Grasping Reality on TypePad, by Brad DeLong

Robin Wigglesworth: Flat yield curve sends a grim message for investors in 2019: "investors are now starting quietly to fret that the US central bank may be on the brink of making a mistake, tightening monetary policy too aggressively in the face of a vulnerable global economy and still-quiescent inflationary forces. The Fed might get away with two hikes this year, but markets should worry about what might come in 2019..."

The argument against Nouriel is that asset markets are still placing high valuations on everything. The argument against taking that as a sign of optimism is that true apocalypse scenarios are not priced: there is no place to hide, so fear of them produces no pressure to sell anything: Nouriel Roubini: Trump May Kill the Global Recovery: "How does the current global economic outlook compare to that of a year ago?...

I think that this is a very important thing to remember. The Fed View—and the zero-marginal-product workers view—and a lot of other pessimistic views about the economy's non-inflationary speed limit for recovery and growth were totally, catastrophically wrong over the past decade. The people who strongly advocated for such views thus had a badly-flawed Vision of the Cosmic All. Thus I think there is no reason to put a weight higher than zero on their current views of how the world works—unless they have publicly and substantially done the work to mark their beliefs to market. Certainly the Federal Reserve has not yet done so: Timothy B. Lee: "Every additional month of strong employment growth and weak wage growth makes people who said we were near full employment in 2014, 2015, 2016, and 2017 look wronger..."

Given the magnitude of the shocks that have hit the world economy since 2005, Alan Greenspan's decision in the mid-1990s to set the Federal Reserve's inflation target at 2% per year rather than 3% or 4% per year looks like a bad mistake. Given what they learned and what we are still learning since 2005, Ben Bernanke, Janet Yellen, and now Jay Powell's refusal to revisit Greenspan's decision is more likely than not to prove a worse mistake. So I go further out on this limb than does the very sharp Karl Smith: Karl Smith: Hey Fed, Don’t Be Scared of a Little More Inflation: "Even if the economy is at full employment, there’s benefit to letting it run hot for a while...

Tim Duy: Powell Wants to Create Some Mystery Around Fed Meetings: "A slower or faster pace of rate hikes, an extended pause, or even a cut are all possibilities at this point...

Ryan Avent: Bond yields reliably predict recessions. Why?: "An inverted yield curve may mean a few things, none of them cheering...

Note to Self: Obama essentially turned monetary, fiscal, and housing policy over to two guys who were “calm down and hope for the best“ rather than “prepare for the worst“ guys: Ben Bernanke and Tim Geithner. Those were, in retrospect, disastrous choices—not because of what they did but because of their opposition to thinking well outside the box and preparing to deal with the worst case scenario’s. So when the “green shoots” of a strong recovery that both saw were not there at all—when they claimed the strong recovery glass was mostly full but in fact there was no glass—their position kept others who would have been preparing for the worst, and who might have been able to do better at dealing with the situation, from being able to take any effective action...

I badly need to find a usable mental model of how employer-side monopsony in labor markets interacts with downward nominal wage rigidity and search and involuntary unemployment. Analyzing just one of these market failures at a time is just not cutting it for me as I try to understand what is going on: Heidi Shierholz and Elise Gould: Why is real wage growth anemic? It’s not because of a skills shortage: "Despite an unemployment rate at 4.1 percent or less since last October, wage growth has been anemic...

A very nice article from the very sharp Justin Lenhart on one of the three things the Federal Reserve is missing right now. The first thing the Fed misses is that, at least as long as the current interest rate configuration holds, they need an inflation rate of 4% per year not 2% per year, in order to have enough running room to fight next recession. The second thing the Fed misses is that the slope of the Phillips curve has changed, and so going for faster growth and higher employment right now is not risky but, rather, harvesting low-hanging fruit. The third thing the Fed misses is that a near-inverted yield curve is a danger sign—and yet the Fed is, as in 2006, finding reasons to pretend that "this time is different". I confess that fed thought—the governors, the bank presidents, and the staff—is quite opaque to me right now: I do not understand why they are making the analytical judgments that they are making: Justin Lahart: What the Fed Is Missing, Again: "The Federal Reserve isn’t worried about the yield curve, and it has reason why. The problem: It is pretty much the same reason it wasn’t worried about the yield curve before the financial crisis...

