact that some corrupt Wall Street dudes even helped them to lie and deceive - just like at greedy home... pieceofcakenoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-30244925947547113042014-04-12T16:38:41.061+00:002014-04-12T16:38:41.061+00:00Remove the math and the implausible assumptions an...Remove the math and the implausible assumptions and there is probably not a lot more left to the New Classical revolution.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-26257869425989078042014-04-12T16:37:44.011+00:002014-04-12T16:37:44.011+00:00'This recession should have been disastrous fo...'This recession should have been disastrous for the influence of finance' <br /><br />Absolutely! <br /><br />'What was really required was to change the story.'<br /><br />Exactly! <br /><br />'The 2010 Eurozone debt crisis was therefore a godsend to finance.'<br /><br />BECAUSE you guy's didn't watch out. <br />You let them - (conservative) 'Finance' - turn the discussion into 'all about monetary policies' . instead of another case of the irresponsibility of finance! <br /><br />AND then - adding insult to insury - some right-wingers used the Euro crisis as their major argument for: 'Socialism doesn't work'!<br /><br />How sad and sorry of a performance by the economists on my side of the political spectrum! <br />pieceofcakenoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-63657344724626304662014-04-12T16:36:40.756+00:002014-04-12T16:36:40.756+00:00Keynesian Help to Buy scheme.
No, this is a New K...Keynesian Help to Buy scheme.<br /><br />No, this is a New Keynesian scheme. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-55949898205940240712014-04-12T16:32:48.125+00:002014-04-12T16:32:48.125+00:00I think the proper technical term is: Ballance T...I think the proper technical term is: Ballance The term may be copyrighted by Robert Waldman so you may have to ask permission to use it.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-60929893974886303512014-04-12T12:57:49.591+00:002014-04-12T12:57:49.591+00:00Cheeky bit of Bulverism
http://www.uncommondesce...Cheeky bit of Bulverism <br /><br />http://www.uncommondescent.com/culture/c-s-lewis-on-bulverism/Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-70877335033245331422014-04-12T12:53:21.327+00:002014-04-12T12:53:21.327+00:00Well no. Adding liquidity constraints makes gov sp...Well no. Adding liquidity constraints makes gov spending stimulatory, pushing up growth and so inflation and so relaxing the ZLB. Pretty standard stuffAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-31752020880127701952014-04-12T12:44:04.501+00:002014-04-12T12:44:04.501+00:00My economic theory is that basically, the economy ...My economic theory is that basically, the economy is like any other resource: be it a gold mine, a labor pool, a robot, a feed stock, an energy source etc. They key point here is that what you want to do is exhaust the resource until you've extracted all the value and then toss it into the trash bin.<br /><br />In this way, the economy is a lot like other natural phenomena. Take the climate, for instance. Its another resource. It acts as a receptacle for economic waste generated by civilization. But its capacity to store the waste while at the same time acting as host to the species is being depleted. The climate, like the economy is being exhausted and is ready for the land fill.Babuhttps://www.blogger.com/profile/01276144465468411434noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-77085214280704606232014-04-12T12:39:06.316+00:002014-04-12T12:39:06.316+00:00Austerity in UK would not be working unless we did...Austerity in UK would not be working unless we did not have the Keynesian Help to Buy scheme which pumps about £15.5bn into economy and the £16bn payment protection insurance rebates from the banking sector.<br /><br />If we think of PPI rebates as a tax imposed on the private sector with a low propensity to consume (banks), shifting it to the private sector with a high propensity to consume (individuals in debt) we see how powerful these Keynesian policies can be. <br /><br />Recovery has nothing to do with austerity!<br /><br />Together they amount to about 2% of GDP! So economy would be flat without it!