tag:blogger.com,1999:blog-2546602206734889307.post5292669546287371277..comments2024-03-19T09:54:37.187+00:00Comments on mainly macro: What do macroeconomists know anyway?Mainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger44125tag:blogger.com,1999:blog-2546602206734889307.post-2733382385911987062015-09-26T00:59:36.946+00:002015-09-26T00:59:36.946+00:00That's probably true for the most part, althou...That's probably true for the most part, although even there it seems to vary, e.g. I seem to recall that even Robert Lucas presenting a fairly New Keynesian analysis of the Great Recession at one point in a talk.W. Pedenhttps://www.blogger.com/profile/15799200383624207846noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-7618724813586415742015-09-25T08:26:10.874+00:002015-09-25T08:26:10.874+00:00There should be more academics on the MPC. There should be more academics on the MPC. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-5844410229052992282015-09-25T08:22:43.368+00:002015-09-25T08:22:43.368+00:00Although I think when I wrote that I overestimated...Although I think when I wrote that I overestimated the extent to which freshwater macro had been converted to New Keynesian ideas.Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-51502267173848223002015-09-25T08:14:27.146+00:002015-09-25T08:14:27.146+00:00The picture I paint ... No, the picture you imagin...The picture I paint ... No, the picture you imagined I painted. I wrote: the analysis helped persuade him otherwise. That is quite compatible with a Prime Minister who has a political view, and is prevented from pursuing it by the weight of economic evidence. <br /><br />So you have read Blair's memoir. I was actually there, with access to many of the main actors involved. The economic evidence mattered. If it had come out clearly supporting entry, we would probably have joined. So it is a clear example of economics winning out over economics. They do not happen often, which is why I cherish events when it does.Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-6194155268910191062015-09-24T20:57:33.796+00:002015-09-24T20:57:33.796+00:00As a coda to this, we might look at Krugman's ...As a coda to this, we might look at Krugman's recent blasting of Andrew Sentance.<br />Which of course brings me back to the problem with an independent central bank.<br />This man was on the MPC?Metatonenoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-33244149417100936492015-09-23T17:35:35.354+00:002015-09-23T17:35:35.354+00:00* Schools of thought.* Schools of thought.W. Pedenhttps://www.blogger.com/profile/15799200383624207846noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-32611541610314978382015-09-23T17:35:27.258+00:002015-09-23T17:35:27.258+00:00By the way, Simon, I'm about halfway through y...By the way, Simon, I'm about halfway through your chapter in "The New Consensus in Macroeconomics". I'm really enjoying it thus far, especially the comparisons between how central bank models were built in the 1980s and how the BoE DSGE model in the mid-Noughties was developed. I also thought your hypothesis regarding the decline of "school of thought" macro (except on internet comments boards!) seems correct.W. Pedenhttps://www.blogger.com/profile/15799200383624207846noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-33474203614196212172015-09-23T08:55:28.505+00:002015-09-23T08:55:28.505+00:00Corbyn is said to want to reinstate the power of t...Corbyn is said to want to reinstate the power of the Unions in his party. If Foot fronted the unions then, what can we expect from Corbyn?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-3671603171290336382015-09-23T07:49:31.209+00:002015-09-23T07:49:31.209+00:00Dear Prof. Wren-Lewis,
In your "Independent&...Dear Prof. Wren-Lewis,<br /><br />In your "Independent" article, your first sentence predicts criricisms of Corbyn's economic policy based on credibility.<br /><br />In my comment, I pointed out another line of coming criticisms.<br /><br />It seems to me that they require a similar refutation, and time is of the essence.<br /><br />Don't you agree?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-21948919851335053532015-09-22T23:12:44.321+00:002015-09-22T23:12:44.321+00:00"I think economists' involvement in finan...<i>"I think economists' involvement in financial regulation is pretty minimal. "</i><br /><br />Sadly, even Hyman Minsky would probably be forced to agree.<br /><br />However, if <i>"financial sector regulation is not mainstream macro"</i> then the problem is not that macroeconomists know nothing, it is that they don't appear to know enough to run an economy holistically. Compartmentalising economics may make sense from an academic standpoint, but it leads to disjoined policy making from a practical standpoint. Cantab83https://www.blogger.com/profile/12485401571391377815noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-80106932526355819152015-09-22T18:27:28.613+00:002015-09-22T18:27:28.613+00:00Anon,
