tag:blogger.com,1999:blog-2546602206734889307.post820778820474713333..comments2024-03-18T11:12:51.114+00:00Comments on mainly macro: Mistakes and Ideology in MacroeconomicsMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger53125tag:blogger.com,1999:blog-2546602206734889307.post-58193881672597921042017-03-22T16:51:34.916+00:002017-03-22T16:51:34.916+00:00This comment has been removed by a blog administrator.pcardiffhttps://www.blogger.com/profile/13848229615521701705noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-75513089646873998082014-12-30T15:51:07.468+00:002014-12-30T15:51:07.468+00:00This comment has been removed by a blog administrator.gameshttps://www.blogger.com/profile/13664386733591215627noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-10931484482495810252014-07-28T14:42:47.064+00:002014-07-28T14:42:47.064+00:00Why do many people study macro? Definitely not for...Why do many people study macro? Definitely not for the fun of it. It is dry, tedious and remote. It is to get jobs at Bain Capital and Goldman Sachs. This will only be more so with tuition fees where people want a real return in terms of wages on their degrees. For these firms it is a signalling and filtering device. Cochrane and others do a good job of giving people who want these jobs what they need. This is demand and supply at work.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-68677801223342529242014-07-28T14:32:25.390+00:002014-07-28T14:32:25.390+00:00"But the central bank is part of the state, a..."But the central bank is part of the state, and it intervenes to improve how the economy works, so this ideological view would also mean that you played down the role of monetary policy in macroeconomics. "<br /><br />I think Sargent and Cochrane are, deep down, anti-democratic. They do not want the central bank do be answerable to the people. Rather it should only obey technical rules set by their betters. Money is above the democratic process. It's funny, we can go to War with WMDs with the decision of an elected president, but by no means can we elect the people who decide the amount of money in the economy or what interest rates to have on our mortgages. Well what do you expect - monetarists and money.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-8841633482401029732014-07-28T14:16:52.269+00:002014-07-28T14:16:52.269+00:00"These ideas changed because Keynesian econom..."These ideas changed because Keynesian economics was a failure in practice, and not just in theory. Keynes left Britain 30 years of miserable growth",<br /><br />What I find most disturbing about this sentence is that he is mixing up the long run and short run. Britain's post WWII decline is not well explained by New Keynesian Theory or any other macro-economic theory. To properly understand that you need to know the effects of WWI and WWII and the long term effects of the dissolution of the Empire and its influence and the related decline of Sterling, amongst many other critical historical events. In fact in any economics, aside from people like Piketty, there would be few that could handle a subject like that. They are more likely to be in a History or Political Science department.<br /><br />Keynesian theory is about how to get out of a situation where there is insufficient demand. rather than how to build up the fundamentals for long term growth.<br /><br />However, having said that, John Cochrane has said,and I really take my hat off to him for it, is that long run issues and growth should be more linked to Political Science and its manner of investigation, while short run issues need to be kept close to micro-economics.<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-9102216637006994712013-09-25T05:00:28.220+00:002013-09-25T05:00:28.220+00:00Yep. The attack on Keynesianism in the 70s was id...Yep. The attack on Keynesianism in the 70s was ideologically driven garbage.<br /><br />The true problem int he 70s was a real resource shortage. This is something Keynes himself would have understood, but sadly the government of the day didn't understand it. *JIMMY CARTER* understood it, but nobody listened to him...<br /><br />"Most economists are absolutely crappy at analyzing situations with genuinely scarce resources (as opposed to common, but not infinite, resources). To my knowledge, some of the environmental economists have tried."<br />Yep. It's not a coincidence that environmental economics started in the 70s. Unfortunately, the establishment ignored them for decades.<br /><br /><br /><br />"Actual resource shortages must be dealt with by restructuring the economy to stop requiring the use of the resources. This almost inevitably means *government intervention*."