<br /><br />Help to Buy<br />http://www.theguardian.com/money/2014/mar/16/help-to-buy-one-year-on-homebuyers<br /><br />PPI rebates<br />http://www.bbc.co.uk/news/business-25635819Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-34461957681064506682014-04-12T12:38:11.885+00:002014-04-12T12:38:11.885+00:00Nick: Of course G can jump, given the relevant tim...Nick: Of course G can jump, given the relevant time frame. That is effectively what happened in the UK and US in 2008/9. You have to work backwards. If the steady state involves the optimal level of G, then to have G falling must imply an initial jump. Your idea of cutting G and then after the ZLB constraint ends raising it back to the steady state would not work - the tax savings generated would only lead to a marginal increase in consumption. You need the initial jump in G to generate the extra demand.Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-68085154415127159292014-04-12T11:53:40.542+00:002014-04-12T11:53:40.542+00:00Simon: OK, but in the real world G is not a jump v...Simon: OK, but in the real world G is not a jump variable. Governments cannot get the news of the ZLB and immediately announce an instantaneous jump in G followed by a declining path in G. The best they can do in practice is to announce that they will start cutting G as soon as possible, and keep on cutting G until the ZLB is no longer a binding constraint.<br /><br />Plus, even if the government can make an instantaneous jump in G, followed by a declining path, it is the declining path that is needed for macro expansion, according to NK models. You would only do the jump for micro reasons.<br /><br />And, if the government had perfect foresight, and could foresee future ZLB, the optimal policy would be for no jumps at all, and to have rising G when not at the ZLB, and falling G when at the ZLB. Again, very different from Old Keynesian models.<br /><br />I know it sounds crazy, but what the UK government actually did with "austerity" should have been expansionary, according to NK models.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-49853970369351646762014-04-12T11:36:23.610+00:002014-04-12T11:36:23.610+00:00You need to update your theory.You need to update your theory.Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-88438593994681906182014-04-12T11:35:04.509+00:002014-04-12T11:35:04.509+00:00Nick. The optimal fiscal policy at the ZLB is to j...Nick. The optimal fiscal policy at the ZLB is to jump up the level of government spending, and then let it decline. See, for example, the paths I show at<br />http://mainlymacro.blogspot.co.uk/2013/12/werning-on-liquidity-trap-policy.html<br />based on the Werning paper. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-59231871178184823722014-04-12T10:54:57.992+00:002014-04-12T10:54:57.992+00:00SH
Then there was the president of the ECB tellin...SH<br /><br />Then there was the president of the ECB telling us categorically that Austerity wouldn't lead to depressed economic performance. <br /><br />I've spent a good long while searching for the ex-ante (there are plenty of ex-post) examples of people from the financial sector (or from the political Right) publicly stating that austerity depresses short-term growth. <br /><br />I've spent longer searching for their excoriating put-downs of those (Hancock, Trichet, Cameron and Osborne are four who come to mind) who told us that Austerity would not depress short-term growth. <br /><br />Maybe you know where those articles are. Your attempt to re-write the record would be a hell of a lot more convincing if you pointed them out. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-7708778876233564012014-04-12T09:27:16.207+00:002014-04-12T09:27:16.207+00:00The fact is Osborne is doing precisely what macro-...The fact is Osborne is doing precisely what macro-economic theory is telling him to do. Lucas and Sargent argued that the Government must demonstrate "credibility". They mean by that a commitment to containing money supply growth and budget balance. <br /><br />Osborne is only doing what the orthodoxy in macroeconomic theory is telling him to do. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-59112394604746729852014-04-12T08:59:45.944+00:002014-04-12T08:59:45.944+00:00At Project Syndicate:
1. Brad DeLong's Jun. ...At Project Syndicate: <br /><br />1. Brad DeLong's Jun. 28, 2013 'Starving the Squid' has very good numbers for the problems with the size of the US finance industry.<br /><br />2. Robert Shiller's Sep. 20, 2013 'The Best, Brightest, and Least Productive?' gets into the numbers of graduates going into that sector.<br /><br /><br /> <br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-64928285313555704702014-04-12T08:57:24.844+00:002014-04-12T08:57:24.844+00:00Come on Simon: let's get the theory right.