Current Versions of Chapters 1-3:

1. DRAFT: My Grand Narrative
2. DRAFT: Themes
3. DRAFT: Making a Global Economy and Society, 1870-1914

Outtakes and Deleted Scenes:

• The Circa-1870 Disjunction Between Production and Distribution: A Possible Outtake from "Slouching Towards Utopia?: An Economic History of the Long 20th Century"
• Why Was the 20th Century Not Another Chinese Century?
• Imprisonment by Malthus and "Negative Liberty"

The extremely sharp Tim Duy provides us with not a recession signal but rather with a signal that current Fed policy is going to provide us with a recession signal: Tim Duy: Fed Pushing Ahead Toward Inversion: "I fully expect the Fed will continue hiking rates if the yield curve inverts unless there is a clear financial meltdown at that time...

Blaming the Pollyannaish fecklessness of the Bank of England on the feckless indolence of Britain's reporters: Simon Wren-Lewis: How UK deficit hysteria began: "Monetary policy ran out of reliable levers to manage the economy. However, journalists wouldn’t know that from the Bank of England, who tended to talk as if Quantitative Easing was a close substitute to interest rates as a monetary policy instrument...

Cedar Brook Notes: The late Rudi Dornbusch liked to say that: “German ordoliberalism was something an economist could recognize if there was a benevolent Kindlebergian hegemon stabilizing the global system.” But if not, not.

Paul Krugman: Monopsony, Rigidity, and the Wage Puzzle: "(1) The wage puzzle:F rom the mid-1990s until the 2008 financial crisis, it looked as if there was a fairly stable Phillips curve...

It is not clear to me that this is right. It is not clear to me that this is wrong. I need to think about this more: a lot more: Narayana Kocherlakota: Practical Policy Evaluation: "How should a policymaker, who is making but one in a long sequence of choices over time, use the available data to arrive at a decision?...

So Rich Clarida's (who should be a good Fed Vice Chair) and Michelle Bowman's Federal Reserve nominations (whom I do not know) made it out of the Senate Banking Committee 20-5 and 18-7. Marvin Goodfriend—who made it out 13-12—is still hanging fire on the Senate calendar. There is no reason I see to think that Fed Governor is a job he should have: there are much more sensible and reality-based conservative and inflation-hawkish monetary economists out there. One of them would dominate Marvin along every dimension. So it is time to highlight this again:

Hoisted from the Archives: I think it is time to move Marvin Goodfriend over to the "unprofessional" and "should not have a role making monetary policy" side of the ledger. There are much better inflation hawks as far as policy judgment is concerned. And someone with a demonstrated desire to pander to the yahoos—which is the only way I can make this coherent—is not a good candidate for the Board of Governors: On the Negative Information Revealed by Marvin Goodfriend's "I Don't Teach IS-LM": The smart and snarky Sam Bell wants to taunt me into rising to his bait by twittering https://twitter.com/sam_a_bell/status/872116967070732288 a quote from likely Fed nominee Marvin Goodfriend: "I don't teach IS-LM". He succeeds. Here is the quote:

Since the mid-1990s we have been, once again, living in a world in which John Maynard Keynes is the most relevant economist to understanding our situation. Robert Skidelsky knows Keynes better than Keynes knew himself. Thus this is likely to be the most valuable economics book you read this year: Robert Skidelsky (2018): Money and Government: The Past and Future of Economics (New Haven: Yale University Press: 0300240325) https://books.google.com/books?isbn=0300240325

Tim Duy: The Fed Has Enough Room to Combat the Next Crisis: "The Fed has more than enough room to replicate the responses to the 1987 stock market crash or the 1997 Asian financial crisis...

Note to Self: Last night I dreamed that I had traveled back in time and was having coffee with the young Schumpeter at the Cafe Central in Vienna. I tried to convince him not to be a "Liquidationist"—that the work of structural adjustment is done in the boom as people are pulled into higher-value activities, not in the depression as people are pushed into zero-value activities. I failed...

