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Scott Sumner Tyler Cowen has an excellent new video out that looks at four schools of thought in business cycle theory, with application to the Great Recession.I agree with most of the specifics in the video, but differ in how to.

MORE December 10, 2017 Scott Sumner For the past nine years I've been promoting market monetarist ideas in the blogosphere Who can help me with my custom presentation macro economics A4 (British/European) APA 144 pages / 39600 words Writing from scratch.MORE December 10, 2017 Scott Sumner For the past nine years I've been promoting market monetarist ideas in the blogosphere.

How important is NGDP targeting to the MM agenda? Much less important than many people assume.Kurt Schuler left the following comment in response to my.MORE December 7, 2017 Scott Sumner I am currently working on the final chapter of a book manuscript, tentatively entitled "The Money Illusion: Market Monetarism and the Great Recession." I am trying to identify my core message should i order a college legal issues research proposal British CSE single spaced.

" I am trying to identify my core message.

What is the essence of my critique of mainstream.MORE December 5, 2017 Scott Sumner MRU has a video entitled "When the Fed Does Too Much".That led me to wonder, "too much what"? Too much discretion? Too much regulation? Too expansionary a policy? So I decided to watch the video.MORE December 1, 2017 Scott Sumner Who's the world's best central banker? I'm not sure, but this guy is certainly a front-runner for the title: Bank of Japan board member Goushi Kataoka said the central bank must expand stimulus further to achieve its price target early,.

MORE Contributing Guest by Pierre Lemieux Individuals are different and assuming the contrary assumes away most of the social phenomena we are trying to understand.There is a good chance that my economist readers will recognize the unicorn.MORE November 29, 2017 Scott Sumner Jerome Powell recently testified in front of Congress.This caught my attention: So the Fed's balance sheet is about $4.

5 trillion now, and we know that it will be much smaller than that when it reaches its new -- its.MORE November 28, 2017 Scott Sumner Here's Bloomberg: President Donald Trump hailed his appointment of Jerome Powell to be the next Federal Reserve chair, citing Powell's "considerable talent and experience." Given the realistic alternatives, Powell was one of Trump's better appointments.MORE November 25, 2017 Scott Sumner My vision of macro has several components: 1.

A production possibilities frontier, which gradually shifts out due to productivity and labor force growth.An AS/AD model that causes output to cycle above and below.MORE November 19, 2017 Scott Sumner Tyler Cowen directed me to an interesting question raised in his comment section (by "BC"): Do federal employees pay income tax on their wages? I know they do nominally, but that tax goes back to their employer, the federal government.

MORE November 18, 2017 Scott Sumner Last week I attended the Cato Monetary conference in Washington.Jim Dorn always does a good job of finding interesting speakers.I couldn't help contrasting the event with the Peterson Institute conference that I attended last month.MORE November 16, 2017 Scott Sumner The Economist recently reviewed a biography of Herbert Hoover: Why was it that Hoover, hitherto so talented at overcoming crises, was unable to overcome the Great Depression? Perhaps he had come to believe his own propaganda about ordinary people collectively.

MORE November 12, 2017 Scott Sumner George Selgin has a new post discussing three pieces of legislation being considered by the Senate.Here's one: The Independence from Credit Policy Act (H.French Hill (R-AR), is intended to restrict the Fed's asset holdings,.

MORE November 8, 2017 Scott Sumner Doug Irwin is one of my favorite economists, and David Beckworth's recent interview of him is well worth listening to.Here are a few points that caught my attention: 1.Special interest groups create inertia, which makes it hard to.MORE November 7, 2017 Scott Sumner Eliezer Yudkowsky has a great post over at Less Wrong, presenting an imaginary dialogue with a central banker: Frequently Asked Questions for Central Banks Undershooting Their Inflation Target I recall reading this dialogue years ago, but I am not sure.MORE November 2, 2017 Scott Sumner I have a new piece in the Washington Post, entitled "Trump wants a non-economist to lead the Fed.

That could be dangerous": Consider this recent comment by Powell: "In contrast, the Federal Open Market Committee's easing of monetary policy increased.MORE October 31, 2017 David Henderson In his entry, "Consumer Price Indexes," in The Concise Encyclopedia of Economics, Michael Boskin concludes that the CPI overstates inflation by 0.That doesn't add up over the years; it compounds up.

MORE October 30, 2017 Scott Sumner In the past, I've argued that bad economic policies led to the development of Keynesian economics.The two major culprits were tight money during 1929-32 and the NIRA (which both dramatically raised real wages.) If Irving Fisher's "compensated dollar plan".MORE Contributing Guest by Pierre Lemieux BEA's casuistry is confusing if not misleading for the typical journalist, not to speak of the typical citizen.

In a press release of October 5, the Organisation for Economic Co-operation and Development (OECD) presented its estimates.MORE October 29, 2017 Scott Sumner George Selgin sent me a 2000 JMCB paper by David Reifschneider and John C.Williams, who were both at the Fed: To reduce the effects of this phenomenon, in our simulations we incorporate a notional upward adjustment to the inflation.MORE October 23, 2017 Scott Sumner I have a new piece at The Hill discussing the 1987 stock market crash, as well as its implications for today's economy: The real lesson of 1987 is that all lessons are provisional, subject to revision as more time goes.MORE October 21, 2017 Scott Sumner Over at TheMoneyIllusion I've been running a series of posts that are critical of popular views of inflation.

I claim inflation is determined by shifts in the supply and demand for money, and that factors like the Phillips curve and.MORE October 20, 2017 Scott Sumner Here's Tyler Cowen: Many monetary rules call for higher rates of price inflation if the economy starts to enter a downturn.That's often the right economic prescription, but voters hate high inflation.Tyler is engaged in "reasoning from a price.

MORE October 19, 2017 Scott Sumner Over at TheMoneyIllusion I have a new post that (among other things) discusses this claim: Blanchard was prompted to recite his faith in the power of the Phillips Curve by former Fed governor Jeremy Stein, who wondered how central banks.

MORE October 16, 2017 Scott Sumner I recently attended a conference at the Peterson Institute on "Rethinking Macroeconomics", which mostly meant returning macro to its Keynesian roots.Readers may know that I have a contrarian take on the crisis---I believe it occurred because macroeconomists did not.MORE October 14, 2017 Scott Sumner I've occasionally done blog posts explaining how it's possible to prevent recessions from occurring, even after they have begun.That's because a recession is dated from the point where output starts falling, but it's not considered a recession unless the.MORE October 12, 2017 Scott Sumner I am currently in DC attending a star-studded macroeconomic policy conference at the Peterson Institute.

Today's participants included Bernanke, Summers, Blanchard, Draghi, Fischer, and many other eminent economists.Bernanke's paper was by far the most interesting, especially his proposal for.MORE October 11, 2017 Scott Sumner Tyler Cowen recently linked to an interesting paper by Emi Nakamura and Jon Steinsson, which discusses the problem of identification in macroeconomics.One section looks at what we know about the monetary policy transmission mechanism: What is the most convincing.MORE October 4, 2017 Scott Sumner I had the good fortune of meeting Roger Farmer last year, when he was still teaching at UCLA.

We had a great discussion of Keynes's ideas.(I seem to recall we both thought he was misunderstood, and that the General.MORE October 1, 2017 Scott Sumner Stephen Kirchner pointed me to a very infuriating Financial Times article on inflation.Here is the title: Nobody seems to know why there's no US inflation Nobody? Seriously? How about market monetarists who point to the very slow growth of.MORE September 26, 2017 Scott Sumner Ben Southwood directed me to a paper by Lawrence Christiano, with the following executive summary: The Great Recession was particularly severe and has endured far longer than most recessions.

Economists now believe it was caused by a perfect storm of.MORE September 20, 2017 Scott Sumner Today the Fed abandoned its previous forecast, which called for 2% inflation in 2018.Now they forecast that inflation will run below 2% in 2018, as it has for most of the past decade.MORE September 19, 2017 Scott Sumner David Beckworth's recent interview of Larry Summers was a treat for two reasons; there was lots of thought-provoking discussion, and I found a written transcript of the interview.

Here's an excerpt (discussing secular stagnation): You have a demassification of the.MORE September 9, 2017 Scott Sumner A new paper by Vipin Veetil and Richard Wagner discusses a heterodox theory of business cycles, and then uses this theory to criticize NGDP targeting.Here is the abstract: This paper argues that NGDP targeting is unlikely to produce macroeconomic.MORE September 2, 2017 Scott Sumner A week ago I criticized an article in the Economist, which saw a "puzzle" in the co-existence of low unemployment and sluggish wage gains.I said there was no puzzle, as wage growth was slow because nominal GDP growth was.

MORE August 30, 2017 Scott Sumner For most of the past decade, I've been arguing that people have underestimated the role of falling nominal GDP in the financial crisis of 2008, and that falling NGDP was almost completely to blame for the Great Recession itself.MORE August 26, 2017 Scott Sumner In a series of posts I've argued that NeoFisherism is wrong as usually presented, but in a quite interesting way.More specifically, higher interest rates don't generally reflect easier money (as NeoFisherism claims), but they can do so on certain.MORE August 24, 2017 Scott Sumner Alex Tabarrok has a new podcast on monetary policy, over at Marginal Revolution University.

He presents a fairly standard view of the Great Recession, emphasizing how an easy money policy during the early 2000s led to low interest rates and.MORE August 23, 2017 Scott Sumner The Fed likes to portray itself as being a bunch of selfless, well-meaning technocrats, who faithfully try to carry out the mandate they have been given by Congress.Is this true, or has the Fed been politicized? There's a certain.MORE August 16, 2017 Scott Sumner In recent years, the political situation in the US has become highly polarized.But I'm not convinced that this necessarily prevents the two sides from coming together on monetary policy.

The idea of NGDP targeting has considerable (and.MORE August 7, 2017 Scott Sumner After pegging the Swiss franc at 1.2 per euro for a period of about three years, the Swiss National Bank suddenly revalued the franc sharply higher in January 2015, in a surprise contractionary move.MORE August 3, 2017 Scott Sumner Over at TheMoneyIllusion I did a post discussing the issue of whether central banks should be thought of as "controlling" interest rates.Here's one excerpt: There are powerful cognitive illusions here.The day-to-day Fed "control" over rates creates the illusion.MORE July 19, 2017 Scott Sumner The Economist is probably the best magazine in the world, but a recent cover story on "The German problem" is just appalling: For a large economy at full employment to run a current-account surplus in excess of 8% of GDP.MORE July 16, 2017 Scott Sumner In January 2008, the US economy had fallen into recession and Ben Bernanke was already supportive of fiscal stimulus: Ben S.

Bernanke, chairman of the Federal Reserve, has told lawmakers that he can support tax cuts or spending measures to.MORE July 14, 2017 Scott Sumner David Levey directed me to a post by Douglas Campbell describing the climate of opinion within the Fed during the Great Recession: Even as the economy was tanking in 2008 and 2009, Bell writes that "Warsh adopted a skeptical and.MORE July 10, 2017 Scott Sumner David Beckworth's podcast series continues to produce fascinating interviews.Today I'll discuss a recent interview with Steve Horwitz.

Many of Steve's views coincide with market monetarism, although in a few areas his views lean more in the Austrian direction.

MORE July 5, 2017 Scott Sumner I've done a number of posts pointing to the folly of using the Phillips curve to predict inflation in the US.People are making the same mistake in Japan, assuming that a stronger labor market will lead to higher inflation:.MORE July 3, 2017 Scott Sumner I wrote this post 10 days ago.Tyler Cowen blogged on the same subject today, so I figure I better post it before it becomes old news.

China's been booming since it started moving away from communism in the late.MORE June 29, 2017 Scott Sumner In this post, I'll use "(e)" to denote a (market) expected value.NGDP(e) is the single most important variable in macro; it should be the centerpiece of modern macro.Unfortunately, it often doesn't even appear in models.

MORE June 21, 2017 Scott Sumner This article caught my eye: When online retail giant Inc.announced last Friday that it would purchase Whole Foods Market Inc., a plunge in retail and grocery stocks reinforced the disinflationary tone set by three straight months of.

MORE June 19, 2017 Scott Sumner There are some indications that the immigration crackdown may slow economic growth: AUSTIN, Texas (AP) -- Though construction is in high demand in Texas' booming capital city, Oscar Martinez's drywall company is suddenly struggling.One-third of the approximately 20 employees.MORE June 15, 2017 Scott Sumner Not quite there yet, but getting very close.Let's take a look at his new Financial Times piece: Many of my friends have recently issued a statement asserting that the Fed should change its inflation target.MORE June 12, 2017 Scott Sumner Caroline Baum directed me to a WSJ article on the Fed.It begins as follows: The Federal Reserve's interest-rate increases aren't having the desired effect of cooling off Wall Street's hot streak.That's already got me worried, as "Wall Street".MORE June 9, 2017 Scott Sumner Ramesh Ponnuru directed me to a couple of Wall Street Journal pieces on the German trade surplus.The first, by Greg Ip, argues that President Trump was partly correct in pointing to this as a problem: President Donald Trump took.

MORE June 7, 2017 Scott Sumner David Beckworth has a new post discussing the implications of declining interstate mobility for whether or not America is an optimal currency area.Adam Ozimek has a post suggesting that lower labor mobility might imply a need for additional monetary.MORE June 5, 2017 Scott Sumner Last July, Arnold Kling made the following observations: Tyler Cowen on Brexit, Steven Pinker, and Joseph McCarthy Posted on July 22, 2016 by Arnold Kling And also other topics.The link goes to a Twitter post with a video.MORE May 31, 2017 Scott Sumner The Great Depression had two primary causes: an excessively tight monetary policy caused NGDP to drop in half between 1929 and early 1933, and then a set of New Deal policies such as the National Industrial Recovery Act (NIRA) slowed.MORE May 25, 2017 David Henderson Alex Tabarrok narrates a very good video on the Great Depression.It's called "Understanding the Great Depression." In it, he applies an aggregate demand/aggregate supply framework and puts most of what happened in that framework.MORE Scott Sumner In the comment section of a recent post, Thomas Hutcheson and I discussed what would happen if there were a financial crisis without tight money (defined as sharply falling NGDP growth.) It's not easy to find examples, because financial crises.MORE May 22, 2017 Scott Sumner I am pleased to announce that a new Hypermind NGDP market is up and running.

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Back in 2015, we ran an annual NGDP prediction market and 4 quarterly markets.Because only the annual forecast has much macroeconomic significance, this time.

MORE May 21, 2017 Scott Sumner Back in the 1980s and 1990s, I did some research with Steve Silver on sticky wages and the business cycle Central banks should have listened to Eliezer Yudkowsky. Monetary Policy. Scott Sumner. Eliezer Yudkowsky has a great post over at Less Wrong, presenting an imaginary dialogue with a central banker: Frequently Asked Questions for Central Banks Undershooting Their Inflation Target I recall reading this dialogue years  .MORE May 21, 2017 Scott Sumner Back in the 1980s and 1990s, I did some research with Steve Silver on sticky wages and the business cycle.

Using postwar data, it's very difficult to draw any conclusion, as the economy was hit by both supply and demand.MORE May 19, 2017 Scott Sumner I often debate the question of whether severe slumps are caused by financial crisis or tight money European Journal of Political Economy 2:5-24. Paldam. Martin, and Schneider, Friedrich. 1980. The macroeconomic aspects of government and opposition popularity in Denmark 1957-78. National   Paper presented at the annual meeting of the American Political Science Association, August-September, Chicago. . 1987..MORE May 19, 2017 Scott Sumner I often debate the question of whether severe slumps are caused by financial crisis or tight money.In my view it's usually tight money, with financial stress being a symptom of falling NGDP European Journal of Political Economy 2:5-24. Paldam. Martin, and Schneider, Friedrich. 1980. The macroeconomic aspects of government and opposition popularity in Denmark 1957-78. National   Paper presented at the annual meeting of the American Political Science Association, August-September, Chicago. . 1987..In my view it's usually tight money, with financial stress being a symptom of falling NGDP.MORE May 17, 2017 Scott Sumner A new NBER paper by Daron Acemoglu and Pascual Restrepo finds that "deployment of robots reduces employment and wages, but they caution that it is difficult to measure net labor market effects." Here is a graph that summarizes their results: unemployment." Here is a graph that summarizes their results:.MORE May 15, 2017 Scott Sumner I am going to criticize a recent Tyler Cowen post on Greece.But before doing so, let me explain where I think we agree.

Fiscal policy doesn't explain very much of the business cycle.MORE May 10, 2017 Bryan Caplan Today my 8th-grade homeschoolers take the Advanced Placement test in Macroeconomics.Back in 1989, when I took this exam, it covered little more than 1960s Keynesianism.

Now we've got long-run Aggregate Supply curves and.MORE May 6, 2017 Scott Sumner Thomas Hutcheson left an interesting comment after my previous post: There is an alternative: use unemployment (some vector or indicators not just U3) to target the "unemployment" portion of the Fed's mandate and the Price level to target the "price.MORE May 5, 2017 Scott Sumner The government reported today that the unemployment rate has fallen to 4.To give you an idea of how low that is, consider that since 1971 the only period of lower unemployment was the tech boom of the late 1990s:.MORE April 24, 2017 Scott Sumner I now favor a monetary policy rule that I have dubbed the "guardrails" approach, although a more accurate metaphor might refer to the beeper you hear if you are about to hit a car in the front or rear when.MORE April 14, 2017 Scott Sumner A recent paper by Michael T.Roberts (both of the Federal Reserve Board) looks at option for improving monetary policy in light of the zero bound problem: Nominal interest rates may remain substantially below the averages.

