Hoisted from the Archives: Risks of Debt: The Real Flaw in Reinhart-Rogoff: : A country that spends and spends and spends and spends and does not tax sufficiently will eventually run into debt-generated trouble.... But can this happen as long as interest rates remain low? As long as stock prices remain buoyant? As long as inflation remains subdued. My faction of economists—including Larry Summers, Laura Tyson, Paul Krugman, and many many others—believe that it will not... #hoistedfromthearchives #macro #fiscalpolicy #publicsphere #economicsgonewrong 2019-07-06
Smackdown: Failing to Do Robustness Checks Is Not a Virtue: There never was any "90 percent debt-to-GDP tipping point". Reinhart and Rogoff thought there was because they did not do any robustness checks of their data-analysis binning procedures.... Marking your beliefs to market makes your thoughts stronger and raises your credibility. Not doing so does the reverse: Ken Rogoff: The Austerity Chronicles: "After years of mounting polemics against austerity policies, Keynesian dogma has become something close to a secular religion in popular economic-policy debates. But a new study of 16 advanced economies shows that, as with all dogmas, righteousness is no substitute for empirical facts... 2019-07-06
Weekend Reading: Discussion of J. Bradford DeLong and Lawrence H. Summers (2012): "Fiscal Policy in a Depressed Economy 2019-06-24
Hoisted from the Archives: John Cochrane's Claim in Late 2008 That a Recession Would Be a Good Thing Deserves Some Kind of Award...: "The fact is that by the end of 2007 the construction sector had rebalanced: there was no excess of people pounding nails in Nevada—even if you did believe the false theory that recessions have recessions do the "necessary work of rebalancing", there was no rebalancing work to be done after 2007. Even a quarter-competent Schumpeterian who kept even half an eye on the data should have been able to recognize that...
Hoisted from Six Years Ago: To Steal a Line from Leon Trotsky: "Every Man Has a Right to Be Stupid, but John Cochrane Abuses the Privilege...": I never reacted to John Cochrane's July 2012 failure to mark his beliefs to market and, instead, doubling down on his claim that the biggest risk the U.S. economy faces is that of becoming "Argentina" "quickly".... If I were going to criticize people for not citing my work, I would not claim that a sentence they wrote which comes immediately after a four-paragraph quote from me as an example, and I would have read their explanation of why they think expansionary fiscal policy right now does not raise the risks of "fiscal dominance" rather than remain in ignorance of it. But to each his own!...
The Intergenerational Burden of the Debt: Nick Rowe Tempts Fate Weblogging: Hoisted from the Archives: https://www.bradford-delong.com/2019/06/the-intergenerational-burden-of-the-debt-nick-rowe-tempts-fate-weblogging-hoisted-from-the-archives.html #economicsgonewrong #fiscalpolicy 2019-06-13 2012-10-12
Hoisted From the Archives: "Attempts to Make Sense Out of Right Wing Austrian Economics Can Never Amount to Anything"—rootlesse: _ 2019-05-16
Note to Self: All of these people are now very, very quiet: Robert J. Barro, Michael J. Boskin, John Cogan, Douglas Holtz-Eakin, Glenn Hubbard, Lawrence B. Lindsey, Harvey S. Rosen, George P. Shultz and John. B. Taylor.... James C. Miller III... Barry W. Poulson... Charles W. Calomiris... Donald Luskin... 95 others... Susan Collins... #economicgrowth #publicfinance #orangehairedbaboons #moralresponsibility 2019-02-14
Debt Derangement Syndrome: Fresh at Project Syndicate: Standard policy economics dictates that the public sector needs to fill the gap in aggregate demand when the private sector is not spending enough. After a decade of denial, the Global North may finally be returning to economic basics: For the past decade, politics in the Global North has been in a state of high madness owing to excessive fear of government debts and deficits. But two recent straws in the wind suggest that this may at long last be changing.... Ken Rogoff.... Brendan Greeley... reported... “a panicked email” from the Committee for a Responsible Federal Budget (CRFB)... Olivier Blanchard.... What Rogoff and Blanchard are saying today is standard policy economics. In fact, I always found it hard to believe–and still do–that anybody can take exception to it. Whenever the private sector stops spending enough to keep unemployment low and jobs easy to find, the public sector needs to fill the gap in aggregate demand... #macro #fiscalpolicy #economicsgoneright #economicsgonewrong 2019-02-07
A Rant on Trump, Trade, and China...: "Steve, what you are saying is simply delusional. You keep saying that Xi needs to deal because Trump is deadly serious on China and will not back down. Do remember that Trump declared victory on reforming NAFTA, "the worst trade deal in the history of the world", with small adjustments on autoparts rules-of-origin. Small adjustment on auto parts were enough to transform NAFTA, in Trump's mind, from the worst trade deal in the history of the world into something he is now very proud of. Xi has to to be thinking that he should deal with Trump the same way that Mexico did... #publicsphere #orangehairedbaboons #highlighted #globalization 2019-02-08
Note to Self: The Heritage Foundation, the Club for Growth, and Stephen Moore Have No Principles Whatsoever. Why Do You Ask?: Now that Stephen Moore has signed up with Donald Trump, he is opposed to the Trans Pacific Partnership.... But... short months ago... Larry Kudlow, Arthur Laffer, and Stephen Moore (2015): TPP Good For Both Sides Of The Pacific... #notetoself #orangehairedbaboons #highlighted #hoistedfromthearchives Economics Gone Wrong American Conservatism's Frankenstein 2019-01-25
Hoisted from the Archives: The Kansas Republican Governance Experiment. Or Is That "Governance 'Experiment'"? Or Is That "'Governance' Experiment"?: Nothing like this was seen before.... It is only under Brownback that it has been down, down, down, down. You can argue how much of it is hostility to immigrants and strangers. How much of it is the profoundly un-Christian cast of a "Christian" government, and how much of it is the collapse of public services. But it has been effective. My friend Dan Davies says that the best proof that there is a skill and art of management comes from the fact that nobody doubts that there is such a thing as gross mismanagement. Similarly, the best proof that there is such a thing as good technocratic government leading to shared prosperity and equitable growth is... Brownback, and his acolytes and supporters, in Kansas... #hoistedfromthearchives #orangehairedbaboons #brownback... 2019-01-25
Barro prefers to have no explanation at all for why production per capita was lower than it had been in 2007Q4, and yet maintain unshaken confidence that he has a deep and correct understanding of what determines the level of production. You can't do that—hold that you have the correct theory, and yet not explain how it applies to the world in which you live... #economicsgonewrong #publicsphere #moralresponsibility
Betting That Nobody Will Check the References as an Intellectual Style: Monday Smackdown: I have long thought that betting nobody will check the references is an intellectual style much more common on the right than on the center or the left. For example: On Niall Ferguson: Why Did Keynes Write "In the Long Run We Are All Dead"?: In [Keynes's] extended discussion of how to use the quantity theory of money, the sentence... has nothing to do with attitudes toward the future, or with rates of time discount, or with a heedless pursuit of present pleasure. So why do people think it does? Note that we are speaking not just of Ferguson here, but of Mankiw and Hayek and Schumpeter and Himmelfarb and Peter Drucker and McCraw and even Heilbroner—along with many others. I blame it on Hayek and Schumpeter...