2008-2012 was, apparently, not enough for the Great and Good of Germany to decide to repair the Eurozone and European Union's structural economic flaws: Wolfgang Münchau: Eurozone Downturn and Lack of Reform Presage Existential Crisis: "A slowdown mixed with a monetary union unwilling to repair itself would be a risk to the global economy...

The slides from my “Macroeconomic Situation and Outlook” talk as it stood ten years ago, in June 2008. The subtitle and the conceit of the talk was that what we were then going through was an eruption into the twenty-first century of the kind of financial crisis that was typical of the pre-Great Depression period.

What did I get right and what did I miss? The main thing I missed was that I misunderstood what Bernanke, Paulson, and Geithner were doing. I thought that they were following the now century and a half-old Bagehot rule from Lombard Street for how to handle a financial crisis:

1. Lend freely
2. On collateral that is good in normal tomes
3. At a penalty rate

Most of the talk is therefore devoted to explaining what the Bagehot Rule is, why it is a good thing, and how it is all likely to work out.

But when Lehman hit the wall in the fall they refused to follow (2) in evaluating its collateral, and so they did not do (1). And they never showed any interest in doing (3). And so here we are...

https://www.icloud.com/keynote/0QioimVob1vnDm7_UGy4AjVxA
http://j-bradford-delong.net/2008_html/20080610_delong_situation.html

Ernie Tedeschi: "Jason... 3 points: The 1st is: if... prime-age... EPOP... better... than the headline unemployment rate, then why haven't wages accelerated more, given those measures have improved faster than U3?...

Interesting and, I think, correct on the costs, benefits, risks, and opportunities from the keen-witted President of the Federal Reserve Bank of Minneapolis: Neel Kashkari: The Fed should not move too quickly to raise rates: "The US recovery took place after the Federal Reserve undertook extraordinary monetary policies...

Miles Kimball: Link to Basic Resources for Intermediate Macro:

• Reminders About Logarithms
• The Logarithmic Harmony of Percent Changes and Growth Rates
• The Shape of Production: Charles Cobb's and Paul Douglas's Boon to Economics
• Cobb-Douglas with Constant Returns to Scale Exercise
• Returns to Scale Exercise
• %ΔQ = elasticity %ΔP; %Δ (PQ) = %ΔP+%ΔQ
• Supply and Demand: Elasticities and Comparative Statics
• Rule of 70 Exercise

Anyone who wants to be a B student, an A student or learn even more than that should read the book Make It Stick. I can summarize the main point this way. If you want to get knowledge into long-term memory, reading and rereading won't do the trick. Your brain only puts something into long-term memory if you prove to your brain that it is worth remembering that thing by trying to remember it. So the activity of trying to remember things is the key to learning something not just for the exam tomorrow but learning it for good.

Besides telling my students what I just said in the last paragraph, the way I use this principle in my class is by treating exams primarily as learning opportunities and only secondarily as evaluation devices. Exams cause students to try to remember things. Before each of the three exams, I ask students to do over the weekend the exam from the previous year as a practice exam—under time pressure. Then I go over that practice exam carefully in the class right before the exam. After the exam, I consider the class where I go over the answers one of the most important class periods for learning.

When I write each exam, I am thinking about what I most want students to remember down the road, since I know they will remember what ended up on the exams much more than any other specific things from the class. The answers to the exam questions represent the bulk of the key ideas and some of the key skills I want the students to take away from the class...

Peter C. Brown et al. (2014): Make It Stick: "Drawing on cognitive psychology and other fields, Make It Stick offers techniques for becoming more productive learners, and cautions against study habits and practice routines that turn out to be counterproductive. The book speaks to students, teachers, trainers, athletes, and all those interested in lifelong learning and self-improvement..."