MORE April 13, 2017 Scott Sumner Polls show that the public thinks it likes low inflation.Thinking you like low inflation is reasoning from a price change, which is almost always a bad idea.Thus we should be very skeptical when the public.MORE April 11, 2017 Scott Sumner Ryan Murphy has a post discussing a paper he wrote with Taylor Leland Smith, testing my claim that sharp NGDP declines lead to governments with statist polices: In a forthcoming paper at Review of Austrian Economics, co-authored with Taylor Leland.

MORE April 10, 2017 Bryan Caplan This year, I'm prepping my 8th-grade homeschoolers for the Advanced Placement tests in European History, Microeconomics, and Macroeconomics.The Macro test is less Keynesian than it used to be, but its Keynesian origin remains blatant.MORE April 9, 2017 Scott Sumner There's an unfortunate tendency for economists to align themselves into "supply-side" and "demand-side" camps.Many conservatives in Europe denied that the ECB's tight money policy caused a double-dip recession, leading to a dramatic rise in unemployment between 2008 and 2013.

MORE April 7, 2017 Scott Sumner I'm starting to clean out my office, and I keep finding interesting old articles that I clipped out of the newspaper.Some of the stuff from 2008 and 2009 is absolutely mind-blowing.Here's a January 31st, 2009 article from The.MORE April 5, 2017 Scott Sumner One of the puzzles of the Great Recession is why the Fed did not move more aggressively to promote recovery in NGDP growth and/or inflation.Many observers, including Christina Romer and Lawrence Ball, noted that the Fed's passivity seemed to.

MORE April 1, 2017 Scott Sumner Years ago I used to enjoy reading Scientific American.Once in and a while, however, they did articles on economics.It was clear that the editors of Scientific American had a very low opinion of orthodox economics, as they would.MORE March 29, 2017 Scott Sumner The sharp reduction in productivity growth since 2004 is one of the most notable recent trends in macroeconomics.Not surprisingly, some pundits have suggested that this slowdown is linked to the Great Recession.

In the most simple business cycle models,.MORE March 25, 2017 Scott Sumner Macroeconomists are often lousy political philosophers.In previous posts I've discussed how macroeconomic views that are considered "liberal" or "conservative" actually have no obvious relationship to those political stances.For instance there's no obvious reason why "using monetary policy" (as.MORE March 21, 2017 Scott Sumner I did a recent post criticizing Bernanke's defense of paying interest on reserves.

This policy was introduced in October 2008, and even the Fed viewed the policy as contractionary in intent.Indeed Susan Woodward and Robert Hall called the Fed's.MORE March 19, 2017 Scott Sumner One often comes across articles that suggest Japan faces "headwinds" of a falling population.This is supposed to contribute to falling aggregate demand and deflation.That may be true, but if so it's almost certainly not for the reason that.

MORE March 17, 2017 Scott Sumner I've devoted much of my life to promoting market-based approaches to monetary policy.To better understand the idea, let's start by assuming the goal is simply a stable price level.Since the value of base money is the inverse of.MORE March 13, 2017 Scott Sumner In July 1933, Roosevelt issued an executive order that effectively forced firms to raise nominal hourly wages by 20% in just two months.

In the previous 4 months, industrial production had risen by 57%, three times faster than in any.

MORE March 2, 2017 Scott Sumner There seems to be a consensus that Japan has been stuck in a "liquidity trap" since the 1990s.Here's a typical story, from the Wall Street Journal: Japan remains definitively stuck, despite a long and aggressive experiment with ultralow rates.MORE March 1, 2017 Scott Sumner As I write this post, Australia just announced 1.4% over the past 12 months, both higher than expected.

Thus once again the "Lucky Country" dodged a recession (GDP had fallen 0.MORE February 27, 2017 Scott Sumner Here's Bloomberg: President Donald Trump will select three members of the Federal Reserve board during his term in office, including a replacement chair for Janet Yellen when her appointment expires early next year.MORE February 25, 2017 Scott Sumner James Alexander has a new post discussing recent trends in NGDP growth in the UK: UK RGDP saved by accelerating NGDP Unfortunately, the headline is a bit misleading.

MORE February 19, 2017 Scott Sumner David Beckworth has done a very interesting set of interviews with leading figures in monetary economics and related fields.One of my favorite occurred a few weeks ago when David interviewed Gauti Eggertsson.Eggertsson is a prominent monetary theorist, who.

MORE February 16, 2017 Scott Sumner Here's Business Insider: Janet Yellen's warning about low rates causing a recession doesn't make sense Federal Reserve Chair Janet Yellen told Congress this week that the US central bank could cause a recession if it waited too long to raise.MORE David Henderson Co-blogger Scott Sumner wrote a post recently titled "Protectionism is Not Inflationary.We both learned from the great Milton Friedman--Scott as one of his students, me indirectly as a student of two.

MORE February 15, 2017 David Henderson In 1996, U.statisticians estimated 10 recessions between 1955 and 1995.In 1966, the late Paul Samuelson stated that the stock market has predicted 9 of the last 5 recessions.MORE February 9, 2017 Scott Sumner When a country does a currency reform, say exchanging 100 old pesos for 1 new one, it doesn't have major macroeconomic effects.Debt contracts and wage contracts get automatically adjusted in the same way, leaving both types of contracts the.

MORE February 8, 2017 Scott Sumner It seems like hardly a week goes by without me running into another article suggesting that Japan needs to do fiscal stimulus.Today there's one discussing the recommendations of Nobel Laureate Christopher Sims, using the "Fiscal Theory of the Price.MORE February 5, 2017 Scott Sumner I'm seeing two common mistakes by commenters trying to analyze the Brexit vote shock: 1.Assuming that monetary offset applies to real shocks 2.Assuming that a cut in the BOE's target interest rate represents an easing of policy.

MORE February 4, 2017 Scott Sumner I recently argued that uncertainty over Brexit did not lead to the recession that many forecasters expected.Actually 'argued' is the wrong term, "pointed out" is more descriptive.But I continue to believe Brexit was a mistake, and that it.MORE February 2, 2017 Scott Sumner This will probably be my most important post of the year, but I predict that almost no one will pay any attention.

Macroeconomics is a deeply flawed field, because it is extremely hard to do controlled experiments.MORE January 23, 2017 Scott Sumner Commenter Bill directed me to an interesting Ben Bernanke post: As a general matter, Fed policymakers view economic or policy developments through the prism of their economic forecast.Developments that push the forecasted path of the economy away from the.MORE January 21, 2017 Scott Sumner Nick Rowe has a post entitled "AS/AD: A Suggested Interpretation".

I'm going to offer a very different interpretation, which (interestingly) has almost identical implications.In my view, the "classical dichotomy" lies at the very heart.MORE January 16, 2017 Scott Sumner When I was in grad school in the late 1970s, there was increased interest in the "monetary ineffectiveness proposition", which posited that money was neutral and monetary policy did not impact real variables.

There was virtually no interest (at Chicago).

MORE January 14, 2017 Scott Sumner Many people are puzzled by the fact that Japan continues to fall short of its 2% inflation target.Some attribute this the Japan being in a "liquidity trap".But surely that can't be the complete explanation.MORE January 11, 2017 Scott Sumner James Alexander directed me to a very good Bloomberg article on "monetary offset": Federal Reserve Chair Janet Yellen may well be thinking it.

Jeffrey Lacker, president of the Richmond Fed, came close to saying it.MORE January 10, 2017 Scott Sumner Paul Krugman has a new post entitled "Deficits Matter Again": Not long ago prominent Republicans like Paul Ryan, the speaker of the House, liked to warn in apocalyptic terms about the dangers of budget deficits, declaring that a Greek-style crisis.MORE January 8, 2017 Scott Sumner Brian Moore asked me the following question: I have read your site for years, but this is the first time I felt compelled to ask a question: some friends and I were discussing the various benefits to society that would.MORE December 31, 2016 Scott Sumner Tyler Cowen recently linked to an interview of Gary Cohn, who will be Trump's top economic advisor: The Chinese have taken multidecade views on what they're doing.

They built up their surplus capital account over many, many years.MORE December 20, 2016 Scott Sumner In the past, I've argued that tight money caused the Great Recession.But what caused the tight money? One answer is too much weight placed on inflation targeting, combined with a backward-looking approach to inflation.MORE December 18, 2016 Scott Sumner Both old monetarists and market monetarists like to describe recessions in terms of a "shortage of money", caused by either a drop in the money supply or an increase in money demand.MORE December 15, 2016 Scott Sumner Nick Rowe and I have fairly similar views on what's right and what's wrong with Neo-Fisherism.Recall that Neo-Fisherism is the view that shifting to a policy of higher nominal interest rates will lead to higher inflation, especially if the.MORE December 14, 2016 Scott Sumner The Fed has a mandate to stabilize prices and provide for high employment.

The Fed interprets that mandate as calling for 2% PCE inflation and an unemployment rate close to the natural rate.Tim Duy points out that the unemployment.MORE December 6, 2016 Scott Sumner A commenter named Captain Parker recently left this comment: Ok, so, inflation is a monetary phenomenon and Burns should take the blame.But if you look at '72 through '76 you would conclude Burns.MORE Scott Sumner In the history of American central banking, Arthur Burns (1970-78) and G.William Miller (1978-79) are often viewed as villains, largely responsible for the Great Inflation.(Although Martin (1951-70) was the one who got the ball rolling.MORE December 2, 2016 Scott Sumner I recently participated on a panel in London, discussing options for monetary and fiscal policy.At one point I mentioned that if the Japanese didn't want such a large central bank balance sheet, then they ought to set a higher.MORE November 29, 2016 Scott Sumner Lars Christensen has a new post pointing to a recent interview of John Allison, who is being considered for the post of Treasury Secretary.Here is what Allison said: We need discipline, we need some kind of rule, I like.MORE November 22, 2016 Scott Sumner David Glasner has a post criticizing the rational expectations modeling assumption in economics: What this means is that expectations can be rational only when everyone has identical expectations.

If people have divergent expectations, then the expectations of at least some.MORE November 18, 2016 Scott Sumner I've been frequently arguing that fiscal stimulus makes no sense, especially at a time when the unemployment rate is 4.9% and the Fed is raising interest rates.Any impact on aggregate demand will be offset by tighter monetary policy.MORE November 16, 2016 Scott Sumner Perhaps you recall this classic line from Dr.Strangelove: The whole point of the doomsday lost if you keep it a secret! I thought of that line when reading a recent Bloomberg piece on monetary offset of the widely.MORE November 15, 2016 Scott Sumner Here's Tyler Cowen in Bloomberg: In Keynesian theory, fiscal policy only works well if you use it in down times and pay off the bill during a boom.Trump seems ready to do the opposite by upping spending as the.MORE November 14, 2016 Scott Sumner With the recent discussion of a possible "fiscal stimulus" coming out of Washington, I find that many people are forgetting a few basic ideas from EC101.

As you may know, I do not believe that fiscal stimulus in the US.MORE November 10, 2016 Scott Sumner It's difficult to know what Trump will do about monetary policy, or any other issue for that matter.Lars Christensen has suggested that inflation expectations are rising due to the perception that Trump will do massive infrastructure spending.MORE November 7, 2016 David Henderson People often use the GDP formula to erroneously derive conclusions about economic causation.

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For example, in the wake of the financial crisis of 2008, some proponents of "stimulus" spending argued that a boost in government spending on infrastructure would obviously.MORE November 6, 2016 Scott Sumner After many years of 2% wage growth, nominal average hourly earnings are finally accelerating, up to 2.This reflects the fact that the (downward) wage adjustments in the wake of the Great Recession are over, 101 Top Economics and Finance Blogs of 2017 FocusEconomics.This reflects the fact that the (downward) wage adjustments in the wake of the Great Recession are over,.

MORE November 4, 2016 Scott Sumner Ben Bernanke is a mild mannered and modest individual.

Anyone who has read his memoir will not confuse him with Donald Trump.During the Great Recession, Bernanke suggested that it would be helpful if fiscal authorities would help to boost Economics and Elections The Major Western Democracies.During the Great Recession, Bernanke suggested that it would be helpful if fiscal authorities would help to boost.MORE November 2, 2016 Scott Sumner Lots of people argue that the Fed would not offset a push for more spending out of Washington.In fact, while that would be technically possible, as a practical matter they have almost no choice in the matter.MORE November 1, 2016 Scott Sumner Suppose you favor a 4% NGDP target.And suppose NGDP growth is running at 3%.What advice should you give to the Fed? I will argue that you should not advise the Fed to push NGDP growth up to 4%.MORE October 30, 2016 Scott Sumner Saturos directed me to a new paper by John Cochrane: This long period of quiet inflation at the zero bound - and Japan's longer period - poses a deep challenge to monetary economics.Old-Keynesian models (including Milton Friedman's 1968 AEA.

MORE October 29, 2016 Scott Sumner Over at TheMoneyIllusion I have a post lamenting the recent revival of old Keynesian ideas.It occurred to me that Japan is an almost perfect refutation of these theories.MORE October 28, 2016 Scott Sumner We live in an age where everything official seems to be distrusted.

Trump has suggested that the government's unemployment data is incorrect, and that the actual rate may be as high as 40%.Some economists on the left also question.MORE October 24, 2016 Scott Sumner Every so often I need to push back against common misconceptions regarding saving and investment.The comment section of my previous post provided a few examples, starting with "pyroseed13": In a less risk-averse and more economically free environment, savings would.MORE Scott Sumner This article in the Wall Street Journal left me scratching my head: The Fed, Not the Market, Is Stifling Growth That's the title, and I eagerly looked forward to an explanation, perhaps a criticism of the Fed rate increase last.

MORE October 23, 2016 Scott Sumner Here's an abstract from a paper by Erich Pinz n-Fuchs: This paper discusses a longstanding debate between two empirical approaches to macroeconomics: the econometrics program represented by Lawrence R.Klein, and the statistical economics program represented by Milton Friedman.MORE October 20, 2016 Scott Sumner Most economists view the Fed as a sort of firefighter, an institution that pushes back against "shocks" that mysteriously arise in the private sector.Bob Hetzel and Josh Hendrickson have a different view.

Here's Josh: The predominant difference between this.MORE October 18, 2016 Scott Sumner TravisV directed me to a recent speech by Janet Yellen: The Influence of Demand on Aggregate Supply The first question I would like to pose concerns the distinction between aggregate supply and aggregate demand: Are there circumstances in which changes.MORE October 15, 2016 Scott Sumner Patrick Sullivan directed me to Brad DeLong: Bernanke (2000): Contrary to the claims of at least some Japanese central bankers, monetary policy is far from impotent today in Japan.Why is it not impotent? Because of: what amounts to an.MORE October 13, 2016 Scott Sumner This Washington Post story (by Ylan Mui) from a couple months back makes me kind of sad: During the long recovery from the Great Recession, the central bank kept its benchmark interest rate at virtually zero and pumped trillions of.

MORE October 12, 2016 Scott Sumner A few weeks ago I presented a graph that showed the trade-off between a big central bank balance sheet and faster NGDP growth: Now I'd like to use this framework to discuss why so many people confuse easy and tight.MORE October 9, 2016 Scott Sumner Tyler Cowen and Alex Tabarrok have a new debate on "Econ Duel", discussing whether robots are taking our jobs.Tyler argues in the affirmative, and suggests that this problem will increase over time.MORE October 6, 2016 Scott Sumner When I was a teenager in the early 1970s, I looked forward to getting a nice stereo system, with a receiver, amp, turntable and big set of speakers.

My 17-year old daughter also likes music, but has no interest in.MORE October 4, 2016 Scott Sumner Immediately after the Brexit vote, I used the knee jerk reactions of various markets to try to estimate the impact.After 14 weeks, it looks like one key market reaction was wrong.Here's the FTSE250, a stock index with a.MORE October 3, 2016 Scott Sumner A recent comment started off as follows: Suppose someone had a fetish for fiscal policy and infrastructure Using the construction of infrastructure for fiscal policy purpose does NOT get you any more infrastructure than not using it for fiscal policy.

MORE October 1, 2016 Scott Sumner Commenter CA directed me to a recent post by Roger Farmer: We are stuck in a low inflation liquidity trap, caused by the fact that money and short term securities are currently perfect substitutes.MORE September 26, 2016 Scott Sumner Here's Ben Bernanke on the recent moves by the Bank of Japan: The most surprising, and interesting, part of the announcement was the decision to target the ten-year JGB yield.As I noted in a previous piece on targeting longer-term.

MORE September 25, 2016 Scott Sumner I recently listened to a podcast where David Beckworth interviewed Cardiff Garcia, of FT Alphaville.

I agreed with most of the things Garcia had to say, including his observations on the recent growth slowdown.MORE September 24, 2016 David Henderson Co-blogger Scott Sumner posted yesterday some interesting facts and figures about the post World War II economic boom in the United States that came after the U.government cut government spending massively.