http://www.redpepper.org.uk/1983-the-biggest...Anon,<br />http://www.redpepper.org.uk/1983-the-biggest-myth-in-labour-party-history/Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-17726600698128659022015-09-22T15:11:45.948+00:002015-09-22T15:11:45.948+00:00In (a) the uses of the words "permanently&quo...In (a) the uses of the words "permanently" and "automatically" provide lots of wiggle room;<br />in (c) there are always "alternative policies";<br />in (d) "monetarist policies" can have many varieties.<br />It was quite like the recent 90-odd economist attacking George Osborne, that S W-L signed for the general drift and then disowned for any actual content.<br />I still get your point, though.James Alexanderhttps://www.blogger.com/profile/12052486292054993368noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-79299109922287104812015-09-22T10:26:04.842+00:002015-09-22T10:26:04.842+00:00A Grexit would be a good idea, but there are a lot...A Grexit would be a good idea, but there are a lot of differences between the UK in 1992 and Greece in 2015. For one thing, our government/bank liabilities were denominated in our own currency. The Euro is like Birmingham: once you're in, it's hard to drive out, even if it would be beneficial overall.W. Pedenhttps://www.blogger.com/profile/15799200383624207846noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-12638292179413774832015-09-22T07:09:02.928+00:002015-09-22T07:09:02.928+00:00I think it does.
The dispute was a political one ...I think it does.<br /><br />The dispute was a political one between Brown and Blair. Blair wanted in. Brown didn't. The academics were drafted in to provide Brown with ammunition in this dispute and to stop Blair from starting on his campaign of persuasion. <br /><br />The picture you painted was one of high minded ministers persuaded by the evidence presented by the academics and deferring to them. That wasn't the truth. The truth was that the decision was political all the way down: the obstacles of the promised referendum and an obdurate and powerful Chancellor were too great. The advice was just ammunition in a fight to which you were not party.<br /><br />I was and am a fan of the Blair government, but I don't believe its decision making is accurately characterised in the way you do here (see Blair's memoir, unless he is lying).SpinningHugonoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-84610890993829126632015-09-21T23:24:07.473+00:002015-09-21T23:24:07.473+00:00I'd be wary about judging monetary conditions ...I'd be wary about judging monetary conditions using the nominal base rate, especially when inflation was falling. Monetary base growth, which fell steadily in 1980, steadied in 1981, and the old reserve requirement was replaced by an ad hoc system of bank's own reserve targeting.<br /><br />The modern Keynesian position would be that while these measures more or less offset the contractionary effects of the 1981 budget, they were not available in 2010-2015, and so monetary offset could not apply in this period.W. Pedenhttps://www.blogger.com/profile/15799200383624207846noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-80232159058769847742015-09-21T22:19:24.697+00:002015-09-21T22:19:24.697+00:00I've tried very hard, but I cannot see how thi...I've tried very hard, but I cannot see how this relates to this post, or indeed any post I have ever written. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-17021139447276214152015-09-21T22:11:39.152+00:002015-09-21T22:11:39.152+00:00I think economists' involvement in financial r...I think economists' involvement in financial regulation is pretty minimal. As far as I can see the financial deregulation that allowed this to happen was largely a result of industry lobbying. True, one very well known economists rubbished the idea that a crisis could happen, but he has also said other contentious things in his time. The main point is that financial sector regulation is not mainstream macro. The episodes I mention are. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-61827682831296164622015-09-21T20:25:09.440+00:002015-09-21T20:25:09.440+00:00«in defence of Michael Foot and how much better th...«in defence of Michael Foot and how much better things would have turned out»<br /><br />Dear Jeremy :-) thanks for commenting anonymously here, the problem was not M Foot and his preferred policies, the problem was the labour insiders who were fronted by M Foot and their preferred policies. Just like in the infamous miners strike the problem was not the miners, but A Scargill and his clique.<br /><br />They all made even That Ghastly Woman and the economic policies of the clique she fronted look like the lesser evil even to many working class people, and it took a lot of «resolutionary socialism» to achieve that.<br /><br />And then her clique bought the loyalty of a large chunk of the working class, especially those close to retirement or retired, with huge tax-free effort-free Right-To-Buy profits, and the rest is history (New Labour's :->).<br />Blissexnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-90180309967742328112015-09-21T19:37:29.579+00:002015-09-21T19:37:29.579+00:00Something which is often forgotten when discussing...Something which is often forgotten when discussing the 1981 budget is that there was a 2% cut in base rate and the exchange rate was allowed to slide in the next few months (20% against the $) the combination of which represented a very considerable loosening in monetary conditionsAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-24583353330341522762015-09-21T19:32:34.973+00:002015-09-21T19:32:34.973+00:00Dear Prof. Wren-Lewis,