This File: http://delong.typepad.com/teaching_economics/miles-kimball-intermediate-macro.html
Edit This File: http://www.typepad.com/site/blogs/6a00e551f08003883401b8d2c935d5970c/page/6a00e551f0800388340224df3527d6200b/edit?saved_added=n
Teaching Economics: http://delong.typepad.com/teaching_economics/contents.html

An enormous amount that I think is right here. And I bunch I think is wrong. And now I have laid down a marker that I have to write down what I think is wrong here, which I will... someday... in my copious spare time But what is right: Miles Kimball: On Teaching and Learning Macroeconomics: "Many... important ideas are missing from most macroeconomic textbooks.... Here are some... I consider so important that I teach them in class:

Note to Self: Working on Today...:

• Computer Literacy: An Educational Experiment http://delong.typepad.com/teaching_economics/an-educational-experiment.html
• Last semester's grading
• Oxford Proposal: Macroeconomics: A Very Short Introduction
• Equitable Growth
• Books- Martha Wells- The Murderbot Diaries https://www.icloud.com/keynote/0OCCvTnS2wOyEF3hrNUALf0dQ

Monday Smackdown/Hoisted from the Archives (August 2015): "We Always Thanked Robert Lucas for Giving Us a... Monopoly" Over Valuable Macroeconomics: The extremely sharp Paul Romer gets something, I think, very very wrong...

Martin Feldstein (1979): Introduction to The American Economy in Transition: "The post-[World] War [II] period began in an atmosphere of doubt and fear...

This year, 2018, will be the 11th year after the 2007 business cycle peak that preceded what is generally called the “Great Recession“. This year American national income per capita will be about 7.5% above its 2007 level. If we are lucky we will hit 10% above 2007 in 2020. That is growth of 0.4% per year—compared to the yardstick of 2.0% per year that we were reasonably expecting back in 2007.

J. Bradford DeLong
Economics and Blum Center of U.C. Berkeley, WCEG, and NBER
Revised 2018-05-01

https://www.icloud.com/keynote/0xoGroPwN3sF-FHQgSM9K3xPw

http://nbviewer.jupyter.org/github/braddelong/LSS18E101b/blob/master/2018-05-01%20%23MRE%20Review%20Intermediate%20Macroeonomics.ipynb

In a sense, closed book exams have been obsolete since 1500. You could argue before 1500 that people would often find themselves in situations in which they had to produce documents and write answer is calling on nothing but what they had currently running on their own wetware. Books, after all, were very expensive. At five pages an hour, figure it would take a month to produce one copy of a book, and that is only the direct, skilled labor required.

After 1500, however closed book exams made no sense—at least not without a theory of why acting like a medieval monk would in fact teach habits of mind and thought that would help us think and write in a world where people were surrounded almost always by their notes and their libraries.

And now, of course, the young ones are never without their smartphones.

So it is time for us professors to start writing exams that test and teach habits of thought relevant for a world in which you have rapid broadband access to the entire online library of humanity at nearly every instant.

Therefore this exam is open note, open book, and open smartphone—or whatever other device you wish to bring...

Only one form of information access is prohibited: direct two-way interaction with other Turing class entities). In case you are uncertain, here are examples of five examples of Turing class entities:

In Keynes’s General Theory the question of why “it seems unlikely that the influence of banking policy on the rate of interest will be sufficient by itself…” is left hanging. The question of how a “somewhat comprehensive socialization of investment“ is to be implemented is left hanging as well. There are remarkably a few references to “fiscal policy” in any form. So will somebody please explain to me why “fiscal policy” plays such a small part in the General Theory, while playing such a large part in mindshare perceptions of “Keynesianism”?...

Keynes's General Theory Contains Oddly Few Mentions of "Fiscal Policy"

Thx to Wavelength and the very interesting micro.blog http://delong.micro.blog/2018/04/21/keyness-general-theory.html

Text: http://www.bradford-delong.com/2018/02/keyness-general-theory-contains.html

RSS: http://delong.micro.blog/podcast.xml.

Weekend Reading: I would have said that the Dark Age is over. But the behavior of professional Republican economists formerly of note and reputation—and I am looking at you, Robert Barro, Harvey Rosen, Douglas Holtz-Eakin, Larry Lindsey, John Taylor, John Cochrane Glenn Hubbard, Michael Boskin, Charlie Calomiris, Jim Miller, Jagdish Bhagwati, and George Shultz: you know better. And, Marty Feldstein, you really should not have written your defense of Trump's China tariffs. The 2009-2014 Dark Age looks to me, mostly, like a deliberate decision to be stupid and not think issues through. This one looks like a last, vain attempt to gain some influence on Republican policy: Mark Thoma (2009): "A Dark Age of Macroeconomics": "Quoting an email [from Paul Krugman], economists who...