MORE September 23, 2016 Scott Sumner Here's Matt O'Brien: Libertarian presidential candidate Gary Johnson is a friendly guy, seems pretty moderate.That's what trying to balance the budget all at once would do.MORE David Henderson Economist Paul Romer reprints a letter he received from an aspiring graduate student in economics and his response to the reader.There is much that is valuable in the letter.MORE September 21, 2016 Scott Sumner Just about all economists agree that a sudden dramatic increase in oil prices is likely to be bearish for the US economy.

Of course that's not always the case (for "never reason from a price change" reasons), but it's usually.MORE September 18, 2016 Scott Sumner The Wall Street Journal has a very interesting story on the BOJ, which faces an important policy decision on Wednesday: Until recently, Bank of Japan Gov.Haruhiko Kuroda managed to keep a fragile majority on the nine-member board in favor.MORE September 15, 2016 Scott Sumner Over at , Narayana Kocherlakota has a nice post discussing the Fed's plan for the next recession.He provides some graphs showing alternative policy paths: Kocherlakota comments: She Yellen views this black-line outcome as a demonstration that the Fed's existing.

MORE September 13, 2016 Scott Sumner I don't follow fiscal policy closely, because I don't think it impacts the business cycle.But most economists disagree with me, and many are recommending fiscal stimulus.I argue that fiscal stimulus has no demand-side effects when the Fed is.MORE Scott Sumner For several years I've been gradually pulling my hair out as I read one pundit/commenter after another claim that since the Fed is currently struggling to hit its 2% inflation target, there's no point in setting a higher inflation target.MORE September 11, 2016 Scott Sumner Ryan Avent, who writes for The Economist, sent me an email with some very good questions about monetary policy rules.

(He was a moderator at the recent Mercatus/Cato conference on monetary policy rules.MORE September 9, 2016 Scott Sumner It's less that 3 months since the Brexit vote, and thus too early to form any firm conclusions.But one recent article points to the growing belief that Britain may have dodged a bullet, which hit the eurozone instead: Brexit.MORE September 7, 2016 Scott Sumner Today I will be presenting a paper at a Mercatus/Cato conference on monetary policy rules.

Here I'd like to summarize my key themes: 1.The past 10 years have destroyed the pre-2008 consensus on monetary policy.MORE September 6, 2016 Scott Sumner I've done a lot of posts on wage stickiness, but misconceptions keep popping up.The sticky wage theory of the business cycle is based on the notion that only a fraction of wages get adjusted each period.

MORE September 5, 2016 Scott Sumner There is a common fallacy that lower interest rates are expansionary.Where does this fallacy come from? I can think of two true facts, each of which contributes to this fallacy.MORE September 3, 2016 Scott Sumner I recently did a post over at MoneyIllusion, arguing against the elimination of currency.I suggested that this would have a disproportionate impact on the poor, who often lack access to banking facilities.It would also reduce privacy; the government.MORE September 2, 2016 Scott Sumner Is it too early to evaluate the impact of Brexit? I'd say so, given that Brexit will not occur until at least 2019.How about the impact of Brexit uncertainty, which just a few weeks ago many (most?) pundits were.

MORE August 30, 2016 Scott Sumner In this post I'm going to ask for your advice.I'd like to know why the public, and even the more sophisticated pundits, have so much trouble understanding monetary offset.Stephen Kirchner sent me a Bloomberg piece discussing the sudden.MORE August 28, 2016 Scott Sumner I seem to vaguely recall a horror story where the protagonist searches everywhere for the monster, and at the end sees himself in the mirror, realizing that he is the monster.

If there is no such story, there should be.

MORE August 27, 2016 Scott Sumner In recent months the rest of the world has finally begun to accept the market monetarist view that interest rates are likely to stay low indefinitely.But there's still a lot of confusion as to the reasons why.MORE August 26, 2016 Scott Sumner There is a sudden interest in NGDP targeting in Australia.Here's Greg Jericho, in the Guardian: For the most part economic debate can revolve around the margins, with few bold ideas promulgated.

This week however, Senator Nick Xenophon proposed a.MORE August 23, 2016 Scott Sumner Here's Tyler Cowen: The thing is this: whether rationally or not, the American public hates higher rates of price inflation.Perhaps they mis-sample or mis-estimate prices, or perhaps the higher prices really do erode their real wages in a way.MORE August 20, 2016 Scott Sumner This post will be about macro theory, but let's begin with a related example.You are a libertarian and your best friend is also a libertarian.

You tend to see eye to eye on most issues, favoring small government.MORE August 17, 2016 Scott Sumner I recently came across a WSJ article that is a gold mine of teachable moments for EC101 students: KORSCHENBROICH, Germany--Two years ago, the European Central Bank cut interest rates below zero to encourage people such as Heike Hofmann, who sells.MORE August 15, 2016 Scott Sumner Here is Arnold Kling: John Cochrane writes, Economics is a work in progress.But it is certainly brand-new, made-up-on-the spot economics, designed to buttress policies decided on for other reasons.

He is describing the economic analysis that claims that policies.MORE August 12, 2016 Scott Sumner I've recently noticed a lot of pessimism about what monetary policy can accomplish.For instance, if I discuss a higher inflation target, people will say, "what makes you think the Fed could hit a higher inflation target? After all, they.MORE August 6, 2016 Scott Sumner I often read the business press, which has a lot of articles on Fed policy.One recurrent theme is that the Fed is sort of kowtowing to the markets.

Here's a typical Bloomberg article: It's the Greenspan put gone wild.MORE July 29, 2016 Scott Sumner Noah Smith has a new post on interest rates: Traditionally, macroeconomists have believed that low interest rates encourage inflation.and Europe have kept rates low for years now, and inflation has stayed stubbornly.

MORE July 28, 2016 Scott Sumner Rajat directed me to a post by Miles Kimball, entitled "Pro Gauti Eggertsson".He discusses Eggertsson's views on the role of inflation expectations in the recovery from the Great Depression.Like Miles, I'm a big fan of Eggertsson's work on.MORE July 27, 2016 Scott Sumner Tyler Cowen has a new Bloomberg column: Maybe Negative Yields Are a Sign of Prosperity Just when it seemed that negative yields could not spread any further, they did.Corporate bonds paying negative interest rates now account for about $512.

MORE July 23, 2016 Scott Sumner Tim Duy always has something thoughtful to say about the Fed.This comment in his latest Bloomberg column caught my eye: But note too that Dudley looks disapprovingly on the 1994-1995 cycle.For policymakers at the Fed, that cycle has.MORE July 21, 2016 Scott Sumner Suppose markets are efficient at pricing assets.And suppose everyone believes they are efficient.

In that case (some argue) no one would have an incentive to gather information, and trade on that information.But in that case, speculators and arbitragers.MORE July 19, 2016 Scott Sumner I've always been a bit skeptical when people point to "uncertainty" as the cause of economic distress.High unemployment? Uncertainty about ObamaCare! More often, the problem is bad monetary policy, and the only "uncertainty" is just how much NGDP instability.MORE July 14, 2016 Scott Sumner Noah Smith has a good post on the costs of inflation and recession, but I don't quite agree with this: Many people seem to think that inflation and recession are equal, symmetric dangers.

MORE July 13, 2016 Scott Sumner There's been a lot of recent discussion of the new GDP statistics out of Ireland, which show 2015 RGDP growth of 26.Almost everyone agrees that the data is somewhat fishy, but it's not clear.

MORE July 6, 2016 Scott Sumner Soon after the Brexit vote was announced, I made this comment: This time around the UK was probably hurt somewhat; British stocks are down around 4% as I write.But French and German stocks are down 7% to 8%.MORE July 4, 2016 Scott Sumner I occasionally see commenters talk about how monetary stimulus and/or low interest rates would merely shift demand from the future to the present.

Now I see that Paul Krugman is equally perplexed:.MORE June 30, 2016 Scott Sumner As I write this, Britain's FTSE100 stock index is soaring to its highest levels of the year.Admittedly, the domestic indices aren't doing that well, but they are also recovering.So what about all the gloom and doom associated with.MORE June 29, 2016 Scott Sumner Timothy Lee has an excellent new post: Brexit isn't the most serious threat to the EU -- the euro is One surprising thing about Britain's vote to leave the EU is that the British economy has been doing better than.

MORE June 27, 2016 Scott Sumner Commenter Matthew Moore asked the following question: Any chance of a post on the likely consequences of GBP devaluation? Ejection from the ERM caused a boom.

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I realise the UK wasn't deliberately overvalued this time, but are there parallels? In.MORE June 24, 2016 Scott Sumner I'm seeing a lot of confusion about the implications of Brexit.Some people see it as a real shock, whereas it's primarily a monetary shock The Holy Grail of Macroeconomics: Lessons from Japan's Great Recession. Singapore: John   This Is Money. http://www.thisismoney.co.uk/money/mortgageshome/article-1672223/Mortgages-rise-but-warning-on-false-   'What Even Famous Mainstream Economists Miss About the Cambridge Capital Controversies'. Blog..

Some people see it as a real shock, whereas it's primarily a monetary shock.

Some see it affecting Britain's economy by disrupting.MORE June 23, 2016 Scott Sumner Bob Murphy was kind enough to review my recent book on the Great Depression, in the Quarterly Journal of Austrian Economics In these conditions, borrowers turn a profit and deposit cash into bank reserves, which expands money supply. This can lead to a cumulative process where inflation increases continuously without an expansion in the monetary base. Wicksell's work influenced Keynes and the Swedish economists of the Stockholm School..MORE June 23, 2016 Scott Sumner Bob Murphy was kind enough to review my recent book on the Great Depression, in the Quarterly Journal of Austrian Economics.Here are the concluding two paragraphs: Putting aside the detailed statistics, I will end this review with a simple In these conditions, borrowers turn a profit and deposit cash into bank reserves, which expands money supply. This can lead to a cumulative process where inflation increases continuously without an expansion in the monetary base. Wicksell's work influenced Keynes and the Swedish economists of the Stockholm School..Here are the concluding two paragraphs: Putting aside the detailed statistics, I will end this review with a simple.MORE June 12, 2016 Scott Sumner Marcus Nunes directed me to a post by Jerry O'Driscoll, which asked the following questions: The specific question I pose for advocates of NGDP targeting is how today will anything the Federal Reserve does to its balance sheet alter the.

MORE June 4, 2016 Scott Sumner Marcus Nunes directed me to a post where Olivier Blanchard recommends some changes in the way we teach macro.In my view, all of these changes are in exactly the wrong direction, although I don't doubt that far more economists.MORE May 18, 2016 Scott Sumner I've recently read a few articles that suggest the Russian economy is doing better than expected.The Economist attributes this success (or perhaps less failure than expected) to the adroit management of the head of Russia's central bank: Russia's economy.MORE May 13, 2016 Bryan Caplan Pace Scott Sumner, suppose a country is stuck in a liquidity trap.

Conventional monetary policy is futile, and unconventional monetary policy isn't working either.What would happen if the government did the following?Step 1: The Treasury refinances the entire national.MORE May 12, 2016 Scott Sumner There's an invisible hyperinflation monster lurking right around the corner, which lots of people are having trouble seeing.(And no, this is not a sarcastic barb aimed at conservatives who were wrong about QE and inflation, it's aimed at people.MORE May 11, 2016 Scott Sumner Ralph Hawtrey has always been in the shadow of Keynes, but might well have been the superior macroeconomist.

I think you could also argue that Hawtrey's model of macroeconomics was more "Keynesian" than the General Theory, in the sense of.MORE May 8, 2016 Scott Sumner Here's Milton Friedman in 1998, talking about Japan: Low interest rates are generally a sign that money has been tight, as in Japan; high interest rates, that money has been easy.MORE May 4, 2016 Scott Sumner This is a sort of follow-up to my most recent Econlog post.Before getting into this post, let me remind you of previous pointless debates, such as whether "Islam" is "really" a this or that sort of religion.

MORE May 3, 2016 Scott Sumner If you rely on bloggers like Paul Krugman and Brad DeLong, you'll end up with a very crude caricature of Robert Lucas's views on macro.The following was from a 2003 Lucas paper (sent to me by Marcus Nunes), which.MORE May 2, 2016 Scott Sumner Back on March 11, 2011, Japan was hit by the worst national disaster to strike a developed country in modern times.Last week, Japan was hit by a human made disaster with a comparable effect on the economy (albeit obviously.

MORE April 30, 2016 Scott Sumner In my book entitled The Midas Paradox, I argued that FDR's NIRA wage program set back economic recovery by almost 2 years.Prior to the wage increase, industrial production had surged by 57% in 4 months, mostly due to the.MORE April 28, 2016 Scott Sumner About 2 years ago, I predicted that 3% NGDP growth was the new normal.At the time, the Fed predicted significantly higher trend growth (both RGDP and NGDP.MORE April 24, 2016 Scott Sumner Here's Scott Aaronson: I love when important decisions fall into the hands of people who constantly second-guess themselves and worry that their own 'tribe' might be mistaken, who are curious about science and have a sense of the ironic and.MORE April 21, 2016 Scott Sumner Rajat recently left the following comment, over at TheMoneyIllusion: Scott, I know you don't like Twitter, but there has been a few exchanges going on about your argument: One between Kocherlakota and Vaidas Urba.Kocherlakota seems to think that although.

MORE April 20, 2016 Scott Sumner For the past seven years, I've been trying to persuade my colleagues that inflation should be removed from macro models.

Inflation is often used as a proxy for positive demand shocks, as when economists assume that higher inflation expectations are.MORE April 17, 2016 Scott Sumner It was the best of times; it was the second best of times.It's natural to want to compare Hong Kong and Singapore.They are among the very richest non-oil producers in the world, at least among economies having more.MORE April 16, 2016 Scott Sumner I recently did a post arguing that it's almost impossible to forecast recessions.

Many commenters were surprised by my view, wondering why market monetarism doesn't provide insights into where the economy is going.MORE April 4, 2016 Scott Sumner I'm starting to clean out my office at Bentley, and throw away lots of old journals.(I dread having to soon throw away lots of my old economics books---I'm of the generation that values things more than experiences.MORE March 31, 2016 Scott Sumner The Keynesian view of fiscal policy is an ever-changing theory.In the 1960s, it was believed that fiscal stimulus was needed during recessions.In the 1990s, Keynesians argued that fiscal policy was not an appropriate stabilization tool, rather monetary policy.MORE March 29, 2016 Scott Sumner Paul Krugman has a new post of mercantilism: Neil Irwin has a good think piece on Trumpism and the trade deficit; but as Dean Baker rightly suggests, it arguably suffers a bit from being a discussion of the effects of.MORE March 27, 2016 Scott Sumner Rajat directed me to a series of posts by Ben Bernanke, discussing monetary policy options if the US once again hits the zero rate bound.

Bernanke thinks this problem is likely to occur in the next recession, and I agree.MORE March 25, 2016 Scott Sumner Marcus Nunes has a new post that discusses a recent Wall Street Journal article.Here's the WSJ: The Fed needs to keep raising short-term interest rates to diminish risks to the economy and markets of "excessive accommodation," Mr.MORE March 22, 2016 Scott Sumner The world is a very complicated place, and people who look at things from just one dimension end up missing much that is important.

For instance, in this post Bob Murphy talks about how Ireland has done well in recent.MORE March 20, 2016 David Henderson While reviewing Robert Gordon's book The Rise and Fall of American Growth for Regulation, I found it relevant to dig into the GDP deflator and the Consumer Price Index.The reasons why would take me too far afield.MORE March 17, 2016 Scott Sumner Matthew Boesler has a very nice piece in Bloomberg discussing the market reaction to several recent pieces of news.

You should read the whole article (it's short) because it's hard to excerpt.The most interesting takeaway is that the market's.MORE March 14, 2016 David Henderson Co-blogger Scott Sumner quoted correctly from an article in The Economist: In places stuck in deflationary quicksand it may be necessary to be more radical still.Olivier Blanchard and Adam Posen of the Peterson Institute for International Economics have argued.MORE Scott Sumner Here's The Economist: In places stuck in deflationary quicksand it may be necessary to be more radical still.

Olivier Blanchard and Adam Posen of the Peterson Institute for International Economics have argued that Japan would benefit from an incomes policy.MORE March 13, 2016 Scott Sumner Before WWII, the government did not measure nominal GDP.But economists Robert Gordon and Nathan Balke put together estimates of nominal GNP, for the period after 1875.(For the US, changes in NGDP and NGNP are highly correlated.MORE March 9, 2016 Scott Sumner During the 1980s and 1990s, there was a growing consensus that: 1.The minimum wage was not a particularly effective anti-poverty program, as it raised unemployment.Even the New York Times editorialized in favor of abolition of the minimum wage,.MORE February 18, 2016 Scott Sumner Here's Tyler Cowen: Closer to the central point I think is Scott's claim: "Any "real shock" that reduces NGDP expectations because the Fed responded passively is also a monetary shock." For me that is a real shock with insufficient monetary.

MORE February 16, 2016 Scott Sumner Back in the 1970s, there was much pessimism about whether the Fed could get inflation under control by raising interest rates.Rates kept going higher and higher, and yet inflation also kept increasing.Markets did react to unexpected rate increases.MORE February 12, 2016 Scott Sumner On January 23rd, I made the following claims: Consider the following two paradoxes: 1.Falling wages are associated with falling RGDP.

Falling interest rates are associated with falling NGDP growth.MORE February 11, 2016 Scott Sumner In the 1970s, the Fed kept tinkering with interest rates, not understanding that high rates don't mean tight money.