<br />Yes -- or intervention by an organization or actor as powerful as the government (so, you know, a consortium of major corporations could probably do it). <br /><br />It's also possible for it to adjust via individual action. In fact, it's inevitable; as the scarcity of the resource becomes clear, everyone will do their damnedest to get off of it. This is actually happening with the mass installation of solar panels and the switch to electric cars. The problem is that the individual, uncoordinated reaction to a real resource scarcity happens *TOO SLOWLY* -- it happens over the course of *multiple decades*, while the real resource scarcity can happen practically overnight.Nathanaelnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-50105800075605881392013-08-03T07:47:36.105+00:002013-08-03T07:47:36.105+00:00Its not a good idea to spend on useless infrastruc...Its not a good idea to spend on useless infrastructure because that would create a dangerous over supply of useless infrastructure manufacturing specialists. When the infrastructure is built the supply chain becomes over time itself a waste of resources and skills. Factories that can make railway parts that nobody wants or needs.<br /><br />Its better to simply give the money away to people willing to spend it and not save or invest it.<br />These people must and will make careful decisions about what to buy and thus a supply of useful manufacturing facilities is created, rather than useless capacity.<br /><br />Caveat - the way money is given away needs to be limited and calculated to avoid infinite bubbles and moral hazard where people expect limitless money for nothing. We are talking about a basic income - *carefully controlled* amounts at regular intervals that is recouped through tax on supply-side profits. I repeat psychological effects on actual people and infinite money expansion are the main, and very very serious issues. But, the effect is increased demand to economies where supply is plentiful.<br /><br />AT present there are plenty of consumers who are not already saturated with goods and services to make this work.<br /><br /><br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-8360669560201183412013-08-03T07:32:50.136+00:002013-08-03T07:32:50.136+00:00You do not *have to* give money to an out-of-work ...You do not *have to* give money to an out-of-work bridge builder to build a bridge (or useless new city) that nobody wants to stimulate demand.<br /><br />Simply give the money (in limited amounts) to the bridge builder do simply spend. As long as he/she does not save or invest speculatively) then demand is increased.<br /><br />In an economy where there is over supply, as is the case at this time, then its win-win. At some time the money printed needs to be partially recouped through a tax on the suppliers.<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-69345201087884651322013-01-28T10:52:54.932+00:002013-01-28T10:52:54.932+00:00Chris G: your metaphor: "if I'm broke, I&...Chris G: your metaphor: "if I'm broke, I'd rather borrow against future earnings than be homeless by getting a loan eg, even if I have to pay interest on that loan. Sure I can still look for a job as a homeless person, but it'd be a lot harder to get one than if I actually had a place to live and clean myself etc"....is a dangerous one! It simply suggests that borrowing itself is good when one is without funds regardless of really having calculated whether one could pay it back. This is a big mistake made all the time!Anonymoushttps://www.blogger.com/profile/09090637267595661732noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-10813659095946310512013-01-28T10:46:09.833+00:002013-01-28T10:46:09.833+00:00the 'fiscal multiplier' does not existthe 'fiscal multiplier' does not existAnonymoushttps://www.blogger.com/profile/09090637267595661732noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-86156016317519472692013-01-03T14:35:29.127+00:002013-01-03T14:35:29.127+00:00"My personal opinion is that the blame game i..."My personal opinion is that the blame game isn't useful in solving this problem. It makes the two sides of the controversy much more rigid and unwilling to seat around the table (even if virtual) and discuss it.<br />In ancient India used to organize public debates and who lost the debate should convert to the view of the other."<br /><br />I'm sorry, but who are these mythical 'flexible' Chicago economists?Barry DeCiccohttps://www.blogger.com/profile/04735814736387033844noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-47678105936132409532012-08-25T23:48:44.365+00:002012-08-25T23:48:44.365+00:00Ah, but here's the problem. And I've expl...Ah, but here's the problem. And I've explained this before. The problem is not the hegemony. The problem is when the rich competent businessmen are replaced by rich demented morons. This has happened in the US. <br /><br />Veblen describes the decay process in _Theory of the Leisure Class_ -- it is the change from "industrialists" to "financiers" in his terminology.<br /><br />The trouble is that the demented financiers do not actually know anything about anything. (Ours have gone so far that they don't even know about laws or accounting -- that's for their hired guns -- only about how to steal things.) They are quite incapable of running the country for their own benefit or anyone else's. <br /><br />They are upper class twits, in Monty Python's terms. The real fight is over whether the rich competent businessmen who know something about what they're doing (Warren Buffet types, perhaps) will prevent the loot-and-steal types at Bain Capital etc. from destroying the whole system.