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October 3, 2014

Latest Posts from Economist's View

Latest Posts from Economist's View


Paul Krugman: Depression Denial Syndrome

Posted: 03 Oct 2014 12:24 AM PDT

What is the price for getting it wrong?:

Depression Denial Syndrome, by Paul Krugman, Commentary, NY Times: Last week, Bill Gross, the so-called bond king, abruptly left Pimco, the investment firm he had managed for decades. People who follow the financial industry were shocked but not exactly surprised; tales of internal troubles at Pimco had been all over the papers. But why should you care?
The answer is that Mr. Gross's fall is a symptom of a malady that continues to afflict major decision-makers, public and private. Call it depression denial syndrome: the refusal to acknowledge that the rules are different in a persistently depressed economy. ...
Now, we normally think of deficits as a bad thing — government borrowing competes with private borrowing, driving up interest rates, hurting investment... But, since 2008, we have ... been stuck in a liquidity trap... In this situation,... deficits needn't cause interest rates to rise. ...
All this may sound strange and counterintuitive, but it's what basic macroeconomic analysis tells you. ... But many, perhaps most, influential people in the alleged real world refused to believe...
Which brings me back to Mr. Gross.
For a time, Pimco — where Paul McCulley, a managing director at the time, was one of the leading voices explaining the logic of the liquidity trap — seemed admirably calm about deficits, and did very well as a result. ...
Then something changed. Mr. McCulley left Pimco at the end of 2010..., and Mr. Gross joined the deficit hysterics, declaring that low interest rates were "robbing" investors and selling off all his holdings of U.S. debt. In particular, he predicted a spike in interest rates when the Fed ended a program of debt purchases in June 2011. He was completely wrong, and neither he nor Pimco ever recovered.
So is this an edifying tale in which bad ideas were proved wrong by experience, people's eyes were opened, and truth prevailed? Sorry, no. In fact, it's very hard to find any examples of people who have changed their minds. People who were predicting soaring inflation and interest rates five years ago are still predicting soaring inflation and interest rates today, vigorously rejecting any suggestion that they should reconsider their views in light of experience.
And that's what makes the Bill Gross story interesting. He's pretty much the only major deficit hysteric to pay a price for getting it wrong (even though he remains, of course, immensely rich). Pimco has taken a hit, but everywhere else the reign of error continues undisturbed.

Thinking the Unthinkable: The Effects of a Money-Financed Fiscal Stimulus

Posted: 03 Oct 2014 12:15 AM PDT

Jordi Gali:

Thinking the Unthinkable: The Effects of a Money-Financed Fiscal Stimulus, by Jordi GalĂ­, Vox EU: Many unconventional policies adopted by central banks in response to the Crisis failed to boost the economy. This column discusses the effects of a temporary money-financed fiscal stimulus. When a more realistic model is allowed, such a stimulus can have a strong effect on output and employment, and a mild effect on inflation. 

He ends with:

The time may have come to leave old prejudices behind and come to terms with the urgent need to increase aggregate demand in a more foolproof way than tried up to now, especially in the Eurozone. The option of a money-financed fiscal stimulus should be considered seriously.

Links for 10-03-14

Posted: 03 Oct 2014 12:06 AM PDT

Is Blogging or Tweeting about Research Papers Worth It?

Posted: 02 Oct 2014 09:02 AM PDT

Via the Lindau blog:

The verdict: is blogging or tweeting about research papers worth it?, by Melissa Terras: Eager to find out what impact blogging and social media could have on the dissemination of her work, Melissa Terras took all of her academic research, including papers that have been available online for years, to the web and found that her audience responded with a huge leap in interest...

Just one quick note. This is what happened when one person started promoting her research through social media. If everyone does it, and there is much more competition for eyeballs, the results might differ.

Why is our Infant Mortality so Bad?

Posted: 02 Oct 2014 08:50 AM PDT

Aaron Carroll:

So why is our infant mortality so bad?: ...Everyone knows that in international comparisons, the infant mortality rate in the US is terrible. Some people think it's because we code things differently and try harder to save premature babies. Others think that's not true, and that this points to other problems in the health care system.
As always, though, it's probably a mixture of many things. A new NBER working paper gets at just that. "Why is Infant Mortality Higher in the US than in Europe?" ... What did they find?
Reporting differences ... explained up to 40% of the disadvantage in US infant mortality. But that would only get us closer. It would still leave us way worse. ... What accounted for the real disadvantage was postneonatal mortality, or mortality from one month to one year of age. That difference was almost entirely due to excess inequality in the US. ...
So there are two main takeaways from this paper. The first is that although reporting differences can account for some of our worse infant mortality statistics, most of the differences we see are not due to that explanation. The second is that most of the rest of the disadvantage is due to differences in postneonatal mortality, that likely require fixes to the healthcare system. Whether the ACA does so remains to be seen.

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