Inflation and NGDP growth kept soaring higher and higher.Eventually economists came to believe that (old) Keynesian economics was bankrupt.MORE February 10, 2016 Scott Sumner In my previous post I criticized Paul Krugman's claim that monetary policy could not have been tightening significantly during the summer of 2008, as real bond yields remained low.In other words, Krugman claimed that low bond yields were telling.

MORE Scott Sumner David Beckworth and Ramesh Ponnuru have produced some excellent pieces on the mistakes made by the Fed in 2008.Here's an excerpt from their latest: Krugman thinks the behavior of long-term real interest rates contradicts our thesis.MORE February 8, 2016 Bryan Caplan Barely two years ago, Tyler Cowen and I agreed to the following bet:.unemployment will never fall below 5% during the next twenty years.If the rate falls below 5% before September 1, 2033, he immediately owes me $10.MORE February 5, 2016 Scott Sumner James Bullard has a Powerpoint presentation on NeoFisherian economics.

It concludes with 8 bullet points; here is the first: Policymaker conventional wisdom and NK theory both suggest low nominal rates should cause inflation to rise.MORE February 3, 2016 Scott Sumner Civil engineers are rarely able to predict the collapse of US highway bridges, at least to within a period of 12 months.How should we feel about that fact? Maybe I'm biased, as my grandfather was a highway engineer in.MORE February 1, 2016 Scott Sumner Of all the things that puzzle me about macroeconomics, the relationship between changes in monetary policy and changes in long-term interest rates is perhaps the most confusing.

I get why monetary injections tends to reduce short-term rates----prices are sticky and.MORE January 29, 2016 Scott Sumner I often get commenters complaining that the Fed should not be controlling interest rates.In one sense I agree, but in another sense I wonder if the commenters are confused.MORE January 26, 2016 Scott Sumner A finance student from Coventry sent me Paul Krugman post from 1997, which has some interesting things to say about today.Fifteen years ago, just after Fran ois Mitterrand became president of France, I attended my first conference in Paris.MORE January 23, 2016 Scott Sumner Consider the following two paradoxes: 1.Falling wages are associated with falling RGDP.

Falling interest rates are associated with falling NGDP growth.Falling interest rates cause higher NGDP growth.MORE January 22, 2016 Scott Sumner My recent book on the Great Depression is not easy to review.The arguments are complex, and not always easy to follow.I did my best, but it's a very complicated story.Given my low expectations, I was pleasantly surprised.MORE January 20, 2016 Scott Sumner The Combat Zone was the name for Boston's red light district, when I first moved here in 1982.

I believe it's now gentrified, much like Times Square in NYC.But I'd like to see if we can work this into.MORE January 15, 2016 Scott Sumner At the beginning of 2015, we were told that growth would pick up, because plunging oil prices were "like a tax cut." Well, they are like a tax cut, but of course demand-side tax cuts also fail to boost growth,.MORE January 13, 2016 Scott Sumner I often get annoyed reading articles claiming that China has an economic model that others should emulate.

China is a poor country, not just compared to the US, but even compared to Mexico.Even if you believe poverty reflects factors.MORE January 9, 2016 Scott Sumner One thing that makes it hard to discuss macroeconomics with people is the widely held assumption that changes in interest rates reflect changes in monetary policy.That misconception comes from the fact that people misinterpret the implications of two true.

MORE January 8, 2016 Scott Sumner The Fed has a legal mandate for price stability and high employment.

Their mandate does not instruct them to stop trying if things get a bit difficult.It does not instruct them to pass the job on to the fiscal.MORE January 6, 2016 Scott Sumner Ken Duda directed me to a speech by Stanley Fischer, which lays out four options for the next time rates hit zero: 1.MORE January 2, 2016 Scott Sumner Vincent Geloso has a new post, where he suggests using nominal gross output (NGO) as an alternative to NGDP targeting: The intuition behind NGDP target is that monetary policy should be aimed at reacting to changes in demand for money.MORE January 1, 2016 Scott Sumner After I began blogging in early 2009, I started giving talks entitled "The Real Problem Was Nominal." I argued that tight money, not financial distress, was the cause of the Great Recession.

MORE Bryan Caplan Six years ago, Robert Murphy and I made the following bet:At any point between now and January 2016, if there is a year/year increase in seasonally adjusted CPI that is at least 10%, then you pay me at that time.MORE December 30, 2015 Scott Sumner Modern economics tends to use sophisticated statistical techniques to try to infer causal relationships.The most important book on macroeconomic history was Friedman and Schwartz's Monetary History of.MORE December 24, 2015 Scott Sumner Suppose I put a digital sign outside my house, with "Sumner's fed funds rate target" and a number.And suppose I adjusted the target rate from 0.MORE December 22, 2015 Scott Sumner I have a couple posts over at MoneyIllusion, arguing that lower interest rates are contractionary.The basic argument is that lower interest rates reduce velocity, which reduces NGDP (for any given money supply).MORE December 16, 2015 Scott Sumner The long dark age of vulgar Keynesianism is finally over.

For 7 long years we've heard economists tell us that the laws of economics don't apply at the zero bound.

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We are told that "everything is different" at the zero.MORE December 15, 2015 Scott Sumner Intellectual progress is much more common than regress, but I do believe that the latter problem occurs more often than we might assume.Mid-century Keynesianism may have represented progress in some dimensions, but it also reflected regress on our understanding Economic industry and city level forecasts and analysis.Mid-century Keynesianism may have represented progress in some dimensions, but it also reflected regress on our understanding.

MORE December 13, 2015 Scott Sumner Bryan Caplan recently applied Tyler Cowen's mood affiliation hypothesis to global warming.

Here's Tyler: It seems to me that people are first choosing a mood or attitude, and then finding the disparate views which match to that mood and, to.MORE December 11, 2015 Scott Sumner One of the many frustrations that I face in advocating NGDP targeting is the misconception that this policy regime is more "expansionary" than inflation targeting Best website to write an macro economics presentation single spaced 117 pages / 32175 words Vancouver Proofreading.MORE December 11, 2015 Scott Sumner One of the many frustrations that I face in advocating NGDP targeting is the misconception that this policy regime is more "expansionary" than inflation targeting.In fact, the two are identical in the long run, and in the short run.MORE December 8, 2015 Scott Sumner Some Keynesians define the stance of monetary policy in terms of interest rates.This is of course a really bad idea, as it implies monetary policy is highly contractionary during periods of hyperinflation.

Give Paul Krugman credit for avoiding that.MORE December 6, 2015 Scott Sumner Tim Fernholz has an excellent article in Quartz on the evolution of Ted Cruz's views on monetary policy: But the Washington Examiner's Joseph Lawler has found Cruz is shifting directions in an intriguing fashion.MORE December 5, 2015 Scott Sumner A little bit of each.My analysis of the Great Depression is monetarist in the sense that I believe inflation and demand-side business cycles are fundamentally monetary phenomena, to be explained by analyzing changes in the supply and demand.MORE December 3, 2015 Scott Sumner Consider the following recent exchange in a Senate hearing: Senator Cruz: In the summer of 2008, responding to rising consumer prices, the Federal Reserve told markets that it was shifting to a tighter monetary policy.MORE December 1, 2015 Scott Sumner My book on the Great Depression is officially published today.Looking back on the long project, I see 6 themes that have been there throughout my research career (which began in 1986, with this project.

MORE November 27, 2015 Scott Sumner In the past I've been critical of Paul Krugman's approach to austerity and business cycles.For instance, he argued that austerity in the UK led to slow growth in real GDP.I countered that RGDP is not the right variable.

MORE November 25, 2015 Scott Sumner Benny Lava sent me an article discussing the German opposition to Mario Draghi's proposed monetary stimulus: But on Monday, Lautenschlaeger broke with normal etiquette to publicly criticize this stance, saying that ever looser monetary policy had its limits and that.

MORE November 19, 2015 Scott Sumner For years I've been arguing that trend real GDP growth is lower than the Fed believes, that the new normal of interest rates will be lower than the Fed believes, that rates will again fall to zero in future recessions,.MORE November 16, 2015 Scott Sumner Several other bloggers have recently described how they visualize macro, so I'll play copycat.I see three types of macro, each radically different from the other two: Long run nominal is the easiest to explain, then business cycles, and long.MORE November 13, 2015 Scott Sumner Fiscal policy is the one area where I disagree most strongly with Ben Bernanke.387), he indicated that he supported Bush's fiscal stimulus of early 2008.But why? Bernanke gives no explanation at all.MORE November 9, 2015 Scott Sumner Perhaps the most surprising thing about Ben Bernanke's recent memoir is the lack of surprises, at least about what was going on inside the Fed in terms of the monetary policy debate.That's probably a result of the high quality.

MORE November 7, 2015 Scott Sumner In my view, old Keynesianism was based on the cognitive illusion that money doesn't matter, at least when interest rates were near zero.By the 1980s that spell was broken, and we had almost all pretty much rejected old Keynesianism,.MORE November 4, 2015 Scott Sumner Here is Arnold Kling: What I wish to point out is that the relationship as depicted is an anomaly with respect to textbook AS-AD, including both Keynesian economics and Sumnernomics.Timothy Taylor refers to the relationship as a Phillips Curve.MORE November 2, 2015 Scott Sumner It's not clear what a term like 'natural' actually means.

What are "natural foods" for instance? Are they foods free of natural pesticides? Free of artificial pesticides? Are they free of both natural and artificial pesticides? And what if the.MORE October 31, 2015 Scott Sumner Bob Murphy has occasionally complained that I contradict myself on interest rates.Interest rates are a meaningless indicator of the current stance of monetary policy.Raising interest rates makes monetary policy more contractionary, on the.MORE October 29, 2015 Scott Sumner Prior to late 2008, I had gone 25 years without having a strong opinion on monetary policy.It seemed about right, even if on occasion I might have preferred something a bit easier or a bit tighter.MORE October 27, 2015 Scott Sumner These two questions are much more similar that we tend to assume, despite the normative/positive distinction emphasized in EC101 textbooks.

They are not identical questions in the short run---say the October or December Fed meetings---but over a long period of.MORE October 25, 2015 Scott Sumner I am gradually working my way through Bernanke's recent memoir, and so far I am greatly enjoying the book.It does an outstanding job of explaining how things looked from the inside, and is full of fascinating tidbits.MORE October 19, 2015 Scott Sumner Arnold Kling replied to me recent post discussing a 4% inflation target (a policy I oppose, by the way.

) I strongly disagree with all 6 of his points.He is responding to this claim I made: The simplest solution is.MORE October 18, 2015 Scott Sumner Seminars at the University of Chicago were pretty intense.I recall times when the speaker was barely one sentence into his presentation, and was already being challenged by pointed questions.MORE October 17, 2015 Scott Sumner I was very excited to read about a new San Francisco Fed study that supported one key tenet of market monetarism.A number of commenters seemed confused as to why it was a big deal.MORE October 15, 2015 Scott Sumner I recently pointed out that Fed officials are becoming more receptive to the market monetarist proposal for negative interest on reserves.Today there is more progress, on an even more important front.First let me provide a bit of background.MORE October 14, 2015 Scott Sumner How did the Fed do during its first 100 years? For a deeper look at this question, you should read Selgin, Lastrapes and White.Here I'll take a very broad overview, and look at a few key themes.

MORE October 12, 2015 Scott Sumner One of the earliest ideas to come out of market monetarism was the proposal for negative interest rates on reserves (negative IOR).I mentioned this idea in a couple papers published in early 2009, and the New York Fed discussed.MORE October 10, 2015 Scott Sumner Arnold Kling recently responded to a point I made about the Fed not determining the path of interest rates: He wrote, Unfortunately, the Fed doesn't get to decide the path of interest rates.

MORE October 7, 2015 Scott Sumner Your debutante just knows what you need But I know what you want -- Bob Dylan Over at MoneyIllusion I did a post---partly tongue in cheek---pointing out that if Milton Friedman were alive today he might be forced to change.MORE October 5, 2015 Scott Sumner I've made this point before, but it's worth repeating, given all the recent talk about the Fed relying on the Phillips Curve.The Phillips Curve model only works when the business cycle is driven by demand shocks.MORE September 30, 2015 Scott Sumner For seven years I've been trying to discuss monetary policy, and commenters (mostly at MoneyIllusion) keep wanting to bring up a completely unrelated topic---banking.

Monetary policy works though the hot potato effect, and banking is no more essential to the.MORE September 29, 2015 Scott Sumner John Cochrane has a post on Japan's long period of near-zero CPI inflation, and then adds this footnote: Update David Beckworth on the same topic.It's like saying all the Chicago Cubs need.MORE September 23, 2015 Scott Sumner Yesterday I discussed one bizarre idea that has popped up in the wake of the Great Recession.

The newly elected leader of Britain's Labour Party has proposed a "People's QE".MORE September 22, 2015 Scott Sumner The past decade has produced some unusual macroeconomic outcomes, and even more unusual new macro theories.One of the very strangest is NeoFisherism.

Irving Fisher noted a positive relationship between inflation and nominal interest rates.MORE September 21, 2015 Scott Sumner Brad DeLong recently made an interesting observation about interest rates: It was Milton Friedman who insisted, over and over again, that in any but the shortest of runs high nominal interest rates were not a sign that money was tight--that.MORE September 20, 2015 Scott Sumner Andrew Sentance has a new post in the Financial Times, which is critical of the Fed's refusal to raise interest rates.The word 'inflation' does not appear in the article.

Here's how it begins: These are tough times for monetary.MORE September 18, 2015 Scott Sumner Paul Krugman has a new post that summarizes Keynesian economics: I would summarize the Keynesian view in terms of four points: 1.Economies sometimes produce much less than they could, and employ many fewer workers than they should, because there.MORE September 17, 2015 Scott Sumner There is a great deal of skepticism about Chinese economic data.I believe that some of the skepticism is justified, but much of it is greatly overdone.

This FT article discusses the critique that I find most plausible: However, doubts.MORE September 15, 2015 Scott Sumner I saw this in the Financial Times: Many economists think the government can help a weak economy by convincing people the rate of price increases is poised to accelerate.In theory, households will spend more whilst businesses will boost their.MORE September 10, 2015 Scott Sumner Here's a question I'm confused about.I think I understand that Keynesians believe that fiscal stimulus is expansionary and fiscal austerity is contractionary.

But what do they believe is the effect of fiscal stimulus if it's called supply-side economics? Does.MORE September 9, 2015 Scott Sumner In October 2009, the US unemployment rate peaked at 10%.(And "austerity" was about to be implemented.MORE September 3, 2015 Scott Sumner Answers: Maybe, and no.Tyler Cowen linked to a recent paper by Jonathan L.

Willis and Guangye Cao, out of the Federal Reserve of Kansas City.Here's the opening paragraph: Over the past three decades, the U.MORE September 1, 2015 Scott Sumner Last year I did a number of blog posts criticizing the consensus view that Japan had fallen into a recession.

Many people assumed that two consecutive declines in real GDP meant that Japan was in recession.MORE August 31, 2015 Scott Sumner Tyler Cowen has a new blog post that has 13 observations on the Fed's upcoming policy decisions.Most are reasonable, especially the first comment.

But I strongly disagree with point 6: 6.

MORE August 29, 2015 Scott Sumner I hope the title of this post has caught your attention---if not please reread it.In the previous few recessions, the consensus of economists did not even forecast a recession until it was already underway.MORE August 26, 2015 Scott Sumner Paul Krugman and Larry Summers have recently argued that the Fed should not raise rates later this year.I agree, mostly because I believe it will prevent them from hitting their announced inflation target, but also because it slightly increases.MORE August 24, 2015 Scott Sumner One of the most gratifying things about blogging is seeing the quality of press reporting going up over time.One sees more and more news reports that seem to have been influenced by the debate in the blogosphere.MORE Scott Sumner By "it" I mean the current stance of policy.To see why, we need to review the circularity problem.Asset markets look at the Fed, and the Fed looks at asset markets.When there is enough blood on the floor,.MORE August 21, 2015 David Henderson UPDATE: I was wrong.

Alex Tabarrok has provided the data from FRED.Median family income was $56,447 in 1984, down slightly from $56,585 in 1980.Given how wrong I was, I would rather not have.MORE August 14, 2015 Scott Sumner Alan Blinder once served as Vice Chairman of the Federal Reserve Board, and now has a new piece in the Wall Street Journal.

Michael Darda sent me the following email in response: Alan Blinder in today's WSJ, arguing, as some.MORE August 10, 2015 Scott Sumner A few days ago I did a post suggesting that the Chinese government needed to devalue the yuan.Today (or last night) the Chinese government took a modest step in that direction: China said it will let the market play.MORE August 9, 2015 Scott Sumner In the 1990s there was (or seemed to be) a consensus that you do not want to apply aggregate demand arguments to questions of long run growth and income distribution.Demand shocks have no long run real effects.

MORE August 2, 2015 Scott Sumner Here's a report on China in the Financial Times: Before the release of Wednesday's second-quarter gross domestic product estimate, China's nominal GDP growth rate had plummeted from almost 20 per cent to 5.MORE July 28, 2015 Scott Sumner Lars Svensson has argued that the Fed should "target the forecast", which means they should adjust policy so that their predicted outcome is also their targeted outcome.Information accidentally leaked by the Fed indicates that they are not doing this,.