St...Come on Simon: let's get the theory right.<br /><br />Standard New Keynesian models say that when the ZLB is a binding constraint, the second best policy is temporarily to *reduce* the *growth rate* of government spending. And in a hybrid Old/New Keynesian model, where some agents are hand-to-mouth and non-Ricardian, they also say we should temporarily *increase* the *growth rate* of taxes. Both these policies would increase the natural rate of interest, and relax the ZLB constraint, according to those models.<br /><br />Whether these results are correct is another question, but that is what NK models say. NK models support "austerity" in *rates of change* (as opposed to levels, which don't matter in NK models). If we teach NK models, that is what we should be teaching our students. If we don't like those results, we should find a different model.<br /><br />http://worthwhile.typepad.com/worthwhile_canadian_initi/2013/11/optimal-fiscalmonetary-policy-in-hybrid-oldnew-keynesian-models.htmlNick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-398781309191950802014-04-12T07:31:01.360+00:002014-04-12T07:31:01.360+00:00I think the reason we get austerity policies now i...I think the reason we get austerity policies now is the former model failed. The Portes model was neo-liberalism: for me that means an economy open to capital, trade and labour flows, with a social welfare net. I think this type of economics was informed by macro-theory connected with the neo-classical synthesis (IS-LM with some concessions to the Chicago School monetarists - eg. an independent central bank) and micro-theory that was heavy in classical theory - eg free trade and deregulated markets are unambiguously good. What this type of economics was not was historically well-informed. If it was they would have been very cautious about the pace of some of the liberalisation. We are relearning big lessons about financial deregulation. And the pace of liberalisation of EU labour inflows from the sudden expansion of the EU good end up being very costly for this country in terms of our relationship with the EU. The model also proved ineffective in dealing with growing inequality.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-80641258129455041222014-04-12T07:17:26.269+00:002014-04-12T07:17:26.269+00:00I think the truth is we get very confused messages...I think the truth is we get very confused messages from academic economists. Why bloggers do an enormous service to the public, the academic literature is full of abstraction which makes it look irrelevant. The dominant macro-paradigm seems to be that policy is ineffective anyway. Really dig deep into Lucas and Sargent and no doubt about it - they are die hard monetarists. It would be different if the subject over the last 40 years was dominated by the works of people like Angus Maddison and Robert Gordon, work that is historically and statistically well informed. Maddison was talking about secular stagnation in the 1980s and warned about the consequences of the developing new orthodoxy in economics. We will see how macro-economics develops in the future. Picketty looks promising.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-44189405889309617622014-04-12T06:41:51.596+00:002014-04-12T06:41:51.596+00:00Yes, that is the example Portes always gives.
Not...Yes, that is the example Portes always gives.<br /><br />Not exactly evidence for widespread support for the obviously crackpot expansionary austerity in the "financial sector" is it? One bonkers Tory MP.<br /><br />S W-L makes it too easy for himself (as does Krugman, and Portes) by attributing to those who disagree obviously stupid views.SpinningHugohttp://twitter.com/spinninghugonoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-76331639865698791912014-04-11T22:28:30.950+00:002014-04-11T22:28:30.950+00:00Spinning Hugo
Well for a start, here's a Govt...Spinning Hugo<br /><br />Well for a start, here's a Govt Minister banging the Expansionary Austerity drum back in 2010.<br /><br />http://www.matthewhancock.co.uk/campaign/matthews-article-deficit-times-today<br /><br />Nice try to re-spin history along the "We ALL knew that growth would stalk under Austerity, but it was done for the long-term good" line. That wasn't in any way how it was played in 2010.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-50686438427621703502014-04-11T21:43:01.864+00:002014-04-11T21:43:01.864+00:00To what is the answer 'no'?
That what is b...To what is the answer 'no'?<br />That what is being taught is wrong. <br />That a substantial section of the media have supported the idea of 'expansionary austerity' and the G.O. approach.Anonymousnoreply@blogger.com