Weekend Reading: This still cuts me to the quick. I am not at all a depressive personality—but if I were, this would have me pulling an Oblomov every time I remember that I am part of a professional discipline that was, collectively, so useless in 2009-12, and that I used to praise the analytical acumen and tell people to listen to and take seriously so many of those who made us so useless: Paul Krugman (2012): Economics in the Crisis: "We’re now in the fourth year of a truly nightmarish economic crisis. I like to think that I was more prepared than most for the possibility that such a thing might happen; developments in Asia in the late 1990s badly shook my faith in the widely accepted proposition that events like those of the 1930s could never happen again. But even pessimists like me, even those who realized that the age of bank runs and liquidity traps was not yet over, failed to realize how bad a crisis was waiting to happen–and how grossly inadequate the policy response would be when it did happen...

Economics Gone Wrong: I swing back and forth between simply thinking that:

• John Taylor has become unprofessional in writing things like Fed Policy Is a Drag on the Economy in which he claims that Federal Reserve quantitative easing is "imposing an interest-rate ceiling on the longer-term market by saying it will keep the short rate unusually low... much like... a price ceiling in a rental market where landlords reduce the supply of rental housing..."

• John Taylor is still very professional—but that he is not a professional economist but rather a professional Republican.

Hoisted from the Archives (October 2015): Central Banks Are Not Agricultural Marketing Boards: Depression Economics, Inflation Economics and the Unsustainability of Friedmanism: Insofar as there is any thought behind the claims of John Taylor and others that the Federal Reserve is engaged in "price controls" via its monetary policy actions...

Strike that.

There is no thought at all behind such claims at all.

Last Wednesday night at Ars Technica LIVE! at Eli's Mile High Club in Oakland—located beneath where the eight-lane Interstate 580 crosses the ten-lane California Highway 24—there were three demands from the People of the Internet Appearing in Meatspace for a return of the Morning Coffee podcast.

So why not?

Joseph Schumpeter’s Liquidationist Errors: DeLong Morning Coffee Podcast:

Joseph Schumpeter was wrong in his claim the depressions were things to be suffered rather than cured. But how much smarter Schumpeter was than our modern day austerians!!

Joseph Schumpeter’s Liquidationist Errors

RSS: http://delong.micro.blog/podcast.xml. The easiest way to create podcasts appears to be to wander around the campus dictating things to Wavelength which then automatically posts them to the very interesting micro.blog: https://delong.micro.blog/2018/04/14/joseph-schumpeters-liquidationist.html

Text: http://www.bradford-delong.com/2018/04/joseph-schumpeter-on-liquidationism-hoisted-from-the-archives.html

Crisis, Rinse, Repeat: Key economic data from the periods following the 1929 stock-market crash and the 2007-2008 financial crisis suggest that the current recovery has been unnecessarily anemic. If policymakers refuse to heed the lessons of the New Deal era, then the next crisis is destined to be as prolonged as the last.

Wednesday night at Ars Technica LIVE! at Eli's Mile High Club in Oakland—located beneath where the eight-lane Interstate 580 crosses the ten-lane California Highway 24—there were three demands from the People of the Internet Appearing in Meatspace for a return of the Morning Coffee podcast.

So why not?

Globalization: What Did Krugman Miss?: DeLong Morning Coffee Podcast:

Paul Krugman has a very nice short “framework for thinking about globalization and the world” piece derived from a talk he gave at the IMF last fall.

But…

Globalization: What Did Krugman Miss?: DeLong Morning Coffee Podcast

Hoisted from the Archives: Joseph Schumpeter on "Liquidationism": Three things strike me while rereading Schumpeter's 1934 "Depressions" (and also his 1927 Explanation of the Business Cycle):

1. How much smarter Schumpeter is than our modern liquidationists and austerians--he says a great many true things in and amongst the chaff, which is created by his fundamentally mistaken belief that structural adjustment must be triggered by a downturn and a wave of bankruptcies that releases resources into unemployment. How much more fun and useful it would be right now to be debating a Schumpeter right now than the ideologues calling for, say, more austerity for and more unemployment in Greece!