MORE July 13, 2015 Scott Sumner The Syriza Party took power in January of this year, and immediately began to issue one inflammatory statement after another, demanding an end to the troika's austerity program.American bloggers were divided on the effectiveness of the Syriza strategy, with.MORE July 9, 2015 Scott Sumner In talking to other economists I often hear concerns that NGDP targeting could occasionally lead to excessive inflation.Oddly, I don't hear the opposite complaint, although there would be just as many periods of below average inflation as above average.MORE July 7, 2015 Scott Sumner Bob Murphy has a post criticizing me for being inconsistent on the subject of interest rates and the stance of monetary policy.

Sometimes I say that changes in interest rates don't tell us anything about the stance of monetary policy.MORE July 5, 2015 Scott Sumner The Greeks have voted no in today's referendum, which makes it more likely (though not certain) that Greece will leave the euro.Some economists believe that this action would help the Greek economy.Devaluation would be an expansionary monetary shock,.MORE July 2, 2015 Scott Sumner I often see Fed officials claiming that the fall in unemployment means that they need to raise interest rates.

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Sometimes this is based on "Phillips Curve" thinking---the (false) idea that inflation is caused by a booming economy.MORE June 30, 2015 Scott Sumner Like many American economists, I've learned macroeconomics from an American perspective.For instance, US RGDP growth has averaged about 3% for the past 120 years, if not more Latest financial, market & economic news and analysis from The Guardian.   buying spree. Two huge mergers have brought consolidation to the world of big retail property – a sign that even the largest malls are feeling the economic chill   Technology sector Is the global desire to buy British a bad thing for UK tech firms?.

For instance, US RGDP growth has averaged about 3% for the past 120 years, if not more.

MORE June 24, 2015 Scott Sumner Jose Romeu Robazzi recently left the following comment: "IMHO the disagreement between keynesians and monetarists remain the same: both schools identify AD shortfall as a problem, and both schools recommend some sort of intervention (e.MORE June 23, 2015 Scott Sumner Russ Roberts did a recent post complaining about the way Paul Krugman uses data to support his arguments Latest financial market economic news and analysis Business nbsp.

MORE June 23, 2015 Scott Sumner Russ Roberts did a recent post complaining about the way Paul Krugman uses data to support his arguments.

Roberts pointed out that when things turn out as he expected, Krugman cites the events as proof of his (Keynesian) worldview.MORE June 21, 2015 Scott Sumner The title of this post might seem a bit strange, for several reasons: 1.The tax cut was widely blamed for causing a recession 2.I'm a libertarian that favors low taxes In a first-best world I'd like to see.

MORE June 18, 2015 Scott Sumner I have repeatedly pointed out that the US government did a massive amount of austerity in 2013, and yet GDP growth was higher than during 2012.One would think that Keynesians would have a response to my claim, a response.MORE June 16, 2015 Scott Sumner Tyler Cowen recently listed three laws, and Kevin Drum responded with variations on Tyler's Laws.Cowen's Third Law: All propositions about real interest rates are wrong.

MORE June 10, 2015 Scott Sumner Matt Yglesias has a good post discussing how Iceland defied the conventional wisdom and still did better than countries like Ireland (which is arguably the country that had the most similar economic crisis.MORE June 8, 2015 Scott Sumner Ever since 2009, I've been using the Peter Pan analogy for the expectations channel of monetary stimulus: If I think I can fly, then I can fly.

Now the Japanese are adopting this approach: Though lower oil prices have stalled.MORE June 7, 2015 Scott Sumner In a comment over at TheMoneyIllusion, Britonomist pleaded for a transmission mechanism: I'm sympathetic to market-monetarists, I'd love to be able to believe that problems like low aggregate demand can easily be solved using monetary policy alone even at the.MORE June 3, 2015 Scott Sumner In a tweet, former Obama economic advisor Austan Goolsbee asked: q for NGDP target fans: if fed target=5% when actual=0, implicitly means target 5% infl for 1 yr.Wouldn't mkt doubt 5% infl just temporary? The answer (from a fellow.MORE June 2, 2015 Scott Sumner Here's a recent WSJ report on the economy: Many Federal Reserve officials entered 2015 thinking they likely would start raising short-term interest rates by midyear.

That idea got put on ice after a winter economic slowdown, partly attributed to the.MORE May 31, 2015 Scott Sumner Here's a typical story about the economy, this one from the Washington Post: When oil prices began to dive in October, analysts and investors spoke of an economy poised for a higher gear: Cheaper prices at the pump amounted to.MORE May 25, 2015 Scott Sumner I don't recall many articles written by neoconservatives discussing how certain aspects of modern global instability might have been caused by US intervention.Perhaps that's because they favor intervention.I don't recall reading many articles written by progressives discussing how.

MORE May 21, 2015 Scott Sumner Aggregate demand is fundamentally a monetary concept, linked to each country's monetary unit.Only in a few cases, such as the eurozone, does it make sense to talk about aggregate demand as a regional concept.MORE May 14, 2015 Scott Sumner I was recently chatting with Caroline Baum about "never reason from a price change" and she mentioned an example from 1986 that I had forgotten.Then I realized it also related to the concept of "re-allocation," which is frequently discussed.

MORE May 1, 2015 Scott Sumner The government recently estimated that real GDP rose at a 0.Most forecasters overestimated the growth rate, while the Atlanta Fed was pretty close, with a 0.MORE April 29, 2015 Scott Sumner I recently presented a paper discussing how economists think about the "stance" of monetary policy.That is, what do economists mean by terms like "easy money" and "tight money"? It turns out that the entire subject is just a big.MORE April 16, 2015 Scott Sumner Over at TheMoneyIllusion I have a long post discussing Ben Bernanke's recent comments on monetary reform.There is one issue that seems especially important, and I wanted to devote an entire post to the subject.MORE April 12, 2015 Scott Sumner Most people find the NGDP shock/sticky wage theory of the business cycle to be at least slightly plausible.However I'm often asked why wages have not adjusted yet.Surely it doesn't take 7 years for full adjustment to a negative.MORE April 11, 2015 Scott Sumner A popular Keynesian theory of recessions is that nominal wages are sticky, and hence reductions in aggregate demand lead to high unemployment.They often go on to advocate more government spending to put people back to work.

MORE April 8, 2015 David Henderson It is hard to think of a website so loved by its followers and so scorned by economists as John Williams' ShadowStats, a widely cited source of alternative economic data on inflation and other economic indicators.MORE Scott Sumner A few weeks ago I criticized a Robert Shiller claim that economic theory tells us that low interest rates should lead to more investment.

That's an EC101 level error, reasoning from a price change.

MORE April 3, 2015 Scott Sumner The Great Recession has exposed the fact that many economists believe things that just aren't so.They believe that low interest rates suggest that money is easy.They believe that monetary stimulus is ineffective at the zero bound.MORE March 13, 2015 Scott Sumner In a recent post I argued that Paul Krugman had started out as a critic of intellectuals who ignored economic models---the sort of person who argued that the laws of supply and demand do not apply to the minimum wage.MORE March 10, 2015 David Henderson A Friendly Amendment: Don't Forget Your Irving Fisher During the 1976 campaign for U.president, candidate Jimmy Carter popularized the "Misery Index" as a way of criticizing his opponent, Jerry Ford.The misery index--equal to the sum of the inflation.

MORE March 3, 2015 Scott Sumner I've done numerous posts pointing out that prior to 2008, New Keynesian economists believed the fiscal multiplier was roughly zero.Paul Krugman used to say that aggregate demand was essentially whatever Alan Greenspan wanted it to be.MORE March 1, 2015 Scott Sumner There are certain topics that are extremely hard to explain to the average person.I've often argued that interest rates don't really matter that much; they are a sort of epiphenomenon of monetary.MORE February 26, 2015 Scott Sumner During periods where there is an enormous demand shortfall, such as the 1930s and the period after 2008, there is a resurgence of interest in demand-side models.But it also produces an unfortunate side effect---mission creep.MORE February 20, 2015 Scott Sumner Kevin Erdmann has an excellent post that discusses what really happened in the famous housing bubble and bust.It's fairly long, so I'll just excerpt a few highlights--but read the whole thing: As far as I can tell, just about.MORE February 16, 2015 Scott Sumner In EC101 we constantly emphasize that students should not reason from a price change.Higher gasoline prices are not expected to be associated with lower consumption, it depends entirely on whether the price increase was due to less supply (1974).MORE February 14, 2015 Scott Sumner Economics textbooks define savings as being equal to investment: S = I This means savings is defined as the funds used for investment.

It's derived from another identity, which says that in a closed economy with no government, gross domestic.MORE February 13, 2015 Scott Sumner Here's Paul Krugman: In his incredible essay "The Great Slump of 1930" - an essay that reads remarkably well to this day, as an analysis of our crisis as well as his - Keynes briefly vents a bit of frustration.MORE February 11, 2015 Scott Sumner I usually start off my PowerPoint presentations as follows: "Tell me," the great twentieth-century philosopher Ludwig Wittgenstein once asked a friend, "why do people always say it was natural for man to assume that the sun went around the Earth.MORE February 6, 2015 Scott Sumner Each January the government revises its payroll jobs estimates, to provide more accurate figures.The recent revisions are not dramatic, but do slightly strengthen two arguments that I've been making over the past few years.

MORE January 29, 2015 David Henderson Regular Econlog commenter Ray Lopez writes, in response to Scott Sumner: My first objection: aside from the "Open Letter" by the liberal leaning economists, that indeed predicted a 'double-dip recession' if sequestration happened, who else predicted a recession? Not the.MORE January 5, 2015 Scott Sumner I just returned from vacation and have some catching up to do.In the meantime let me point to a post over at Coyote Blog that relates to my recent post on the US recovery.MORE December 27, 2014 Scott Sumner Paul Krugman says that the reduction in long-term unemployment has been rather disappointing.This is important, because 2014 was a sort of "natural test" of the hypothesis that the extended unemployment insurance program led to higher unemployment.MORE December 12, 2014 Scott Sumner When John Cochrane writes on finance I prefer him to be "the grumpy economist." When he writes on macro, I prefer the less grumpy version.

His new (non-grumpy) post on macro is outstanding, full of so many important insights that.MORE December 7, 2014 Scott Sumner In a recent post I suggested that one could argue that the entire increase in per capita income over the past 50 years was pure inflation (and hence that real GDP per capita didn't rise at all.MORE December 5, 2014 Scott Sumner There has a been a recent flurry of blog posts on the 1921 depression--especially why it was so much less severe than the Great Depression.One unfortunate aspect of the dispute is that it has become linked to a misleading.

MORE December 4, 2014 David Henderson Paul Krugman has recently reraised the topic of the 1920-21 Depression.It was a very deep depression but it ended quickly.Robert Murphy has an interesting response.First, how he got interested in the issue:.

MORE Scott Sumner Over the past 6 years the blogging world (especially market monetarists) has been highly critical of central banks.Outsiders might have trouble discerning who's right.After all monetary policy is highly complicated.MORE November 30, 2014 Scott Sumner Rising oil production is likely to lead to faster global growth.

Falling oil production is likely to lead to slower global growth.That's because oil is an important input into the production process.However falling oil prices have no implications.MORE November 18, 2014 Scott Sumner Here's another post in my favorite theme, cognitive illusions.Let's start with sticky wages, the easier concept.

Suppose hourly nominal wage rates for many workers are renegotiated every 12 months.Also suppose the economy is in equilibrium and nominal wages.MORE November 2, 2014 Scott Sumner The title of this post has probably angered 90% of the profession, and perplexed another 9%.Obviously I'm taking a few liberties here; both individuals died long ago.And it's not even clear their policies caused the Great Recession.

MORE October 30, 2014 Scott Sumner Tyler Cowen often has posts entitled "A very good sentence." Here Tyler dishes up one of his own: Yes, it is a big mistake to assume Say's Law always holds but it is an even bigger mistake to think it.MORE October 20, 2014 Scott Sumner Sometimes I argue that nominal GDP is like Coke, it's the "real thing." By that I mean it's a well-defined concept, the dollar value of all output of final goods and services.

Of course I exaggerate, there are some conceptual.MORE October 16, 2014 Scott Sumner Here are some things that seem very likely: 1.The global stock/oil/bond yield plunge is at least partly due to expectations of slower nominal GDP growth.I know of no other economic news could explain a sudden decline of this.MORE October 14, 2014 Scott Sumner Do bad times make us less smart? It sometimes seems that way.

When times are good, people dispassionately explain how you don't want to overreact to plagues with draconian policies like quarantines, especially if the disease is not highly contagious.MORE October 10, 2014 Scott Sumner Many economic models are symmetrical.If higher business costs lead to higher prices, then lower business costs lead to lower prices.Thus if higher raw tobacco prices lead to higher cigarette prices, then lower tobacco prices lead to lower cigarette.MORE September 30, 2014 Art Carden Saturday Morning Breakfast Cereal has joined The Oatmeal, XKCD, and Botched Spot as one of my favorite comics.

This particular installment was especially brilliant.It proposes a browser plug-in that makes the opportunity cost of military hardware explicit.MORE September 29, 2014 Art Carden This is an edited version of my comment on this Reddit thread.OP had offered this quote from his microeconomics professor: "Government is the only institution which is allowed to hold a gun to your head and force you to.

MORE September 27, 2014 Scott Sumner Paul Krugman likes to mock extremely talented conservative economists every time they make a statement that seems inconsistent with the textbook AS/AD model of demand shock-created recessions.And yet as far as I can tell, the views of people like.MORE September 21, 2014 Scott Sumner Bill Woolsey directed me to a post by Kevin Grier (commenting on Lars Christensen): OK, so the first graph is the path of Nominal income (PY) relative to trend.The second is the path of real income (Y) and the.MORE September 9, 2014 Scott Sumner This has to be one of the most amusing things I've read all year: The problem comes from believing that QE is some magic growth elixir.

The world's Keynesians have convinced themselves that the U.MORE September 8, 2014 Scott Sumner Here's David Andolfatto: Everyone knows that deflation is bad.Why is it bad? Well, we learned it in school.We learned it from the pundits on the news.MORE September 7, 2014 Scott Sumner Bryan Caplan has a post showing that Janet Yellen is one of the sensible Keynesians, who understands the problems caused by sticky wages.Here's the Washington Post discussing Yellen's views: The stagnation in wages despite a pickup in hiring over.MORE September 5, 2014 Scott Sumner Here are four things I strongly believe to be true: 1.The Great Recession was caused by tight money at the Fed, and other major central banks.Fed policy almost never strays far from the.MORE September 4, 2014 Bryan Caplan From: My Department of Credit Where Credit Is DueI've previously insisted that when there's high unemployment, all good Keynesians should say "Wages must fall!"I'm delighted to learn, then, that Janet Yellen is one of the good stagnation in.

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MORE August 26, 2014 Scott Sumner Vaidas Urba sent me an interesting piece from the Financial Times: For macro investors, the end of summer is usually signalled by the Kansas City Fed's annual conference at Jackson Hole.

On occasions, former Fed chairman Ben Bernanke used this.MORE August 24, 2014 Scott Sumner Here's Brad DeLong: I have to say that most of what I have quoted from Nick seems wrong to me Fischer, S. (1980), Rational Expectations and Economic Policy, University of Chicago Press, Chicago. Fisher, P.G. (1989), SLIM: User's Manual for Version 6.2', mimeo, University of Warwick. Fisher, P.G., K.F. Wallis, and J.D. Whitley (1985), 'Financing Rules and Output Variability: Evidence from UK Macroeconomic Models',  .MORE August 24, 2014 Scott Sumner Here's Brad DeLong: I have to say that most of what I have quoted from Nick seems wrong to me.

Yes, in 1982-1983 it was true to say "it became harder than normal to sell other goods for money.MORE August 23, 2014 Scott Sumner Commenters Patrick Sullivan and gofx directed me to a post on NGDP targeting in developing countries, by Pranjul Bhandari and Jeffrey Frankel: Targeting Nominal GDP has been proposed in the context of major industrialised countries.MORE August 19, 2014 Scott Sumner In order to do good economic analysis, it is important to distinguish between supply and demand shocks.Commenter SG pointed me to this curious post by Paul Krugman: For those new to or confused by the term, secular stagnation is.MORE August 15, 2014 Scott Sumner Here is The Economist: IF ABENOMICS means anything, it is the promise of the prime minister, Shinzo Abe, to restore healthy economic growth to Japan and end years of deflation.To that end the central bank, sloughing off its.MORE August 10, 2014 Scott Sumner Here's Paul Krugman in 2013: Joe Stiglitz has an Opinionator piece arguing that inequality is a big factor in our slow recovery.

Joe is an insanely great economist, so everything he says should be taken seriously.MORE August 9, 2014 Scott Sumner I've recently been working my way through a long set of 2008 blog posts by Eliezer Yudkowsky.It starts with an attempt to make quantum mechanics seem "normal," and then branches out into some interesting essays on philosophy and science.MORE August 4, 2014 Scott Sumner One thing that economists and non-economists have in common is that they underestimate the power of economic theory.

More specifically, they aren't able to accurately connect the predictions of economic theory with the behavior that they (wrongly) think they observe.MORE July 28, 2014 Scott Sumner Market monetarists tend to prefer using monetary policy to stabilize the path of NGDP, not fiscal policy.We are skeptical of the efficacy of fiscal policy, and also view it as being inefficient.Now David Beckworth has suggested that a.MORE July 24, 2014 Scott Sumner Keynesians often say that it's "obvious" that more government spending will boost GDP.

