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March 21, 2014

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Latest Posts from Economist's View


Paul Krugman: The Timidity Trap

Posted: 21 Mar 2014 12:24 AM PDT

When policymakers are overly cautious, it can backfire:

The Timidity Trap, by Paul Krugman, Commentary, NY Times: There don't seem to be any major economic crises underway right this moment, and policy makers in many places are patting themselves on the back. ...
Unfortunately, that ... just goes to show how accustomed we've grown to terrible economic conditions. We're doing worse than anyone could have imagined a few years ago, yet people seem increasingly to be accepting this miserable situation as the new normal.
How did this happen? ... I'd argue that an important source of failure was what I've taken to calling the timidity trap — the consistent tendency of policy makers who have the right ideas in principle to go for half-measures in practice, and the way this timidity ends up backfiring, politically and even economically.
In other words, Yeats had it right: the best lack all conviction, while the worst are full of passionate intensity.
About the worst: If you've been following economic debates these past few years, you know that both America and Europe have powerful pain caucuses — influential groups fiercely opposed to any policy that might put the unemployed back to work. There are some important differences between the U.S. and European pain caucuses, but both now have truly impressive track records of being always wrong, never in doubt. ...
So what has been the response of the good guys?
For there are good guys out there... But these good guys never seem willing to go all-in on their beliefs.
The classic example is the Obama stimulus, which was obviously underpowered... Some of us warned right from the beginning that the plan would be inadequate — and that because it was being oversold, the persistence of high unemployment would end up discrediting the whole idea of stimulus in the public mind. And so it proved.
What's not as well known is that the Fed has, in its own way, done the same thing. From the start, monetary officials ruled out the kinds of monetary policies most likely to work — in particular, anything that might signal a willingness to tolerate somewhat higher inflation, at least temporarily. As a result, the policies ... have fallen short of hopes, and ended up leaving the impression that nothing much can be done. ...
You might ask why the good guys have been so timid, the bad guys so self-confident. I suspect that the answer has a lot to do with class interests. But that will have to be a subject for another column.

Links for 3-21-14

Posted: 21 Mar 2014 12:03 AM PDT

A Break

Posted: 20 Mar 2014 03:13 PM PDT

Yahoo! The quarter is over. No more teaching for 18 months (except for a summer class at UT Austin).

'Capital Ownership and Inequality'

Posted: 20 Mar 2014 11:27 AM PDT

Atif Mian and Amir Sufi follow up on something noted here a few days ago:

Capital Ownership and Inequality, by Atif Mian and Amir Sufi: Lots of interesting and thought-provoking reactions to our post yesterday on how the gains in U.S. productivity are shared.
One aspect of the debate that is often over-looked is the concentration of financial asset holdings in the U.S. economy. Who owns financial assets such as stocks and bonds in corporations tells us who has a direct claim to the income generated by capital. Here is the distribution of financial asset holdings across the wealth distribution. This is from the 2010 Survey of Consumer Finances:

Houseofdebt_20140319_12

The top 20% of the wealth distribution holds over 85% of the financial assets in the economy. So it is clear that the direct income from capital goes to the wealthiest American households. ...
There is ... the question of incorporating housing wealth in the graph above. How should we think about housing which is more broadly held? But it's important to have the basic facts established to begin the debate. If you think the above chart is misleading or incorrect in some way, we are happy to hear why. ...

Turning Their Backs on the Unemployed

Posted: 20 Mar 2014 10:11 AM PDT

The Fed:

Fiscal policy is restraining economic growth

Congress, implicitly:

We don't care

Maximizing the fortunes of the wealthy backers of political campaigns -- e.g. cutting their taxes so they don't have to pay for programs that help "those people" after the financial wizards on Wall Street cause the economy to crash -- is not the same as maximizing economic growth and employment. The wealthy think it's the same -- in their minds they are the job creators, what's good for the wealthy is good for America! -- but it's not.

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