2. How very strange it is for Schumpeter to be laying out his depressions-cause-structural-change-and-growth theory of business cycles at the very same moment that he is also laying out his entrepreneurs-disrupt-the-circular-flow-and-cause-structural-change-and-growth-theory of enterprise. It is, of course, the second that is correct: Growth comes from entrepreneurs pulling resources into the sectors, enterprises, products, and production methods of the future. It does not come from depressions pushing resources into unemployment. Indeed, as Keynes noted, times of depression and fear of future depression are powerful brakes halting Schumpeterian entrepreneurship: "If effective demand is deficient... the individual enterpriser... is operating with the odds loaded against him. The game of hazard which he plays is furnished with many zeros.... Hitherto the increment of the world’s wealth has fallen short of the aggregate of positive individual savings; and the difference has been made up by the losses of those whose courage and initiative have not been supplemented by exceptional skill or unusual good fortune. But if effective demand is adequate, average skill and average good fortune will be enough..."

3. How Schumpeter genuinely seems to have no clue at all that the business cycle is a feature of a monetary economy--how very badly indeed he needed to learn, and how he never did learn, what Nick Rowe and company teach today about the effects of monetary stringency on economic coordination.

From June 2017: Fed Up Rethink 2% Inflation Target Blue-Ribbon Commission Conference Call: I hear four arguments for not changing the 2%/year inflation target, even though pursuing that target found us in a situation where monetary policy was greatly hobbled in its ability to manage the economy for a solid decade. And, as best as I can evaluate them, all four of these arguments seem to me to be wrong. They are:

1. The Federal Reserve, even at the zero lower bound, has powerful tools sufficient to carry out its stabilization policy tasks....

2. The problem is not the 2%/year target but rather pressure on the Federal Reserve... from substantial numbers of economists and politicians practicing bad economics and motivated partisan reasoning....

3. A higher inflation rate would bring shifting expectations of inflation back into the mix, distract people and firms from their proper task of calculating real costs and benefits to worry about monetary policy, and make monetary policy management more complicated....

4. The Federal Reserve needs to maintain its credibility, and if it were to even once change the target inflation rate, its commitment to any target inflation rate would have no credibility...

Macroeconomics: How Large Is the Shadow Cast by Recessions?

https://www.icloud.com/keynote/0-rKMXUoFYubeD2FVgezAd8kg http://www.bradford-delong.com/2018/04/macroeconomics-how-large-is-the-shadow-cast-by-recessions.html

• J. Bradford DeLong and Lawrence H. Summers (1988): On the Existence and Interpretation of the "Unit Root" in U.S. GNP http://delong.typepad.com/unit_root.pdf
• Danny Yagan (2017): Employment Hysteresis from the Great Recession http://delong.typepad.com/w23844.pdf
• Christina Romer and David Romer (2017): Why Some Times Are Different: Macroeconomic Policy and the Aftermath of Financial Crises http://www.nber.org/papers/w23931
• J. Bradford DeLong and Lawrence H. Summers (2012): Fiscal Policy in a Depressed Economy https://www.brookings.edu/bpea-articles/fiscal-policy-in-a-depressed-economy
• J. Bradford DeLong (2018): Notes on Gerald Friedman https://www.icloud.com/pages/0n7dprWN7e0ZqfoYxNytgBEwg

This is a very nice short framework-for-thinking-about-globalization-and-the-world piece by Paul Krugman: Paul Krugman (2018): Globalization: What Did We Miss?

It is excellently written. It contains a number of important insights.

But.

I have, unusually, a number of complaints about it. I will make them stridently:

Franklin Delano Roosevelt (March 4, 1933): I am certain that my fellow Americans expect that on my induction into the Presidency I will address them with a candor and a decision which the present situation of our Nation impels...

National Income and Components

Real GDP:

Real GDP per Worker:

Books to Reread: John Maynard Keynes (1931): Essays in Persuasion: "Here are collected the croakings of twelve years—the croakings of a Cassandra who could never influence the course of events in time...