I love this reply by Nick Rowe: The average reader of the New York Times probably thinks he knows about fiscal policy.MORE July 17, 2014 Scott Sumner Over at TheMoneyIllusion I've been having a discussion of aggregate demand.What does the term actually mean? In the comment section I see lots of average people giving common sense explanations, and also experts like Nick Rowe making high-level arguments.MORE July 12, 2014 Art Carden Among the hats I'm wearing these days, I'm writing semi-monthly columns for a Birmingham-based website called .

Recent columns have considered population growth, inflation, and the origins of money.In addition, EconLog friend Sam Wilson and.MORE July 10, 2014 Scott Sumner Ideology is perhaps the most common way of dividing economists into groups.You have Allan Meltzer on the right, and Paul Krugman and Joe Stiglitz on the left.

Today I'd like to argue that in one very important way it.MORE July 7, 2014 Scott Sumner The past two years Kansas reduced its state income tax rates.As a result, the top rate of income tax faced by Kansas residents (combined state and federal) rose from 41.MORE July 3, 2014 Art Carden Here's a Sesame Street classic.I remember this from when I was a kid; we watched it a few times with our kids Monday morning.The sheer amount of knowledge embodied in this whole process is mesmerizing.MORE July 2, 2014 Scott Sumner Paul Krugman seems annoyed by the recent modest success of market monetarism, at least in terms of becoming part of the discussion.

But the post contains only one tiny critique of our actual policies: I don't buy this on the.MORE June 28, 2014 Scott Sumner Commenter Felipe sent me to an interesting Jeffrey Frankel post on NGDP targeting: There are good reasons to think that NGDP targeting is better suited to emerging and developing economies than to industrialized countries.These economies are more frequently subject.MORE June 27, 2014 Art Carden Why can't the US be more like Europe? Why can't we have decent economic growth and an extremely generous welfare state? Here's one reason: we spend an enormous amount of money on the military.Wikipedia's "List of Countries by Military.

MORE June 18, 2014 Art Carden On Monday, we celebrated our daughter's fourth birthday.Today, we celebrate our younger son's second birthday.On Saturday, we will celebrate my wife's and my eleventh anniversary.When we found out we were expecting our third a few years ago,.MORE June 17, 2014 Scott Sumner People on the left like Paul Krugman sometimes suggest that 1934-80 was a sort of golden age of stable banking---after the New Deal regulatory reforms and before the deregulation of the 1980s.

I'm not convinced that regulation has much to.MORE June 13, 2014 Scott Sumner Here is Noah Smith: Abe is the most effective national leader in the world right now.I never thought I'd say this, but he's an example that the rest of the world should be following.MORE June 11, 2014 Scott Sumner I occasionally point out that the European Central Bank raised interest rates several times in 2011, triggering a double dip recession.

At other times I argue that interest rates are not a reliable indicator of the stance of monetary policy.MORE June 6, 2014 Art Carden According to a report in the Tennessean by way of , "gains in whiskey sales are outpacing increases in production by 'at least' a 2-to-1 Jack Daniel distillery announced a $100 million expansion in distilling and warehouse space.MORE May 26, 2014 Scott Sumner Tom Brown sent me to an Austrian critique of monetary stimulus (in this case negative interest on reserves): Negative deposit rates" means that the banks will charge the customer for saving money and placing it in the bank.MORE May 14, 2014 Scott Sumner I recall a movie where a guy asks his buddy if his girlfriend is intelligent." And the other guy responds "average is dumb.I don't know if that's fair overall (I doubt.

MORE May 13, 2014 Scott Sumner There as been a lot of recent discussion about the "Neo-Fisherite" claim that higher interest rates lead to higher inflation.Unfortunately the debate has been marred by a lack of precision.MORE May 5, 2014 Scott Sumner Broadly speaking, there are three approaches to stabilization policies and business cycles: 1.

Stop the excesses: In this view, monetary policy is too expansionary at certain times.Some people worry about excessive real GDP growth.MORE David Henderson However, the classical understanding of capital and its place in economic theory was muddled.Even though it was refined in light of the new marginal productivity theory of pricing, the increasing formalism of economics in the 20th century led many.

MORE April 25, 2014 April 22, 2014 Scott Sumner Many people assume that Germany has long been an economic success story.It was certainly successful back in the 1950s and 1960s.But as recently as 2004 it was widely viewed as the "sick man of Europe" despite all those.MORE April 18, 2014 David Henderson This is another installment in my posts on my visit to the San Francisco Fed on April 9.My talk was in the afternoon, but I always like to see the talks that precede mine so that I can get.

MORE April 17, 2014 Scott Sumner TravisV sent me to the following graph of industrial production: That looks like good news.To see why it is bad news, we need to take a brief digression.The recent recession has been rather unusual.MORE April 14, 2014 Scott Sumner In the past 10 years Germany as gone from being the "sick man of Europe" to the star of the eurozone.

This partly reflects the strong job creation that preceded the recession, perhaps due to the labor market reforms of.MORE April 9, 2014 David Henderson I second co-blogger Bryan Caplan's appreciation of the late Simon Kuznets.One of my pleasures in writing the many bios of famous economists for The Concise Encyclopedia of Economics was researching and writing his bio.MORE April 7, 2014 Scott Sumner In a new post, Tyler Cowen is skeptical of Paul Krugman's claim that higher inflation hurts the rich.

Brad DeLong also expresses some skepticism.I agree with Cowen and DeLong, but would like to quibble with this comment in.MORE April 3, 2014 Bryan Caplan The minimum wage and welfare (broadly defined to include unemployment benefits and such) curiously interact.As I've previously explained:The minimum wage deprives the unfortunate workers shown in red of their ability to support themselves.Given this involuntary unemployment, the case.

MORE April 1, 2014 Bryan Caplan Tyler publicizes a challenge from founding EconLog blogger Arnold Kling:I still want to see an economist reconcile a belief in secular stagnation with a belief in Piketty's claim that the return on capital is going to exceed the growth rate.MORE March 31, 2014 Scott Sumner There's a vigorous debate about the money multiplier taking place in the blogosphere.On one side is everyone from MMTers, to new monetarists, to market monetarists.MORE March 27, 2014 Scott Sumner Nor (in my view) do they deserve our contempt.They are trying to do a good job, but often fall well short.One such occasion occurred in 2011 when the ECB tightened monetary policy.MORE March 6, 2014 Scott Sumner Those of us who liked the 1990s vintage Paul Krugman have been able to hold on to a few stands of hope.At least he only applies the old Keynesian model to the.MORE March 5, 2014 David Henderson In a fascinating article on why Friedrich Hayek did not write a review of John Maynard Keynes's The General Theory of Employment, Interest, and Money, Hayek expert Bruce Caldwell writes: Perhaps most damning is the tendency of Hayek's stories to.MORE Scott Sumner This post tries to tie together some diverse observations about the sticky wage/NGDP shock model.

The motivation for this (unfortunately long) post was the observation that many non-economists seem to find the sticky wage/NGDP shock model to be appealing.MORE March 3, 2014 Scott Sumner Tyler Cowen recently linked to an interesting post by Edward Hugh.Hugh argues that much of the recent uptick in Japanese inflation is due to the recent depreciation of the yen.That may be true in an accounting sense, but.

MORE February 18, 2014 Scott Sumner The Administration has released a report defending the ARRA program, and it's every bit as embarrassing as you might expect.The report seems to ignore the fact that fiscal stimulus failed to produce.MORE February 17, 2014 Scott Sumner But now we know the actual problem was tight money, which caused NGDP to fall in half.Here's Noah Smith: This seems to be the overwhelming consensus in academic macro these days.It seems obvious to most people that the.MORE February 15, 2014 Scott Sumner There are some questions that have no answers.

One example is the question: "Was monetary policy too expansionary during the housing boom?" The only sensible answer is "it depends." It's not clear what the Fed was trying to do during.MORE February 14, 2014 Scott Sumner Over at TheMoneyIllusion I have a series of posts exposing the common fallacy of "reasoning from a price change." (Trademark) This occurs when people assume that consumers will buy less oil when the price is high, or there will be.MORE February 13, 2014 Scott Sumner Here's Paul Krugman: Barry Ritholtz reminds us that we've just passed the third anniversary of the debasement-and-inflation letter -- the one in which a who's who of right-wing econopundits warned that quantitative easing would have dire consequences.

MORE February 10, 2014 Scott Sumner The answer to this question might seem obvious, but it isn't.Yes, booms feature lots of jobs and income, but most standard macro models suggest that booms feature "excesses," with too much employment and perhaps over-investment too.MORE February 2, 2014 Scott Sumner Marcus Nunes has a highly critical post contrasting Paul Krugman's views on Argentina in 2012 and today.

As is often the case with Krugman it's almost impossible to figure out what he is "really.MORE January 20, 2014 David Henderson Recently, there has been a brouhaha in the blogosphere over comments made by Paul Krugman and then responded to critically by Russ Roberts and Bob Murphy.The issue--and everyone on both sides agrees that this.

MORE January 15, 2014 David Henderson One of the big advantages of having been an economist for a long time and having been at the Council of Economic Advisers 30 years ago is that I've gotten to know and follow a lot of people and their.MORE January 12, 2014 Scott Sumner Ryan Avent discusses a recent speech by Larry Summers:The basic set-up of his narrative remained unchanged from last year.Imagine a world, he said, in which resources are increasingly concentrated in the hands of those with high propensities to save and.MORE January 3, 2014 Scott Sumner During late 2012, market monetarists like myself argued that fiscal austerity in 2013 would not slow growth. We based that on an idea that was relatively uncontroversial as late as 2007 (even among New Keynesians)---monetary offset.

MORE December 31, 2013 David Henderson Starting tomorrow, Econlog's new guest blogger will be Scott Sumner.Ever since we lost Arnold Kling, in the late summer of 2012, Econlog has needed a macroeconomics presence.Both Bryan Caplan and I post occasionally about macroeconomics, but we are.MORE December 18, 2013 David Henderson In a front-page report in the Wall Street Journal on low inflation in the United States (where the inflation rate for the past 12 months was only 1.

2%) and in the euro zone (where it was only 0.MORE December 17, 2013 Art Carden Regular readers of EconLog know that I, like Bryan Caplan, try to follow Rolf Dobelli's advice and Avoid News.Scan the headlines and look for claims about programs that are Obviously Good Ideas, according to Some.

MORE December 12, 2013 David Henderson Blogger and frequent Econlib Feature Article contributor Robert P.Murphy has coined the term "Krugman Kontradiction." I believe, and I think Bob agrees with me, that Krugman is very clever and crafty.(Or should that be Klever and Krafty?) And.MORE December 2, 2013 Art Carden What should students learn in their introductory economics courses? Are we, as Mike Konczal argues, "teaching economics backwards" (HT: Justin Wolfers via Twitter)? I'm sympathetic to Konczal's argument that we need to focus more of our attention on the institutions.

MORE November 24, 2013 David Henderson Picture this: The U.

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government finally sells the Postal Service.As with other functions moved from the government to the private sector, the privatized post office does what the government did for about half the cost.MORE November 14, 2013 Art Carden I teach our principles and intermediate macro courses at Samford, and when Google Reader shut down I (like many, I suspect) let my RSS feeds die with it Applying economic impact analysis and other quantitative tools to inform policy and business decisions   UK GDP growth is estimated to have slowed to 1.5% in 2017, bucking the stronger global trend, and we forecast activity will remain sluggish over the next two years with growth of 1.5% in 2018 and 1.6% more..MORE November 14, 2013 Art Carden I teach our principles and intermediate macro courses at Samford, and when Google Reader shut down I (like many, I suspect) let my RSS feeds die with it.

MORE November 11, 2013 David Henderson One of Scott Sumner's most important posts in the last few months is his November 8 post, "Mike Konczal: "We rarely get to see a major, nationwide economic experiment at work." Scott quotes blogger Mike Konzcal from last April: We Rethinking the Economics of Land and Housing Google Books Result.

" Scott quotes blogger Mike Konzcal from last April: We.

MORE October 24, 2013 Art Carden Without digging deeply into the conversation, my sense is that a lot of economists and public intellectuals saw the financial crisis and the slow recovery as a confirmation of a lot of things they already believed Rethinking the Economics of Land and Housing Google Books Result.MORE October 24, 2013 Art Carden Without digging deeply into the conversation, my sense is that a lot of economists and public intellectuals saw the financial crisis and the slow recovery as a confirmation of a lot of things they already believed.MORE October 22, 2013 David Henderson Lawrence Klein, an economist who won the 1980 Nobel Prize in economics for his macro-models of the economy, died on Sunday.Because the bio of him in The Concise Encyclopedia of Economics is so short, I'm reprinting all of it.MORE October 11, 2013 Bryan Caplan Many of my favorite people are strident anti-Keynesians.

In their eyes, Keynesianism isn't just false; it's incoherent pseudo-science, a blight on our fair economics profession.Those who think of Keynesianism as pseudo-science generally hold all Keynesians in one dim view.MORE October 5, 2013 Art Carden This morning, a colleague and I are conducting a seminar on Frederic Bastiat for homeschooled students.We're discussing "What is Seen and What is Not Seen," "A Petition," "The State," and "The Law." In re-reading these essays, I'm struck yet.MORE October 1, 2013 Bryan Caplan Fogg and Harrington provide an excellent intro to the empirics of malemployment.

Highlights:Definitions:Mal-employment, a variant of underemployment, is based on the concept of over-education.It represents a mismatch between skill requirements of the job and the education of the worker:.MORE September 6, 2013 David Henderson This is an almost 2-hour video of a forum held at Butler University in April.The participants are Mike Munger, Robert Skideslky, Richard Epstein and moderator Russ Roberts.

Some highlights: 00:08:40: Mike Munger's "beauty contest.MORE August 30, 2013 Bryan Caplan During recessions, demand for both housing and labor plummets.But the two markets respond in very different the housing market, we usually see dramatic price falls.Lots of properties sit on the market for months.MORE August 26, 2013 David Henderson In my critical comment on Robert Solow's slam on Friedman, I pointed out that when I reread Solow's and Samuelson's famous 1960 article on the Phillips Curve as a "menu" for policy makers choosing between low unemployment and low inflation,.MORE August 24, 2013 David Henderson Kitty Galbraith makes Hayek's mistake (although check the big caveat below) This is my next installment on Richard Parker's book on John Kenneth Galbraith: His Life, His Politics, His Economics.From a footnote, a quote from Galbraith's wife Catherine (Kitty).MORE August 21, 2013 Art Carden Yesterday morning, I opened a bag of beef jerky that reads "MADE IN THE U.On the back of the bag--and I found this interesting--one reads that the jerky Contains beef.MORE August 19, 2013 David Henderson Daniel Kuehn, in the comments on my recent post on Galbraith's criticism of Keynes, and in his own blog post, has pointed out that Keynes did not commit the error that Galbraith accused him of.MORE August 18, 2013 David Henderson This is next in my continuing series of posts about Richard Parker's John Kenneth Galbraith: His Life, His Politics, His Economics.In May 1941, John Kenneth Galbraith had an article published in the prestigious Review of Economics and Statistics.MORE August 6, 2013 Bryan Caplan I'm frankly stunned that Krugman would approvingly quote the following passage from Keynes: I f a particular producer or a particular country cuts wages, then, so long as others do not follow suit, that producer or that country is able to get.MORE July 30, 2013 Art Carden Here's my latest article, which is written in part in response to fellow contributor Laura Shin's question about whether the attention given to McDonald's wages will lead a higher minimum wage.

MORE June 26, 2013 Art Carden I agree with Bryan: Frederic Bastiat's essay "What is Seen and What is Not Seen" is "the pinnacle of profundity." Indeed, on re-reading Bryan's post on Bastiat from last summer, I realized he wrote most of what I was planning.MORE Bryan Caplan I am always proud to claim vindication by bet.But I am extremely reluctant to claim vindication by events.

Few things are easier than (a) making vague claims, (b) waiting for something or other to happen, then (c) crowing about.MORE June 24, 2013 Art Carden In my profession as an economics professor and through churches I have attended, I've been around a lot of people who want to "make a difference." They almost inevitably equate "making a difference" with "working for a government or a.MORE June 13, 2013 Art Carden The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.Hayek On May 29, I offered my proposal for how I would answer Bryan's "spend a.MORE June 12, 2013 Art Carden My latest op-ed was published today by .In it, I evaluated claims by Senator Jeff Sessions and Rep.Mo Brooks that "we don't have that many jobs" (Sessions) and that "simple economics" says "You increase the supply of anything,.

MORE June 4, 2013 Art Carden The long-promised but slow-in-coming dialogue promised here.PERSONS OF THE DIALOGUE Jacob Carden, Age 4 Taylor Grace Carden, Age 2 Dad: Art Carden, an Economist, Age 34 Scene: Chuck E.MORE May 30, 2013 Bryan Caplan Foote, Gerardi, and Willen's subprime manifesto is theoretically enlightening as well as empirically edifying.

