Joe Gagnon: Saving Abenomics
Monday DeLong-Being-Stupid Self-Smackdown Watch: Expansionary Fiscalists vs. Expansionary Monetarists and the Federal Reserve's Shift from a Time- to a State-Based Policy Rule: Will It End Our "Lost Decade"?

Noted for June 17, 2103

  • Paul Krugman: Taylor's Rule on Fiscal Policy: "I just happened to run across John Taylor’s latest… Taylor now says that we should not cite falling spending by state and local governments as a reason for the weak recovery. Why? Because, he says, such spending is endogenous: state and local governments cut spending in line with revenue. Basically, they’re cash constrained; so what can you expect? But wait: Taylor has prominently argued (pdf) that the Obama stimulus… part that involved aid to state and local governments, was ineffective, because the state and local governments just used the money to pay down debt — that is, giving them more cash wouldn’t have mattered. I’m sure that Taylor will come up with some reason these statements aren’t diametrically opposed. But from here it looks like the Taylor rule on fiscal policy is that Obama is always wrong, and that state and local governments are either cash-constrained or not cash-constrained, depending on which assertion is needed to back up that position."
  • Clay Shirky: guest-bleg: How do you describe bad economics reporting?: "Acemoglu, Robinson and Verdier model a technologically interdependent world where countries can chose either cutthroat or cuddly capitalism (the US and Sweden being the usual avatars)…. They… discover that… 'the more harmonious and egalitarian Scandinavian societies are made possible because they are able to benefit from and free-ride on the knowledge externalities created by the cutthroat American equilibrium.' Not just the US but indeed the whole world would be worse off if we had public health care, because we have to treat poor people badly if Larry Page is to get rich, so that the Swedes can copy us. Because innovation. Now there’s nothing too surprising in this sentiment—the headline 'Neo-Liberalism Woven into Fabric of Universe, say Economists' could have run unaltered in every year since 1977. What is surprising—or at least what Tamar made me see with new eyes—is that the entire exercise is a machine for smuggling easy knowledge into public discourse…. Start with some assumptions, then test them, where the result is never anything other than foregone. Then claim that because the expected conclusion turned out as expected, belief in the assumptions is strengthened. (This is a generalized case of Daniel Davies’ rule for debating Milton Friedman.) In 'Can’t We All Be More Like Nordics', as in all great intellectual smuggling, the miracle occurs in Step 2…. If we assume that innovation requires income inequality, then we can conclude that innovation requires income inequality. QED…. For self-evident reasons, it is difficult for a political columnist to adjudicate these warring claims. Why? Here is Acemoglu, Robinson and Verdier’s first assumption: Screenshot 6 14 13 5 40 PM That sure is a lot of math symbol things right there! This so frightens the ordinarily incisive Edsall that he forgets that if the assumptions are wrong, all the math in the world won’t produce a useful conclusion."

Neil Irwin: Is a little bit of inflation just what the doctor ordered to keep unemployment down? |