Beckworth and Hendrickson on NGDP targeting vs. the Taylor Rule

David Beckworth and Josh Hendrickson have a new working paper at Mercatus.  Here is the abstract:

Some economists advocate nominal GDP targeting as an alternative to the Taylor rule. These arguments are largely based on the idea that nominal GDP targeting would require less knowledge on the part of policymakers than a traditional Taylor rule. In particular, a nominal GDP targeting rule would not require real-time knowledge of the output gap. We examine the importance of this claim by amending a standard New Keynesian model to assume that the central bank has imperfect information about the output gap and therefore must forecast the output gap based on previous information. Forecast errors by the central bank can then potentially induce unanticipated changes in the short-term nominal interest rate, distinct from a standard monetary policy shock. We show that forecast errors of the output gap by the Federal Reserve can account for up to 13 percent of the fluctuations in the output gap. In addition, our simulations imply that a nominal GDP targeting rule would produce lower volatility in both inflation and the output gap in comparison with the Taylor rule under imperfect information.

It seems to me that this argument is becoming increasingly persuasive over time.  Both the natural rate of interest and the output gap are increasingly difficult to estimate, as both the natural rate of interest and the trend rate of growth seem to be becoming increasingly unstable.

Speaking of David Beckworth, I’ve enjoyed listening to his podcasts of people in monetary economics/finance.  The latest with Narayana Kocherlakota is particularly interesting, as it gives listeners a perspective on what things seem like for someone on the inside of the Fed.  (He recently retired as the Minneapolis Fed President.)

How the GOP treats women

Here’s the Washington Post:

As a former communications aide to Sen. Ted Cruz (R-Tex.) and former senator Jim DeMint (R-S.C.), I can personally testify that Republican women have, for years, fended off accusations from the Democrats of the party’s allegedly anti-woman beliefs. What did we get for it? The nomination — by way of a largely older, male voting base — of a brazen and unapologetic misogynist.

I want to ask the men leading the GOP some questions. Why didn’t you defend women from this raging sexist especially after so many Republican women — for so many years — eagerly defended the party from charges of sexism? You must make us out for fools.

Over the course of the GOP primary, it became clear that too many Republicans felt it was too politically risky to do anything that would offend the types of voters Trump was attracting in droves — the types who showed up at rallies wearing T-shirts that said, “Trump that b—-” and “She’s a c—, vote for Trump.”

Somehow, in some amorphous but unambiguous way, it was decided that appealing to those voters was more important than appealing to women.

Some of my commenters actually claim Trump is a “dove”.  Not quite:

On the tapes, Mr. Trump describes a passionate enjoyment of fighting, which started during his adolescence in Queens. It did not matter, he said, whether an altercation was verbal or physical. He loved it all the same.

MR. TRUMP: I was a very rebellious kind of person. I don’t like to talk about it, actually. But I was a very rebellious person and very set in my ways.

INTERVIEWER: In eighth grade?

MR. TRUMP: I loved to fight. I always loved to fight.

INTERVIEWER: Physical fights?

MR. TRUMP: Yeah, all kinds of fights, physical …


MR. TRUMP: All types of fights. Any kind of fight, I loved it, including physical. …

His behavior was so belligerent that his parents sent him off around age 13 to the all-boys New York Military Academy, a highly regimented school about an hour north of Manhattan. He seemed to revel in the masculine culture of confrontation there. In the interview, he sounds nostalgic for the time when roughness and physical conflict were more acceptable:

 MR. TRUMP: I’m standing there at the military academy and this guy comes out, he’s like a bulldog, too, rough guy. He was a drill sergeant. Now they call him “Major Dobias,” but he was a sergeant. When I first knew him, he was “Sergeant Dobias,” right out of the Army.

And he was a rough guy, physically rough and mentally rough. He was also my baseball coach. He said things like, “Stand up!” and I went, “Give me a [expletive] break.” And this guy came at me, you would never believe it. I mean, it was really fantastic.

INTERVIEWER: Did he rough you up?

MR. TRUMP: Oh yeah, absolutely.

INTERVIEWER: Grabbed you by the shirt …

MR. TRUMP: It doesn’t matter, it was not like what happens today. And you had to learn to survive. It was tough. It wasn’t today. Those were rougher times. … These guys, you go back to some of those old drill sergeants, they can’t even understand what’s going on with this country.

“But how do you explain the fact that he opposed the Iraq War?”  Simple, he supported it.