Unlike many economists, they understand asymmetric information on an unusually deep level.Standard adverse selection models suggest that the market for iffy mortgage-backed securities would never.MORE May 24, 2013 Bryan Caplan I just read Foote, Gerardi, and Willen's subprime facts manifesto.In the process, I learned more about the subprime crisis than I learned in the last five years put together.

If you're going to read one piece on this.MORE May 17, 2013 Bryan Caplan Arthur Breitman and I have hammered out the following inflation bet: If the 12 month change of the CPI-U as reported by the BLS is greater than 5% for any sliding window between today and December 2015 in monthly increments,.MORE May 7, 2013 Bryan Caplan As far as I can tell, none of the comments on my Keynesian bet bleg point out or propose a Keynesian bet.On Twitter, however, Noah Smith alerted me to the existence of the following Smith-DeLong bet:If, at any time.

MORE May 6, 2013 Bryan Caplan The strongest evidence for Keynesianism, in my view, is introspection.

During the last five years, however, I've often heard Keynesians claim that their views have been vindicated by events.To which I'm sorely tempted to respond:It's easy to claim "vindication.MORE Bryan Caplan Many of my friends laughed at Paul Krugman when he wrote: Maybe I actually am right, and maybe the other side actually does contain a remarkable number of knaves and n continued:The key to understanding this is that the anti-Keynesian.MORE April 24, 2013 Garett Jones Want to know how to win a gold medal in Rio in 2016? Here's a guaranteed plan to reach the top spot on the podium: 1.MORE April 17, 2013 Garett Jones Why are apparently good workers unemployed for so long in recessions? One channel that Tyler has promoted is ZMP: Some workers are almost completely unproductive, so employers can them rather than have them eat up all the pizza on Pizza.MORE April 8, 2013 Garett Jones First things first: A hearty welcome to my new co-blogger Art the task at hand: A while ago I wrote on how "Capital should be untaxed" should be the default view in economics: Zero capital taxation should be the.

MORE April 5, 2013 David Henderson No one whose opinion I respect doubts that Paul Krugman is very clever.Here's a recent example from his column in yesterday's New York Times, titled "The Urge to Purge": When the Great Depression struck, many influential people argued that.MORE April 2, 2013 David Henderson Casey Mulligan's cleverly titled book, The Redistribution Recession, could have been one of the most important economics books in 2012.It makes the case that a major reason U.employment has been so low is that during the recent recession,.MORE March 18, 2013 Garett Jones 1: Is the Cyprus bank levy a crude approximation of bankruptcy?Actually, the bank levy is probably better for depositors than reason it's probably better than bankruptcy is because in return for haircuts, Cypriot banks will get cheap money from.MORE March 17, 2013 Garett Jones Some theories of the business cycle say that booms and recessions are caused by shocks to the supply of key inputs: a wave of new high-tech ideas, a rise in oil prices, big changes in labor law.MORE March 16, 2013 David Henderson Scott Sumner has a first-rate post this morning and one of the most important ones you can read if you want a quick look at why real changes in the economy rarely cause large business cycles.

MORE March 14, 2013 David Henderson That is the title of an article by Michael Sivy sent to me by a frequent reader of Econlog.I have heard other people ask the same thing, so I'll answer.First, let me point out that authors of popular.MORE March 9, 2013 Garett Jones There's an old story about a mathematician asking Paul Samuelson for one idea in economics that was simultaneously true and not obvious.

 Today, I've got another: The Chamley-Judd Redistribution Impossibility Theorem.MORE March 7, 2013 Bryan Caplan As far as I can tell after a quick read, this OMB report says that I'm on track to win my TARP bet in 2013.But I'd rather outsource this to outside readers.

Anyone?Update: Does anyone dispute that this is.MORE March 6, 2013 David Henderson In 2009, I taught Jeff Hummel's Masters class in Macro at San Jose State University while he was on sabbatical.I did so to relearn macro and to learn what's new in macro.MORE March 2, 2013 Garett Jones There are some ideas I love to believe in despite a lack of evidence. Among my favorites: That the business cycle is partly a self-fulfilling prophecy: You go to the party you think everyone else is going to, you stay.MORE February 11, 2013 Garett Jones The new Econ Journal Watch piece by David Cushman checks this claim that Krugman made in March 2009: is right to expect high growth in future if the economy is depressed now. I'm not writing about that quote, since Cushman and.MORE January 23, 2013 Garett Jones We're still debating how extra government spending influences the short run economy.

 How it influences the long run is a more important question but that's a topic for another blog post. Recently there's been some buzz that multipliers are on.MORE January 20, 2013 David Henderson And, moreover, uses some of Milton Friedman's best work to do so.First, Joe Stiglitz offers a version of the "underconsumption" hypothesis, basically that the rich spend too little of their income.This hypothesis has a long history -- but.

MORE January 15, 2013 Garett Jones Jon M at Sociological Speculation reports:drugs such as Modafinil appear to vastly reduce the need for sleep without significant side effects (at least so far).Based on reports from users, it seems that people could realistically cut their sleep.MORE January 14, 2013 Garett Jones I recommend Russ's recent EconTalk with Morten Jerven. Jerven's forthcoming book, Poor Numbers, shows that GDP estimates in sub-Saharan Africa are fraught with error.

Jerven, who visited many statistics offices in the region firsthand, concludes that poorly staffed offices and.

MORE December 31, 2012 Bryan Caplan My inflation bet with Bob Murphy, unlike David's, doesn't mature until January 1, 2016.David as usual is a model of gentlemanly conduct, but other observers are cackling with glee at Bob's defeat.MORE December 3, 2012 Garett Jones My latest book review for Barron's is here ($, probably).

 Zandi's Paying the Price adds some value; this post excerpts some positive parts of the review:"Regulatory, legal, and policy uncertainty was holding business back." That's author Mark Zandi, Moody's Analytics chief.MORE October 25, 2012 Garett Jones Nobelist Thomas Sargent said this, about early tests of rational expectations macro models back in the 70's: I recall future Nobelists Bob Lucas and Ed Prescott both telling me that those tests were rejecting too many good models.MORE October 24, 2012 Garett Jones I thought the mainstream view was that fiat money was--in most mainstream theories and possibly in practice--a Tirole (Econometrica, 1985) defines a bubble (it's a conventional definition among economists), and notes that Samuelson's excellent model of money fits that.

MORE October 14, 2012 Garett Jones "Why do Americans work so much more than Europeans?" That's the title of one of Nobelist Ed Prescott's papers. His story has something to do with high taxes causing low employment, so you might be tempted to begin your yawning.MORE October 11, 2012 Garett Jones As always, I enjoyed the hour.I suspect it was this post that led to the invitation.

 I really do believe Fisher's 1933 Econometrica article offers a more complete model of the entire business cycle process.MORE October 6, 2012 Bryan Caplan Back in 2010, Mike Shedlock ("Mish") and I agreed to the following bet:If the official initially reported U.monthly unemployment rate falls below 8.0% for any month between now and June, 2015, I win $100.

MORE September 28, 2012 David Henderson In my August 26 post, "U.Federal Budget Cuts in the 1990s," I pointed out that U.

MORE September 20, 2012 Garett Jones Eli Dourado has a great post on whether we can believe we're still in the short run (see Bryan's critique here).Along the way, Dourado calls into question the sticky debt channel, correctly noting that according to official estimates, household.MORE September 19, 2012 Bryan Caplan My friend and former student Eli Dourado has gotten a lot of attention for his recent post, "The Short-Run Is Short."Key passage:Around 40 percent of the unemployed have been unemployed for six months or longer.

MORE September 18, 2012 Garett Jones I'm still shocked at the speed with which bipartisan elites coalesced around TARP.A key reason: The proffered alternatives were incredibly painful.No bailouts would have meant bankruptcies much bigger and more complicated than Lehman--and that bankruptcy ostensibly threatened short.MORE September 17, 2012 Garett Jones Mian and Sufi (who showed that cash for clunkers failed) have written a batch of papers on leverage and the financial crisis.

This one may be my favorite: They check to see whether counties with the highest leverage before the crisis.MORE September 13, 2012 Bryan Caplan Garett Jones is one of the most Sumnerian macroeconomists I know.But he's not Sumnerian enough for Sumner.Sumner channels Matt Yglesias to question the importance of Garett's debt deflation mechanism (or to be more precise, debt less-than-expected-inflation mechanism):Debt prices.MORE September 11, 2012 Garett Jones Economists tell a lot of stories about how a fall in dollar spending can hurt the real economy.

And we should be forced to tell these stories--we shouldn't take it for granted that a fall in spending causes a fall.MORE August 23, 2012 Arnold Kling He talks with Russ Roberts.

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business cycles, productivity, measured either as total factor productivity or labor productivity--output per hour or output per worker--typically falls significantly during substantial recessions such as those in the 1970s.

MORE August 12, 2012 David Henderson When I'm at my cottage in Canada, as I am now, I do a lot of reading.I just finished Robert Caro's new book, The Years of Lyndon Johnson: The Passage of Power How to buy a macro economics presentation 2 days British Business Master's.I just finished Robert Caro's new book, The Years of Lyndon Johnson: The Passage of Power.

MORE August 10, 2012 David Henderson In a recent e-mail alerting me to an important 2011 piece by Alan Greenspan that I somehow had missed ("Activism," International Finance 14:1, 2011: pp.165-182), Jeff Hummel writes the following: One of the unusual features of the current recession.

MORE August 7, 2012 Bryan Caplan A question for economists of all factions:What would you call a "helicopter drop" of cash: "monetary policy" or "fiscal policy"?Please explain your answer 24 Jan 2017 - He also runs the Alpha Sources Blog. Economics and financial markets are Claus' passion and you'll likely find his ideas presented through his content on Alpha Sources interesting and insightful. He also happens to write fiction as well, which you can also find on his blog. Focus topics: Macroeconomics  .MORE August 7, 2012 Bryan Caplan A question for economists of all factions:What would you call a "helicopter drop" of cash: "monetary policy" or "fiscal policy"?Please explain your answer.MORE Arnold Kling About four years ago, I described myself as an Austro-Keynesian.Recently, I have been asked about that concept.One way to put it is that I accept and reject some major tenets of each camp.MORE August 4, 2012 Arnold Kling Evan Soltas writes, A disparaging but not unfair comparison would be to little orphan Annie."The sun'll come out tomorrow," Annie sang."Bet your bottom dollar that tomorrow there'll be sun." The 3-to-4 percent recovery growth we've been long promising.MORE August 3, 2012 Arnold Kling Steve Randy Waldman writes, Idle unemployment is a problem in societies that are highly productive but very unequal.

Here basic goods (food, clothing) can be produced efficiently by the wealthy via capital-intensive production processes.MORE July 27, 2012 Arnold Kling It is called Misunderstanding Financial Crises, a title that may be unintentionally ironic.As you probably know, Gorton is famous for treating the crisis as a "run on the shadow banking system" that had very little real basis.MORE July 20, 2012 Arnold Kling Bryan has one angle.In this video, Thiel confronts Google CEO Eric Schmidt over the issue of Google's cash hoard.If you have $50 billion in low-yielding investments, are you not more of a bank than a.MORE July 19, 2012 Arnold Kling He writes, Hurst notes that fewer and fewer Americans with a high school education or less are finding employment in manufacturing.

This is a trend that accelerated in the late 1990s.Some of those lost jobs resulted in twentysomethings exiting.MORE July 12, 2012 Arnold Kling from Timothy Taylor.Behind Hornbeck's estimates seems to me a deeper pattern of human behavior.When confronted with difficulties, leaving to try somewhere else is hard, but do-able.

Staying and continuing with the same behavior is unpleasant, but do-able.MORE July 10, 2012 Arnold Kling George Selgin writes, U.NGDP was restored to its pre-crisis level over two years ago.

Since then both its actual and its forecast growth rate have been hovering relatively steadily around 5 percent, or about two percentage points below the.MORE July 9, 2012 Arnold Kling The Washington Post has the story, but buries the lede.The pharmaceutical industry once was a haven for biologists and chemists who did not go into academia.Well-paying, stable research jobs were plentiful in the Northeast, the San Francisco Bay.MORE Bryan Caplan Daniel Kahneman's view of the 2008 crash is eerily similar to my own:Many people now say they knew a financial crisis was coming, but they didn't really.

After a crisis we tell ourselves we understand why it happened and maintain.MORE July 6, 2012 Arnold Kling Mark Thoma gives us Tim Duy: What was more important in holding the economy close to potential output, residential construction itself, or the housing price bubble? I tend to believe the price-driven balance sheet effects were driving dynamics over this.MORE June 30, 2012 Arnold Kling Timothy Taylor has written one of his bests posts.He writes, Through much of the 1990s, the ratio of owner's equity to GDP fell, but in the early 1990s, that was partly a result of depressed regional real estate markets.MORE June 27, 2012 Arnold Kling Don Peck writes, Today, American companies facing weak demand typically lay off workers, even though that decision can be costly down the road (rehiring and training are expensive).

A work-sharing program would allow companies to instead make temporary, across-the-board reductions.MORE June 18, 2012 David Henderson Paul Krugman writes: I've been writing about how macroeconomic reality under Ronald Reagan didn't actually match the myth, and many people are inevitably upset.And one of the things they tend to bring up is the hoary old myth that.MORE June 14, 2012 Arnold Kling Two papers on Milton Friedman's monetarism (both in the same pdf), one from Jerry Jordan and one from Allan Meltzer.

They come from a 2010 symposium sponsored by the LIberty Fund and the Pacific Research Institute, and they are reproduced.

MORE May 31, 2012 Arnold Kling Simon Wren-Lewis writes, I do not think targeting nominal GDP means that the monetary authorities can achieve that target at all points in time.The main way I think it overcomes the zero lower bound (ZLB) for nominal interest rates.MORE May 1, 2012 Arnold Kling The Kindle sample for Robert Hetzel's The Great Recession.I will probably buy the book, but its exorbitant price strikes me as profoundly unfair.If you are interested in the book, then I recommend my Million Mutinies series (continues here.

MORE April 29, 2012 Arnold Kling He is one of my favorite economists.He is only guest-blogging now, for Megan McArdle.I had stopped reading her blog while others were substituting, but Garett is a must-read.Still, his posts could use a bit of refinement, which.MORE April 19, 2012 Arnold Kling Russ Roberts pointed me to an essay from last year, by Edmund Phelps.

The bond market will see that, in the long run, the pile-up of government debt - and any pile-up of entitlements - will make things much worse.MORE April 16, 2012 Arnold Kling Mark Thoma has the story, from Volker Wieland and Maik Wolters.Basically, the forecasts made in the latter part of 2008 failed to anticipate the severity of the recession.Here are some implications that come to mind: 1.MORE Arnold Kling The latest essay in my "million mutinies" series says, For mainstream economists, the financial crisis has produced a new intuitive model of the economy which has yet to be articulated in any formal theory.MORE April 5, 2012 Arnold Kling From a new paper by Steven R.When decision makers face the unappealing task of revealing unsuccessful outcomes that impact their reputations, delay may be their first instinct.MORE March 31, 2012 Arnold Kling Recent issues of some journals from de Gruyter publishers, including Capitalism and Society, which published a paper of mine on PSST.MORE March 28, 2012 Arnold Kling I outsource my comments to Scott Sumner.The Fed is unwilling to provide enough monetary stimulus.OK, now what is the point of this paper? Is this to train our future econ PhD students? Are we.MORE March 24, 2012 Arnold Kling Timothy Taylor writes, The claim isn't that leverage cycles explain all recessions, but rather that they can help explain why some recessions--often those that also include a financial crash--can turn out to be so severe.The original version expressed a trade-off in terms of the level of inflation vs.From about 1953-1968, the trade-off was approximately: inflation + unemployment = 7 percent.

MORE March 20, 2012 Arnold Kling Recently, bloggers have been talking about potential output or potential GDP.I find the discussion to be frequently misleading.For example, Mark Thoma quotes Tim Duy: If we claim the economic potential of the nation has declined - that in.

MORE March 14, 2012 Arnold Kling My latest essay: We have accumulated more than six decades of macroeconomic experience since the end of World War II, yet neither stubborn Keynesians nor stubborn monetarists have encountered any data that would make them change their minds.MORE March 13, 2012 Arnold Kling A reader who remembers this essay suggested this chart: I lifted the chart from Barry Ritholtz, who in turn lifted it from paper by David Andolfatto and Marcela M.I think that the evidence for structural change as a.

MORE March 8, 2012 Arnold Kling A Panel of Expert Economists was asked whether they agreed with: Because the U.Treasury bailed out and backstopped banks (by injecting equity into them in late 2008, and later committing to provide public capital to any banks that failed.MORE March 7, 2012 Arnold Kling Timothy Taylor writes, We need a convincing theory of this third kind of unemployment--sluggish unemployment, tar-pit unemployment--and an associated sense of what policies are useful for addressing it.

Firms as a group have high profits and strong cash reserves, but.

MORE March 6, 2012 Arnold Kling He writes, The immediate problem was a huge shortfall of demand, as the private sector moved from large financial deficit to large financial surplus.You have the basic identity that (S-I) + (T-G) = (X-M).MORE February 21, 2012 Arnold Kling Bryan responds to my question.

Scott Sumner also responded in the comments on my original post.My question is how to reconcile low employment with low unit labor costs.Presumably, low unit labor costs would cause labor demand to be.MORE February 18, 2012 Arnold Kling Mainstream macro in the 1970s (which a lot of people seem to have gone back to) held that there was a NAIRU, meaning the non-accelerating inflation rate of unemployment.If unemployment was above that, inflation would fall.