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-26766339219296262242012-08-25T23:42:34.912+00:002012-08-25T23:42:34.912+00:00(Technically, "full resource usage"; if ...(Technically, "full resource usage"; if you hit full usage of oil before you hit full employment, additional stimulus will only succeed if it's targeted at production which doesn't require oil)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-31191130991128685252012-08-25T23:41:36.408+00:002012-08-25T23:41:36.408+00:00The effect of stimulus is positive *because it emp...The effect of stimulus is positive *because it employs people who would otherwise be unemployed*. That is why it is always effective to spend money on bridges *when there are unemployed bridge-builders*. <br /><br />Not because we need more bridges, necessarily; altough the bridge might come in handy, the key is that the bridge-builders will spend their money on food, clothing, shelter, etc. And nobody expected *that* money to be spent. Got it?<br /><br />In other words, you don't understand macro. GIVING MONEY AWAY to poor people would actually work during a depression. Once you hit full employment, then stimulus doesn't work.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-16407577483050231962012-08-25T23:38:47.141+00:002012-08-25T23:38:47.141+00:00Boy, that's a stupid model. It's been wel...Boy, that's a stupid model. It's been well understood forever that there are more than one consumption good, that government spending tends to be on different things than private spending, and that almost no economy has full employment.<br /><br />Saying "But it's true if cows are spherical" is not a defense. Lucas is pathetic.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-31769747331479645322012-08-25T23:36:39.568+00:002012-08-25T23:36:39.568+00:00"Keynesianism didn't 'fail' in th..."Keynesianism didn't 'fail' in the'70s-the price of THE commodity in our economy rose sharply, and we (the US, anyway) tried to inflate it away-hence,"stagflation",as OPEC was not confused, and raised prices to compensate. The US economy sucked-except,for some reason, in Texas and Louisiana. When, in the early '80s, the price of oil tanked, the situation reversed itself. When the price of the commodity which affects all others is dropping like a rock( from nearly $50 bbl to $11 in three years, IIRC)you can have a great credit expansion without inflation -"Morning in America!" In Texas,however, the joke was that a bird, unlike a Texas oilman, could make a deposit on a new Mercedes. The Murchisons (owners of the Dallas Cowboys)went broke, John Connelly(yes,the former Governor in the limo with JFK) went broke..."<br /><br />The key point here is that monetary policy and fiscal policy CANNOT do anything about an actual resource shortage. Attempting to do so is how Zimbabwe got hyperinflation, incidentally. We effectively had a resource shortage in the US in the 1970s due to OPEC "closing the spigots". Now we have one worldwide as we hit peak oil.<br /><br />Most economists are absolutely crappy at analyzing situations with genuinely scarce resources (as opposed to common, but not infinite, resources). To my knowledge, some of the environmental economists have tried.<br /><br />Actual resource shortages must be dealt with by restructuring the economy to stop requiring the use of the resources. This almost inevitably means *government intervention*.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-16859399479646666982012-08-14T22:37:08.577+00:002012-08-14T22:37:08.577+00:00Perhaps this is taking Lucas' informal remarks...Perhaps this is taking Lucas' informal remarks a bit too seriously, but he says: "You apply a multiplier to the bridge builders, then you've got to apply the same multiplier with a minus sign to the people you taxed to build the bridge." It does seem like the implication is that there is zero net change to GDP. The statement "in some sense there is nothing to apply the multiplier to" also strongly suggests he means there is no net effect on GDP. Although Keynes did consider multiplier effects important, the most basic Keynesian point about fiscal policy is that fiscal policies (such as "balanced-budget" stimulus) with a multiplier of 1, or even less than 1, can increase GDP in a situation where resources aren't fully employed. The truly bizarre thing about Lucas' remarks is that he seems to think this can't be so, based on a simplistic argument that can be seen to involve neglecting intertemporal considerations. Howard Barnumhttp://winephysicssong.comnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-4626533544833901732012-04-13T11:39:34.857+00:002012-04-13T11:39:34.857+00:00A Keynesian would argue that Cochrane and Lucas ar...A Keynesian would argue that Cochrane and Lucas are wrong when desired savings are higher than desired investment.