- Paul Krugman: Rock Bottom Economics
- Links for 11-24-14
- 'Is Economics Really a Dismal Science for Women?'
- 'Lower Oil Prices and the U.S. Economy'
Posted: 24 Nov 2014 12:24 AM PST
The era of "rock-bottom economics" is far from over:
Rock Bottom Economics, by Paul Krugman, Commentary, NY Times: Six years ago the Federal Reserve hit rock bottom. It had been cutting the federal funds rate ... more or less frantically in an unsuccessful attempt to get ahead of the recession and financial crisis. But it eventually reached the point where it could cut no more...
Everything changes when the economy is at rock bottom... But for the longest time, nobody with the power to shape policy would believe it.
What do I mean by saying that everything changes? As I wrote..., in a rock-bottom economy "the usual rules of economic policy no longer apply..." Government spending doesn't compete with private investment — it actually promotes business spending. Central bankers, who normally cultivate an image as stern inflation-fighters, need to do the exact opposite, convincing markets ... that they will push inflation up. "Structural reform," which usually means making it easier to cut wages, is more likely to destroy jobs than create them.
This may all sound wild and radical, but ... it's what mainstream economic analysis says will happen once interest rates hit zero. And it's also what history tells us. ...
But as I said, nobody would believe it. By and large, policymakers and Very Serious People ... went with gut feelings rather than careful economic analysis. ...
Thus we were told ... that budget deficits were our most pressing economic problem, that interest rates would soar ... unless we imposed harsh fiscal austerity... —... demands that we cut government spending now, now, now have cost millions of jobs and deeply damaged our infrastructure.
We were also told repeatedly that printing money ... would lead to "currency debasement and inflation." The Fed ... stood up to this pressure, but other central banks didn't. ...
But... Isn't the era of rock-bottom economics just about over? Don't count on it..., the counterintuitive realities of economic policy at the zero lower bound are likely to remain relevant for a long time..., which makes it crucial that influential people understand those realities. Unfortunately, too many still don't; one of the most striking aspects of economic debate in recent years has been the extent to which those whose economic doctrines have failed the reality test refuse to admit error, let alone learn from it. ...
This bodes ill for the future. What people in power don't know, or worse what they think they know but isn't so, can very definitely hurt us.
Posted: 24 Nov 2014 12:06 AM PST
Posted: 23 Nov 2014 11:23 AM PST
Since I posted an excerpt from Noah Smith's column, I should also post this response from Frances Woolley:
Is economics really a dismal science for women?: Donna Ginther and Shulamit Kahn have just published a paper that tracks thousands of American academics from the time they first get their PhDs through to their tenure and promotion decisions. ...
Noah Smith ... takes, Ginther and Kahn's cautious and nuanced results, and leaps to the conclusion that economics "seems to have a built-in bias that prevents women from advancing."
I have never seen a woman denied tenure when a man with similar number and quality of publications was awarded it. I don't deny Ginther and Kahn's findings, but might there be a non-discriminatory explanation of the fact that a woman in economics with X number of publications is less likely to receive tenure than a man with X publications? ...
She goes on to give the "non-discriminatory explanation", and then says:
"Sexism" is not the result of some high level conspiracy. It is the product of millions of every day actions by thousands of ordinary people. ... If a man with 5 publications gets tenure while a woman with 5 publications does not, there must be a reason: either the man has higher quality publications, or higher impact publications, or more evidence of national or international reputation, or better letters of reference.
But a scholar's reputation and impact is determined by ... others: who they choose to acknowledge, who they choose to network with. Every single active academic can, through the citation and other decisions they make every day, influence other academics' reputations - and thus the probability that they will receive tenure or get promoted.
Who do you cite? If you're like most people, you're more likely to cite the seminal work of some well-known male academic than the work of a female scholar. ...
Do you give women credit for their ideas? Just about every woman has had the experience of sitting in a committee, saying something, and having her contribution ignored. A man will then restate her point, and he is listened to, and receives credit for the idea. ...
How do you word your letters of reference? Do you use the same adjectives to describe women and men? Or are women delightful, pleasant, conscientious and hard-working while men are strong, original, insightful and persistent?
Who do you invite to present at conferences or departmental seminars? If a man, do you turn down invitations to participate in conferences with all-male line-ups...? Do you make it easy for female colleagues to come for a drink in the bar after a seminar by corralling them into the bar-going group?
The economics profession is far from perfect. I personally don't find it any worse than the world of media (that the Globe and Mail paid Stephen Gordon more than me still burns), or the world of academic administration. But it could be better - and the power to change it lies within every one of us.
Posted: 23 Nov 2014 10:43 AM PST
Lower oil prices and the U.S. economy: ... The current price of gasoline is 80 cents/gallon below what it has averaged over the last 3 years. Last year Americans consumed 135 billion gallons of gasoline. That means that if prices stay where they are, consumers will have an extra $108 billion each year to spend on other things. And if the historical pattern holds, spend it they will. ...
But another thing that's changed is that much more of the oil we consume is now being produced right here at home. While lower prices are a boon for consumers, they pose a potential threat to producers, especially the higher-cost operators. ...
If there are employment cuts in places like Texas, Louisiana, and North Dakota, that would obviously offset some of the gains to consumers noted above, and ultimately undercut the major force keeping the price of crude low for the time being, that being the success of small U.S. oil producers.
Nevertheless, there should be no question that at this point this is a favorable development on-balance for the U.S. economy. We're still importing 5 million more barrels each day of petroleum and products than we are exporting. Importing fewer barrels, and paying less for the barrels we do import, is a good thing.
|You are subscribed to email updates from Economist's View |
To stop receiving these emails, you may unsubscribe now.
|Email delivery powered by Google|
|Google Inc., 1600 Amphitheatre Parkway, Mountain View, CA 94043, United States|