Goods vs. Services Inflation
Thursday Underrated Non-Economic Weblogger: Oliver Willis

Noted for June 6, 2013

Jonathan Coopersmith (2000): But Gore Did Help Invent the Internet | Digby: Deficit fever is definitely breaking | Susan Perry: The health risk of having a gun in the home | Josh Barro explains that this is why he is a Republican | Michael Hiltzik: Social Security should be expanded, not cut | Mike Konczal: We Just Had the Lowest Core Inflation in 50 years. What Does This Mean for "Expectations" and Monetary Policy? | Francesco Saraceno: Supporting Aggregate Demand in Fiscally Constrained Economies | Sparse Thoughts of a Gloomy European Economist |

  • Paul Krugman: Non-prophet Economics: "My view is that a pretty standard IS-LMish macro model has done very well in recent years. It didn’t predict the housing bubble and collapse, but it certainly did not, unlike some other models, declare that deep recessions can’t happen at all. It predicted that once we were up against the zero lower bound, countries could run very large deficits without driving up interest rates, that central banks could drastically expand the monetary base without inflation, that contractionary fiscal policy would in fact be contractionary…. I’ve made some pretty wrong predictions in my time. The thing, however, is that all of these bad predictions involved stepping outside the models I understood. I underestimated the payoff to the internet…. I predicted a fiscal crisis in 2003; I really regret that, because my own models weren’t predicting any such crisis — they said, even at the time, that America wasn’t vulnerable to an Argentine-type crisis because it borrowed in its own currency. But I let my gut feelings override my analysis."

  • Digby: Hullabaloo: "Deficit fever is definitely breaking. But we're not out of the woods just yet. Uh oh, here comes another shrill condemnation of deficit fever by a leftwing radical commie: 'The International Monetary Fund chief criticized the U.S. on Tuesday for cutting back government spending too much too fast, saying it was taking a toll on growth in one of the world's main economic engines…. "The U.S. is not doing as well as it should, largely because of self-inflicted fiscal wounds", she said, a reference to government belt tightening which the IMF says has gone too far too fast. She particularly criticized across-the-board federal spending cuts imposed in March known as sequestration.'… It's another data point showing that deficit fever may have finally broken…. Now if they could just get rid of sequestration altogether we'd be in good shape."

  • Kevin Drum: Immigration Reform Gets a Sudden Blast of Reality: "One of the key questions that's been swirling around the immigration debate from the beginning is whether Marco Rubio is being an honest broker…. Or does he want to play the role of reasonable conservative… and then… turn against his own bill at the end because it's not tough enough?…. 'Rubio answered, “Well, I think if those amendments don’t pass, then I think we’ve got a bill that isn’t going to become law, and I think we’re wasting our time. So the answer is no.”' 'Those amendments' are poison pills that would require 100 percent operational control of the border before any new green cards are issued, a standard that's pretty obviously impossible to meet. The only reason to insist on them is to give Rubio a plausible exit strategy from his own bill. Or so it seems. Maybe Rubio has something else in mind. But it's sure starting to look like Rubio has figured out that his support for immigration reform is doing him more harm than good with the tea party folks he needs if he ever wants to become president. What's more, he's probably less confident than he used to be about the chances of getting the House to go along anyway, which makes it pointless for him to keep taking damage over the issue. We'll see. Rubio's support, as always, is critical to immigration reform. If he bolts, it's dead. But if he insists on his poison pill amendments, it's dead too. I'd say the odds on passage just dropped dramatically."

  • David M. Byrne, Stephen D. Oliner, and Daniel E. Sichel: Is the Information Technology Revolution Over?: "Given the slowdown in labor productivity growth in the mid-2000s, some have argued that the boost to labor productivity from IT may have run its course. This paper contributes three types of evidence to this debate. First, we show that since 2004, IT has continued to make a significant contribution to labor productivity growth in the United States, though it is no longer providing the boost it did during the productivity resurgence from 1995 to 2004. Second, we present evidence that semiconductor technology, a key ingredient of the IT revolution, has continued to advance at a rapid pace and that the BLS price index for microprocesssors may have substantially understated the rate of decline in prices in recent years. Finally, we develop projections of growth in trend labor productivity in the nonfarm business sector. The baseline projection of about 1¾ percent a year is better than recent history but is still below the long-run average of 2¼ percent. However, we see a reasonable prospect--particularly given the ongoing advance in semiconductors--that the pace of labor productivity growth could rise back up to or exceed the long-run average. While the evidence is far from conclusive, we judge that: 'No, the IT revolution is not over.'"

  • Paul Krugman: Greek Regrets: "The IMF has released a fairly remarkable piece of self-criticism (pdf) over policy in Greece… it failed to acknowledge early on that Greece simply could not repay its debt in full, and it vastly underestimated the economic damage austerity would inflict. Both errors were, if I may say so, obvious at the time. The troika plan was clearly not realistic — and just about all of us on the Keynesian side were warning, loudly, that multipliers estimated from normal periods with offsetting monetary policy were grossly misleading for fiscal policy under current conditions. All one can say is that the IMF was better than the rest of the troika, with the ECB in particular actually buying in to the fantasy of expansionary austerity…. I think it’s possible to envisage a Greek program that began with a big debt writedown, traded off nasty but not crippling austerity for substantial bridge loans from the ECB, and in which Greece returned to the private market in 2012 or so. OK, it wasn’t going to happen politically, and maybe even if it did the price would have been socially disastrous. But in that case you have to wonder whether it was worth trying to keep Greece in the euro at all."