Something that has puzzled me for quite a while: Keynes's General Theory contains remarkably few references to fiscal policy in any form:

• "Government spending": no matches...

• "Government purchases": no matches...

Everybody interested in macroeconomics or macroeconomic policy should know this topic backwards and forwards by heart. My problem is that I do not see how I can add value to it. The only thing I can think of to do is to propose two rules:

1. Paul Krugman is right.
2. If you think Paul Krugman is wrong, refer to rule #1.

I do wish that those who were not bad actors who made mistakes would 'fess up to them. Those who don't will get moved to the "bad actor" category: and, yes, I am looking at you, Marvin Goodfriend.

The only remaining question, I think, is whether these should all be read in chronological or reverse chronological order. I find myself torn, with arguments on both sides having force:

• Paul Krugman (2018): It’s Baaack, Twenty Years Later https://www.gc.cuny.edu/CUNY_GC/media/LISCenter/pkrugman/Its-baaack.pdf

• Olivier Blanchard and Daniel Leigh (2013): Growth Forecast Errors and Fiscal Multipliers http://delong.typepad.com/wp1301.pdf

• Paul Krugman (2011): Ricardian Confusions() https://krugman.blogs.nytimes.com/2011/03/10/ricardian-confusions-wonkish/

• Paul Krugman (2009b): One more time https://krugman.blogs.nytimes.com/2009/04/06/one-more-time/

• Paul Krugman (2009a): A Dark Age of macroeconomics https://krugman.blogs.nytimes.com/2009/01/27/a-dark-age-of-macroeconomics-wonkish/

Ben Bernanke (1999): Japanese Monetary Policy: A Case of Self-Induced Paralysis? https://www.princeton.edu/~pkrugman/bernanke_paralysis.pdf

• Paul Krugman (1998): It's Baaack: Japan's Slump and the Return of the Liquidity Trap http://delong.typepad.com/krugman_its_back.pdf

Hoisted from the Archives: Economics as a Professional Vocation: The very sharp Binyamin Applebaum had an interesting rant....

Binyamin Applebaum: @BCAPPELBAUM ON TWITTER: "I am not sure there is a defensible case for the discipline of macroeconomics if they can’t at least agree on the ground rules for evaluating tax policy. What does it mean to produce the signatures of 100 economists in favor of a given proposition when another 100 will sign their names to the opposite statement? How does Harvard, for example, justify granting tenure to people who purport to work in the same discipline and publicly condemn each other as charlatans? How are ordinary people, let alone members of Congress, supposed to figure out which tenured professors are the serious economists?...

I would say, first, that journalists (and others) are supposed to use their eyes and their brains. They can take a look at the Nine Unprofessional Republican Economists who placed their letter in the Wall Street Journal... [on a] Saturday containing:

Does this belong in the next edition of Martha Olney's and my Macroeconomics textbook?

Box 4.4.6: Estimating the Effects of Policy Changes: An Example

In late 2017 and early 2018 the Trump administration and the Republican congressional caucuses pushed through a combined tax cut and a relaxation of spending caps to the tune of increasing the federal government budget deficit by about 1.4% of GDP. These policy changes were intended to be permanent.

Not the consensus but the center-of-gravity analysis by informed opinion in the economics profession of the effects on long-run growth of such a permanent change in fiscal policy would have made the following points:

No Longer Fresh Over at Project Syndicate: Why Low Inflation in the Global North Should Be No Surprise: Late last summer the thoughtful and very sharp Nouriel Roubini used his space here at Project Syndicate to attribute the stubborn and, by many, unexpected persistence of low inflation in the Global North to "positive" (so-called, even though a number of them are on balance unwelcome) shocks to aggregate supply: Nouriel Roubini: The Mystery of the Missing Inflation:

The recent growth acceleration in the advanced economies would be expected to bring with it a pickup in inflation.... Yet core inflation has fallen.... Developed economies have been experiencing positive supply shocks.... The Fed has justified its decision to start normalizing rates... by arguing that the inflation-weakening supply-side shocks are temporary.... Central banks aren’t willing to give up on their formal 2% inflation target, [but] they are willing to prolong the timeline for achieving it...