<br /><br />So C+S falls by X but I increases by X. (G increases by X if you prefer not to count investment by government in I). Savings which had nowhere to go are put to work by government investment.Joshttps://www.blogger.com/profile/05580273919295183456noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-48352687508947204352012-04-13T03:06:15.620+00:002012-04-13T03:06:15.620+00:00Remember the real world. The reason we're doin...Remember the real world. The reason we're doing the bridge now is that employs resources that would otherwise go unused. There is also a multiplier effect: having money in the hands of the previously unemployed, who will probably spend it, puts further idle resources to use.<br /><br />The effect is greater if the bridge has a positive economic value (which would be nice). During the Depression things were so bad that it would have paid to pay some people to bury money and allow others to dig it up. We blithely imagine we can do better than that.<br /><br />The result is that the taxes to pay for the investment are levied on an economy that is at a higher level of production than it would have been without it. In your terms, you are subtracting from a different function.<br /><br />The effect you describe would occur if there were no idle resources, so that a dollar spent on A had to cause the dollar not to be spent on B.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-65641438329888961832012-04-13T02:31:01.240+00:002012-04-13T02:31:01.240+00:00Seems like a bit of a dry argument, since what we ...Seems like a bit of a dry argument, since what we need is to spend and not tax. That is, assuming the goal is to actually help the economy recover.SteveK9noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-23531598071976852552012-04-12T05:44:52.230+00:002012-04-12T05:44:52.230+00:00You don't get capital release (spending) equal...You don't get capital release (spending) equally by all players. When player A has a much larger pot than those of players B, player A is more likely to hoard resources (capital), than return it into the system. That same capital distributed more evenly flows more readily. Tax may or may not stimulate depending on the actions of the state. Greater wage parity does stimulate. What we have now is massive resource hoarding by a small group of wealth controllers. The best way to get equilibrium back in a system that has become more uneven is to give more labour powers.keyfeatureshttps://www.blogger.com/profile/08372676453743945344noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-83353143294942517322012-03-10T11:28:37.526+00:002012-03-10T11:28:37.526+00:00In the post, the author is using a very cheap tric...In the post, the author is using a very cheap trick. In his opinion, at time t output rises because people will partly postpone the decrease in consumption due to taxes. And, we have to believe, in his opinion the world ends at time t, otherwise the smoothed decrease in consumption continues at time t+1, when there's no government spending anymore. The sum of all of these must be equal to government spending, that's budget constraint. Duh.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-29128762751186950322012-03-09T14:50:15.542+00:002012-03-09T14:50:15.542+00:00I think you have misread Lucas. In his argument GD...I think you have misread Lucas. In his argument GDP increases with one bridge. but that's it! There is no further effects, the 'multiplier' is exactly 1. The reason is simple: The bridge builders get a temporary income from the Gov' for building the bridge. They split this between consumption and savings. But the boost in consumption is offset by the decline in consumption by the people being taxed. <br /><br />A multiplier of 1 is of course just what you would expect in a world with idle resources. The Keynesian magic comes from the fact that you get something more. And Lucas simple argument is that this something extra is zero if the bridge builders and the taxed people have the same propensity to consume.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-11676432955947555052012-01-18T23:57:40.835+00:002012-01-18T23:57:40.835+00:00C+I can decrease by X but doesn't. The rise in...C+I can decrease by X but doesn't. The rise in G causes Y to increase allowing savings to rise to finance the original I.hyperbollockshttps://www.blogger.com/profile/03754035032137931461noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-74615545911261877732012-01-14T19:02:31.419+00:002012-01-14T19:02:31.419+00:00The problem is that by using physics as the exampl...The problem is that by using physics as the example it suggests the model is more credible than it could possibly be in theory, or in fact is, in practice. Newton's laws weren't founded on the assumption that the gravitational constant is -9.8 m/s, rather, the constant was derived from first principles and verified experimentally. The same is not true for the "fiscal multiplier" or any other immeasureable economic quantity. It appears the sumner/lewis debate is partially a quibble about what some textbook "model" assumes this quantity to be. Nobody ever argued that g!=-9.8m/s.justinhttps://www.blogger.com/profile/05667924298375461880noreply@blogger.com