- David Andolfatto: Ron Paul's Comments on Bernanke's Press Conference
- links for 2011-04-29
- "What I Learned in Econ Grad School"
- Did Keynes Support Having a "Central Plan"
- Don't Let Fiscal Policymakers Off the Hook
- DeLong: Economics in Crisis
Posted: 30 Apr 2011 12:33 AM PDT
David Andolfatto continues his battle with Ron Paul and his supporters:
Posted: 29 Apr 2011 10:04 PM PDT
Posted: 29 Apr 2011 04:32 PM PDT
Posted: 29 Apr 2011 04:23 PM PDT
Posted: 29 Apr 2011 12:33 PM PDT
The recent focus on Ben Bernanke and the Fed, in particular what more could be done to help the economy and the unemployed, takes the pressure off of fiscal policymakers. But Congress also bears as much responsibility, or more in my view, for the slow recovery and the sorry state of the employment picture.
Fiscal policy was far from aggressive enough -- at best it offset declines at the state and local level leaving the net effect near zero -- yet people express surprise it wasn't able to do more. It was also too small, way too late, and it was not persistent enough. Declines in stimulus spending as the program ends are holding back economic growth at a time when fiscal policy ought to be aiding, not stalling the recovery.
Our long-run budget problem is mostly a health care cost problem, and we do need to fix this. If we address the health care cost problem, the picture improves and any worry about bond vigalantes showing up in the future mostly goes away. If we don't adress health care costs, the long-run budget remains problematic no matter what else we do. Given that reality, there is plenty of time, plenty of room, and plenty of need for more help from fiscal policy. This was always a battle that needed to be fought on multiple policy fronts, neither monetary nor fiscal policy alone, or perhaps even in combination, was going to be enough. We needed both monetary and fiscal policy to respond aggressively, and to continue to respond as long as needed, but both have fallen short and there is no sign of monetary and fiscal policymakers moving to make up lost ground.
Monetary policymakers are feeling the heat right now, at least I hope they are, but don't forget about fiscal policymakers -- they too deserve to be on the hot seat. I understand that with all the talk of austerity, the chances of more help from fiscal policy without some huge change in the outlook is next to zero. But maybe, just maybe, we can stop Congress and the president from repeating the mistakes of the past (and present in Europe) by moving to balance the budget before the economy can handle it? I'm hoping we can avoid premature austerity -- that will hurt, not help employment -- but I'm not counting on it. </rant, for now anyway>
Update: From the CBPP:
Posted: 29 Apr 2011 09:18 AM PDT
Brad DeLong on what is (and should be ) taught in economics programs:
Economics in Crisis, by J. Bradford DeLong, Commentary, Project Syndicate: The most interesting moment at a recent conference held in Bretton Woods, New Hampshire ... came when Financial Times columnist Martin Wolf quizzed ... Larry Summers... "[Doesn't] what has happened in the past few years," Wolf asked, "simply suggest that [academic] economists did not understand what was going on?"
Here is the most interesting part of Summers' long answer: "There is a lot in [Walter] Bagehot that is about the crisis we just went through. There is more in [Hyman] Minsky, and perhaps more still in [Charles] Kindleberger." That may sound obscure to a non-economist, but it was a devastating indictment. ... Summers then enlarged his answer to include living economists: "Eichengreen, Akerlof, Shiller, many, many others." ...
For Summers, the problem is that there is so much that is "distracting, confusing, and problem-denying in…the first year course in most PhD programs." As a result, even though "economics knows a fair amount," it "has forgotten a fair amount that is relevant, and it has been distracted by an enormous amount."
I think that Summers' judgments are fair and correct. ... "We need to change our hiring patterns," I expected to hear economics departments around the world say in the wake of the crisis.
The fact is that we need fewer efficient-markets theorists and more people who work on microstructure, limits to arbitrage, and cognitive biases. We need fewer equilibrium business-cycle theorists and more old-fashioned Keynesians and monetarists. We need more monetary historians and historians of economic thought and fewer model-builders. We need more Eichengreens, Shillers, Akerlofs, Reinharts, and Rogoffs – not to mention a Kindleberger, Minsky, or Bagehot.
Yet that is not what economics departments are saying nowadays. ...
[My response to Summers' talk was a post called Re-Kindleberger.]
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