Brad DeLong (Summer 2010): It Is Far too Soon to End Expansion: Wednesday Hoisted from Three Years Ago
Not too Late for the Social Credit Helicopters!

Noted for May 22, 2013

Mark Thoma: Economist's View: Inequality and Economic Growth: Paul Krugman and Tony Atkinson | Dylan Matthews: Senior poverty is much worse than you think | THE humble shipping container is a powerful antidote to economic pessimism and fears of slowing innovation. Although only a simple metal box, it has transformed global trade. In fact, new research suggests that the container has been more of a driver of globalisation than all trade agreements in the past 50 years taken together |

  • Paul Krugman: Jaime Caruana, general manager of the Bank for International Settlements, warning of the dangers of easy money and the need to raise rates now to avert … something or other. And his views matter, says the Wall Street Journal: "Mr. Caruana is no disgruntled outvoted hawk on a policy-setting council, trying desperately to set the record straight after being outvoted. Rather, he’s the mouthpiece for a global college of central bankers, almost all of whom find themselves under intense pressure from their national governments to keep things ticking over while they try to repair the economy...." What I do recall, however — which the Journal apparently doesn’t — is that the BIS has spent years warning about the dangers of low interest rates. Except that a couple of years back it was telling a completely different story about why we needed to raise rates; you see, the big danger was of imminent inflation: "'Global inflation pressures are rising rapidly as commodity prices soar and as the global recovery runs into capacity constraints', said the BIS, which acts as a central bank for the world’s central banks. 'These increased upside risks to inflation call for higher policy rates.'” In fact, inflation is running below target just about everywhere. You might therefore think that the BIS would step back a bit and reconsider both its policy recommendations and the framework it uses to derive those recommendations. But no. Higher interest rates are always the solution; it’s only the problem they’re supposed to solve that changes."

  • Zack Beauchamp: The Inside Story of The Harvard Dissertation That Became Too Racist For Heritage: "The idea that some racial groups are, on average, smarter than others is without a doubt among the most discussed (and debunked) 'taboos' in American intellectual history. It is an argument that has been advanced since the days of slavery, one that helped push through the draconian Immigration Act of 1924, and one that set off a scientific firestorm in the late 60s that’s hardly flagged since. Yet every time the race and IQ hypothesis reclaims the public spotlight, we are caught slackjaw, always returning to the same basic debates on the same basic concepts… Jason Richwine…. If the dissertation was bad enough to get him fired from the Heritage Foundation, how did it earn him a degree from Harvard? A popular answer among Richwine’s defenders is that, quite simply, it was exemplary work…. But dozens of interviews with subject matter experts, Harvard graduates in Richwine’s program who overlapped with him, and members of the committee itself paint a somewhat more textured picture. Richwine’s dissertation was sloppy scholarship, relying on statistical sophistication to hide some serious conceptual errors. Yet internal accounts of Richwine’s time at Harvard suggests the august university, for the most part, let serious problems in Richwine’s research fall through the cracks."

  • Nick Rowe: Worthwhile Canadian Initiative: Monetary stimulus vs financial stability is a false trade-off: "There's an idea floating around out there that I fear may be influential. And that idea is horribly wrong…. '[M]onetary policy works by lowering interest rates and encouraging people to borrow more and spend more. And that creates a problem for financial stability, because some people are already borrowing too much. So there's a trade-off between monetary stimulus and financial stability, and monetary policy needs to take both objectives into account.'… It rests on a fallacy of composition. Suppose the Bank of Canada wanted me, Nick Rowe, to spend more…. If it lowered the Nick Rowe rate of interest I would save less if I were a saver, and borrow more if I were a borrower. Either way I would spend more…. Monetary policy does not work by increasing actual borrowing. That is not the causal channel of the monetary policy transmission mechanism. Monetary policy works by increasing spending, not borrowing. And one person's spending is another person's income, so people in aggregate do not need to borrow more in order to spend more. Their increased spending finances itself…"