Don't you think it is ...Dear Prof. Wren-Lewis,<br /><br />Don't you think it is time to write a post in defence of Michael Foot and how much better things would have turned out if he had not lost against That Ghastly Woman?<br /><br />After all, a main line of criticism against Jeremy Corbyn will be the claim that he is nothing but Foot's reincarnation and that that is enough to condemn him.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-32363196449429287182015-09-21T19:20:01.984+00:002015-09-21T19:20:01.984+00:00But "austerity" is a very amply misused ...But "austerity" is a very amply misused word! So there can be cases for and against "austerity" that are both valid, with different meanings of the word.<br /><br />The meaning that fits with the original keynesian discussion is more or less "letting domestic demand by the government fall during a recession caused by a fall in total demand to below its sustainable level". That is failing in maintaining effective demand at its best sustainable level when in a "general glut" (the qualifications all matter enormously).<br /><br />Some people seem to use it as "smaller government deficits in any circumstance whatsoever"; I have the impression that SimonWL uses it that way, as he rather strangely seemed to think that Greece was in "austerity" in 2010-2014.<br /><br />There are cases, like a balance sheet recession (as opposed to a falling demand one), in which some form of austerity properly defined is inevitable, however unpleasant that is, else there would not be the conditions that caused a balance sheet recession, and the sooner the better, because the costs of balance sheet recessions mount rapidly with time.<br /><br />But in general the case for anti-austerity, properly defined, policy is overwhelming on both theoretical and empirical grounds.<br />Blissexnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-53101026943555943492015-09-21T19:19:20.889+00:002015-09-21T19:19:20.889+00:00Hi Rohan, this is anon from 3:54.
Are you aware o...Hi Rohan, this is anon from 3:54.<br /><br />Are you aware of any studies that do not find a negative impact of austerity, and use a better specification than the ones above, that you so easily dismiss?<br /><br />Re Gujarado et al and Jorda/Taylor: I think a) constructing a good narrative variable with a large number of observations is way more than decent in terms of establishing causality, b) using that narrative variable as an instrument, and complementing with inverse propensity score weighting, as Jorda-Taylor do, is even better. So I don't buy your rejection of causal claims, so far. Yes, it is difficult to establish causality in macro, but as far as things go, the studies of austerity are pretty decent. Surely not much worse than e.g. ERM?<br /><br />Regarding your point on controls, even the Gujarado et al study does a number of robustness checks with various controls and lag structure. And Jorda-Taylor further deal with this in their IPSW. So in the end we have a well-identified shock, and a number of controls for bias on observables, which looks pretty good to me.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-60520455018117336802015-09-21T19:00:09.544+00:002015-09-21T19:00:09.544+00:00In a blog post titled "What do macroeconomist...In a blog post titled "<b>What do macroeconomists know anyway?</b>" I cannot let pass a very recent statement:<br /><br />«<i>The first is obviously welfare reducing,</i>»<br /><br />The theorem of the second best precludes any statement as to welfare, especially any beginning «<i>obviously</i>», and especially coming from a professor of economic <em>policy</em> who seems to believe in microfounded new keynesian theories.<br /><br />More generally the theorem of the second best perhaps should prevent any involvement in economic policy by microfoundationalist new keynesians, but stranger things have happened :-).<br />Blissexnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-60196208450337183122015-09-21T17:58:31.458+00:002015-09-21T17:58:31.458+00:00It's true that there were more innovations tho...It's true that there were more innovations though? That doesn't really contradict it.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-56485647470734574122015-09-21T17:47:40.533+00:002015-09-21T17:47:40.533+00:00"but if you just go with the credible policie..."but if you just go with the credible policies, you can never have any innovation" No. Central bank independence in the UK was an innovation which reflected movements in the academic consensus. You may not like it, but it was an innovation. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.com