MORE February 16, 2012 Arnold Kling He asks, Assume I am an individual household or small firm, and that I have perfectly flexible prices.How am I affected if all the other households and firms around me have sticky prices, and there is a monetary shock.MORE Arnold Kling This week's IGM forum is on whether the stimulus produced more jobs.Most of the panelists agree that it did.

I wonder how many of the panelists are familiar with the Bradford Hill Criteria for making inferences based on observational.MORE February 13, 2012 Arnold Kling Atif Mian and Amir Sufi write, The aggregate demand channel for unemployment predicts that employment losses in the non-tradable sector are higher in high leverage U.counties that were most severely impacted by the balance sheet shock, while losses in.MORE February 10, 2012 Arnold Kling Tyler Cowen writes, There is still not enough talk of wealth effects in current macro debates, as they are invoked only selectively.

Scott Sumner writes, I'm missing something blindingly obvious, as Jim Bullard, David Andolfatto and Tyler Cowen (who also.MORE February 5, 2012 Arnold Kling John Cochrane writes, I ran across a fascinating article, "A Post-Mortem on Transition Predictions of National Product," in the 1946 Journal of Political Economy, by Lawrence Klein.Klein, who would go on to create the main macroeconomic forecasting models and.MORE February 3, 2012 Arnold Kling The Adam Smith Institute has just released a paper of mine on patterns of sustainable specialization and trade.An excerpt: The PSST approach drops the assumption that production technology is known.

Instead, the Smithian division of labour and Ricardian comparative.MORE February 2, 2012 Arnold Kling in the WSJ European edition.Unfortunately, the patterns of specialization and trade that had emerged five years ago were not sustainable.Many jobs in home construction, durable-goods manufacturing and distribution, and mortgage finance were dependent on housing markets with ever-rising.MORE January 27, 2012 Arnold Kling Bryan focuses our disagreement: when 10% of the workers in an occupation lose their jobs, or 5% of firms in an industry go out of business, continuity isn't merely a convenient assumption.

MORE Bryan Caplan Arnold writes:So, if the demand for mortgages collapses, all it takes to get back to 2006 levels is for mortgage underwriters to take a 20 percent pay cut? In a world with no discontinuities, we would not get crazy subprime.MORE January 26, 2012 Arnold Kling Bryan writes, (c) Workers continue to be employed at their old job for 5, 10, or 20% lower wages until an entrepreneur makes (b) happen.So, if the demand for mortgages collapses, all it takes to get back to 2006.

MORE Bryan Caplan Arnold writes:Suppose that a bunch of mortgage underwriters get laid off.There are two possible full employment equilibria.(a) They can be instantly employed as dishwashers at 20 cents an hour.(b)They can be employed as health insurance claims processors.MORE Bryan Caplan Arnold tells us:The PSST story is equally consistent with a correlation between employment and nominal GDP.

It just interprets the causality as running the other way.If a bunch of workers are laid off, for whatever reason, nominal GDP will.MORE January 25, 2012 Arnold Kling Bryan asks, without nominal rigidities, why doesn't the PSST model specifically predict that prices will adjust to restore full employment? Suppose that a bunch of mortgage underwriters get laid off.There are two possible full employment equilibria.MORE Arnold Kling The ratio of nominal GDP to employment is NGDP/L, where L is the level of employment.This can be decomposed into: NGDP/L = (NGDP/RGDP) x (RGDP/L) = the GDP deflator x productivity As long as inflation and productivity growth are.MORE January 23, 2012 Bryan Caplan In 2009, I bet John Quiggin that Europe's unemployment would average at least 1.5 percentage-points higher than the United States over the following decade.

Quiggin's update:Until now, I've been consistently ahead.

EU-15 and US unemployment rates were very close during.MORE January 17, 2012 Arnold Kling I am going to try to stick to substance, and not do name-calling.But I think I am articulating a model that is in the spirit of Keynes, which probably puts me on the Brad DeLong and Paul Krugman side.MORE January 14, 2012 Bryan Caplan Gross Domestic Product is staunchly atheoretical.If someone spends money on X, X is GDP - even if "someone" is Congress, and X="a bridge to nowhere.

"There are exceptions; most notably, the stats supposedly exclude "intermediate goods" to avoid double.MORE January 13, 2012 Arnold Kling Nick Rowe writes, Negative AD shocks will do harm to PSST, but positive AD shocks cannot do good to PSST.

Never let a serious crisis go to waste how neoliberalism survived nbsp

The issue of asymmetry in macroeconomic phenomena is important.I would speculate that in a modern economy the process of.MORE January 12, 2012 Arnold Kling Walter Kurtz writes, Credit Suisse defines structurally impaired sectors to "include real estate related industries, finance, manufacturing, and the state and local government sector History of macroeconomic thought Wikipedia.

MORE January 12, 2012 Arnold Kling Walter Kurtz writes, Credit Suisse defines structurally impaired sectors to "include real estate related industries, finance, manufacturing, and the state and local government sector.

" These are the sectors that at least in part rode the "bubble" economy wave.MORE January 4, 2012 David Henderson Messieur one of the first "mathematical economists," who chose the title Elements of Pure Economics for his 1874 you wonder what is "pure" economics? It's not an epithet, like pure baloney .MORE January 4, 2012 David Henderson Messieur one of the first "mathematical economists," who chose the title Elements of Pure Economics for his 1874 you wonder what is "pure" economics? It's not an epithet, like pure baloney.MORE December 31, 2011 Bryan Caplan With this, Matt Yglesias instantly enters my sadly short list of good Keynesians:The depressing truth is that the easiest way to bring good, high-paying manufacturing jobs back to America is to make them less good and less goodness: T he reality.

MORE Arnold Kling James Hamilton writes, My suggestion is that America should try to return to what some scholars maintain was the original source of America's success, which came from using North America's abundant natural resources as a basis for a competitive advantage.MORE December 29, 2011 Arnold Kling The Economist writes, They have thrived on the back of massive disillusion with mainstream economics, which held that the economy would grow steadily if central banks kept inflation low and stable, and that there were no great gains in the.MORE December 28, 2011 David Henderson Backhouse and Bateman argue, as the book's title implies, that although Keynes wanted a substantial amount of government intervention, he did believe in preserving large elements of capitalism.This part of the book is somewhat persuasive, although their discussion of.MORE December 23, 2011 Arnold Kling Scott Sumner writes, Now here's one of the most striking facts about US business cycles.

When the unemployment rate does rise by more than 0.MORE December 21, 2011 Arnold Kling He speaks for me when he writes, The institutional fact that makes a liquidity trap an irrelevant academic construct is the unlimited ability of the central bank to create money.One can make this point in an irrefutable manner by.

MORE December 19, 2011 Bryan Caplan Volume 2: Macroeconomics of Grady Klein and Yoram Bauman's Cartoon Introduction to Economics ships this week - a great last-minute stocking stuffer.Volume 1 was good (see here and here); volume 2 is better.Chapter 2 ("Unemployment") does a swell.MORE December 17, 2011 Arnold Kling Bryan writes, Unemployment is just a labor surplus; since wages are the price of labor, the fundamental cause of unemployment has to be excessive wages.Nick Rowe writes, The only way to increase output in a demand-constrained economy is to.

MORE December 15, 2011 Arnold Kling Stiglitz writes, At the beginning of the Depression, more than a fifth of all Americans worked on farms.Between 1929 and 1932, these people saw their incomes cut by somewhere between one-third and two-thirds, compounding problems that farmers had faced.MORE Bryan Caplan When Keynesians want to gloat, they often point to the overwhelming empirical evidence in favor of nominal wage rigidity.For the latest example, see Krugman on the Irish labor market.MORE December 12, 2011 Arnold Kling In the latest issue of Capitalism and Society.I wrote one of the papers, and then Peter Howitt wrote a comment.I recommend both of them, although personally I find Howitt's paper more interesting, because I already knew what I.MORE December 11, 2011 David Henderson I've been busy in the last week with end-of-quarter classes and two speeches, the latter of which I'll report on today or tomorrow.

Which is why I hadn't replied to Jeff Sommer's criticism of me in the New York Times.MORE December 8, 2011 David Henderson On Tuesday, I posted my notes from John Cochrane's December 3 talk at Hoover.When he saw my notes, John sent me his talk and gave me permission to reprint it.Comments at "Restoring Robust Economic Growth.

MORE December 7, 2011 David Henderson How important is the work of Friedrich Hayek in 20th-century economic thought? David Warsh has written an excessively nasty piece on that, which doesn't mean it contains no kernels of truth.Alex Tabarrok has written a defense of Hayek which.MORE December 6, 2011 David Henderson At his Friday talk at Hoover, University of Chicago economist John Cochrane went a mile a minute to try to fit a lot into 10 minutes.He succeeded and the talk was outstanding.

MORE December 2, 2011 Arnold Kling He writes, If I understand the news coming out of Europe correctly, the new head of the European Central Bank is offering a simple deal: If fiscal policy becomes hawkish, monetary policy will be dovish.MORE Arnold Kling Here are some data on job losses in each recession since 1970 (I grouped together the two recessions in 1980-1982).I look at total losses in nonfarm payroll employment and losses in employment in the durable goods sector.MORE November 24, 2011 Arnold Kling Michael Mandel writes, real state and local government output, as measured by the BEA, has been effectively flat since 2001.To put it a different way, the stagnation at the state and local government level started way before the 2007.MORE November 23, 2011 Arnold Kling Interviewed by Phil Bowermaster here.I elaborate on my thesis that the Great Depression was a major transition and that we currently are undergoing another major transition.MORE November 22, 2011 Arnold Kling Tyler Cowen comments, drawing a response from Bryan.

I just don't think that the fraction of the healthy adult population with ZMP has risen much since the last time unemployment was 5%.Here is where the term sustainable in patterns.MORE Bryan Caplan Tyler makes some thoughtful points on ZMP.There has been plenty of evidence for "labor hoarding"; oddly, once the ZMP workers start actually being fired, the concept suddenly becomes controversial.

The simple insight is that firms don't hoard so.MORE November 20, 2011 Arnold Kling An economist who attended a business conference told me that the trucking industry is doing well (probably a sign that the economy overall is improving).However, industry experts foresee a shortage of drivers next year.MORE November 19, 2011 Arnold Kling Atif Mian and Amir Sufi write, If weak household balance sheets are responsible for a large share of job cuts, we expected losses in non-tradable industries to be much larger in U.

counties with weak household balance sheets.MORE November 18, 2011 Arnold Kling His post is here.I would say that there is a decent probability that he is correct.

However, below are some potential counter-arguments.On the point that past forecasts of technological unemployment have been.MORE November 17, 2011 Arnold Kling As you may know, I have been recording chalk-talks for my high school economics class.I did macro first, and now I am working on micro (I am now quite a few lectures ahead of where we are currently in.

MORE Bryan Caplan My brilliant former student Eli Dourado wonders why I'm so hostile to the Zero Marginal Productivity (ZMP) theory of high unemployment:It is hard to think of another idea that is more Caplanian.MORE November 15, 2011 Arnold Kling The broadest measure of employee compensation is called the employment cost index.It includes the cost of benefits, such as health insurance.It is available quarterly, starting in the first quarter of 2001.

MORE Arnold Kling A while back, Scott Sumner wrote, The BLS doesn't claim housing prices fell 7.7% since mid-2006, they claim they rose by 7.BLS is the Bureau of Labor Statistics, the custodians of the.MORE Bryan Caplan In my last reply to Arnold, I asked for a "Guide to Discontinuity/ZMP for Skeptics."Arnold's response:The main evidence that I cite against the AD/AS story is the length of unemployment spells and the large number of workers who are.MORE Arnold Kling Mike Konczal writes, Every age group has seen a substantial drop in the employment-population ratio during this Lesser Depression, but no other group I've seen comes close to this plummet.

For the first time in half a century, a majority.MORE Arnold Kling Bryan writes, What's the best available "Guide to Discontinuity/ZMP for Skeptics"? Non-economists have always been quick to believe stories about technological unemployment.Economists have been ridiculing this popular fear for centuries.What happened in the last three years that ought.

MORE Bryan Caplan My last post critiqued Arnold's PSST ("patterns of sustainable specialization and trade") alternative to the conventional aggregate supply/aggregate demand model:In Arnold's story, firms and workers violate the First Law of Wing Walking: Never let hold of what you've got until.

MORE November 14, 2011 Arnold Kling Bryan writes then when technological change occurs, we should observe Cut wages in existing industries drastically enough to keep firms afloat and workers fully employed.Mathematically, it assumes continuous functions.MORE Bryan Caplan For the last couple of years, Arnold has been energetically promoting a macroeconomic alternative to the standard AS-AD model.

He calls it PSST - "patterns of sustainable specialization and trade": I focus on patterns of trade to try to avoid.MORE November 10, 2011 Arnold Kling That is about all that is left to say about the European situation.Clive Crook writes, the only sane choice is to accept the logic of the currency union they created and the obligations that go with it.MORE November 6, 2011 Arnold Kling From Ed Glaeser.

Unemployment represents a crisis of imagination, a failure to figure out how to make potential workers productive in the modern economy.That might be a one-sentence articulation of PSST.The challenge is to find the comparative advantage.MORE October 31, 2011 Bryan Caplan Yesterday, while reviewing my tax withholdings, I noticed a weird anomaly.In 2011, for the first time in my life, my employer was paying more Social Security taxes than I was.

I furrowed my brow until I remembered this earlier.MORE October 30, 2011 Arnold Kling He writes, When an economy is not healthy, there is less exchange.There is less buying and selling of goods and services and labor.To describe that unhealthiness as less aggregate demand is just to put the problem into different.MORE October 23, 2011 Arnold Kling I am not a fan of textbook macroeconomics.

But it is a marvel of logical consistency when compared with the macroeconomics that you get from journalists.From the perspective of a macroeconomic textbook, journalists write as if the aggregate supply.MORE October 22, 2011 Arnold Kling He writes, There are no solid theoretical foundations for price level theory in a modern economy where hedonics is very important.It's not just that we're not good at measuring price changes for computers and consulting services; it's not even.MORE October 21, 2011 Arnold Kling Citing work by his colleagues, David Andolfatto writes, the collapse of the construction sector accounts for 46.

9% of the decline in total employment (roughly 3.I found an ungated version of the John Haltiwanger paper first spotted by Mark Thoma and then praised by Tyler Cowen.Some excerpts and my comments are below the fold.

Brian Arthur has a piece on the digital.MORE October 15, 2011 Arnold Kling Russ Roberts continues to engage with Tyler Cowen on whether there has been stagnation.A lot of the argument is over what has happened to the median worker.MORE October 14, 2011 David Henderson Pardon me for coming late to this discussion.I've been sitting on airplanes this week but am now back.Russ Roberts recently wrote: The evidence for the Keynesian worldview is very mixed.Most economists come down in favor or against.

MORE October 13, 2011 Arnold Kling Some thoughts, beyond my reaction of "eh.Since their work became widely circulated, one can argue plausibly that 99 percent of all macroeconomics papers published, dissertations completed, and tenure decisions awarded have been in the mold of Sargent, Sims,.MORE October 11, 2011 Top Economics & Finance Blogs of 2017 As 2017 kicks off, we've put together a list of 101 economics and finance blogs that you might want to add to your RSS feeds and browser's bookmarks this year, if you haven't already.

The list was compiled by the FocusEconomics Insights Blog with the help of the FocusEconomics team of economists.

The criteria for inclusion in the list was simply that they had to have regularly blogged in 2016 and that they needed to be English-language blogs.In the future we hope to be able to compile a list of foreign-language blogs.In this list, there are economics blogs from the Keynsian school to the Chicago school to the Austrian school and everything in between.We've included blogs on microeconomics, macroeconomics, health economics, sports economics and even water economics. Politics and public policy are common themes in many of these blogs as the impact of politics and policy plays an important role in economics of all kinds.

Let's also not forget the intersection between economics and finance.There are some purely finance and investment related blogs in this list as well as blogs that do a bit of it all.As you read through this list, you may be asking where all of the big established media blogs are. Where are Krugman, the Economist blogs and the WSJ's Real Time Economics? Although, we do recommend you read some of those blogs, with this list we tried to put together an eclectic mix of blogs from individuals and institutions that you may not have heard of. We believe this list should provide a wealth of choices, presenting perspectives from different ends of the economics and finance blogosphere.

It is important not to get stuck in an echo chamber, listening and reading the same things over and over again without understanding other perspectives.Therefore, some of the blogs on this list are contrarian in nature and even in some cases highly controversial.We don't necessarily endorse all of the bloggers's viewpoints, however we do acknowledge that there are two sides (or more) to every coin.With that said, we can dive into FocusEconomics' Top Economics and Finance Blogs of 2017 listed in no particular order (actually they are listed in alphabetical order, but just because it seemed easier).Be sure to scroll down and have a look at all of the blogs.

If you're short on time, each blog has a bolded section with the "Focus topics" listed underneath the write-up that should help to identify what each blog is generally about quickly and easily.image?" ":s,l=a(""),v=a(""+d+"");if("image"===t.attr("data-nav-flyout-full-width","1"),t.push("nav-image-abs-right"),t "absolute-right" &&g.