He’s also using campaign donations for his personal profit:

The Daily Beast previously reported that Trump spent $55,000 in money from his own campaign to buy copies of his latest book, Crippled America, which was published by Simon and Schuster. Copies were distributed to GOP delegates attending the summer convention in Cleveland.

The purchase of books is just the latest example of Trump using donors’ money to purchase goods and services from his own businesses and generating personal profit for himself.

Trump houses his campaign headquarters in Trump Tower in midtown Manhattan, where the campaign pays $169,758 a month for office space at about $100 per square foot. (The Clinton campaign, in contrast, rents two floors in a Brooklyn Heights office building for about $32 per square foot.)

Trump paid his Mar-a-Lago resort in Palm Beach $423,373 on the same day in May that his campaign finalized a deal with the RNC that began bringing him hundreds of millions of dollars of outside donations ― even though the only events he’d held there were two victory parties and an afternoon news conference two months earlier. He could have held those three events at nearby hotels for a total of about $40,000.

In July, Trump’s campaign sent $48,240 to his Westchester County golf course. The only event it had hosted for him was a June 7 victory party. Trump could have used a ballroom at a nearby Marriott hotel for less than half that much.

And Trump’s insistence on using his own personal Boeing 757 jet is now costing taxpayers millions of dollars extra. Because Trump’s Secret Service detail is making up a large percentage ― and on some days even a majority ― of the flying passengers, the agency must pay a proportionate share of the $10,000-an-hour flying costs.

In a recent post I suggested that Trump cared so little about America that he was only spending 1% or 2% of his $10 billion fortune on “saving the country”.  I was wrong.  He’s spending an order of magnitude less than that, more like 0.2%:

Trump’s staff has defended his decisions to spend more at his own businesses rather than use less-expensive alternatives by pointing out that he is contributing $2 million a month to his own campaign.

That $2 million figure, however, is dwarfed by the many tens of millions of dollars per month coming to Trump’s campaign from both large and small donors.

He might be the most selfish bastard in all of American political history.  And yet despite everything, including dozens of press stories claiming that he’s already lost the race, he still has a reasonable chance of winning (about 17%.)  Indeed the polls have tightened slightly this week.

Zero fiscal multiplier, example #371


Fed Inclined to Lift Rates If New President Adds Budget Bump

The Federal Reserve is inclined to raise interest rates higher than otherwise if the next president pursues a more stimulative fiscal policy.

U.S. central bankers say they would welcome such a step as shifting some onus for supporting the economy away from the Fed. But they suggest they would offset the extra demand that a bigger budget deficit would spur by making monetary policy less stimulative.

Once again, market monetarists have known all along what the media is just beginning to discover—just as with negative interest rates.

And this made me shake my head:

It also could pose some political problems for the Fed if it was perceived by lawmakers as working at cross-purposes with their efforts to spur economic growth.

Congress has been whining about low rates for years.  And now were are told that if the Fed raises rates to 1% or 2%, Congress will start complaining about high interest rates?

BTW, the entire premise of the article is wrong.  Fiscal policy will not have much impact on interest rates, because rates mostly depend on NGDP growth, and the Fed isn’t going to let that rise above 3% on any sustained basis.

Hillary and Trump aren’t going to give us growth, they are going to deliver big government.

HT:  Michael Darda

PS.  Time for the daily Trump dump:

1.  Trump has threatened to sue people on at least 20 occasions since the campaign began.

2.  The ABA prepared a report on Trump’s excessive litigation, which called Trump a “libel bully“.  But the ABA refused to release the report .  .  . (and this is not a Onion joke) .  .  . for fear of being sued by Trump.

3.  Trump praised Hillary as a great senator and a great person.  Said Bill was a great president.  But don’t worry Harding, that was back in 2008, when he was not running for president and was free to speak his mind.  I’m sure his views since he had to begin kowtowing to the alt-right are much more representative of his actual beliefs.

4.  And talk about “first world problems“:

For all their sharp differences, supporters of Hillary Clinton and Donald Trump have one thing in common: election-related stress.

HT:  Tom Brown


Utility: It’s (increasingly) all in your mind

We are long past the days of “fat cats”, when rich people could afford to eat more food than poor people.  And I’d argue that this is increasingly true almost everywhere you look.  When I was young, a Cadillac Eldorado was a vastly different car from a VW Beetle or Datsun.  Especially if cruising down the highway at 80 mph.  Today Datsun is called Nissan (one of the stupidest name changes in US history).  And while an Infiniti is a bit more luxurious than a Nissan, and the BMW handles somewhat better, I no longer think the experience of driving the Nissan is much different from a typical luxury car.  Even the size is similar.  Here’s the interior of their economy model (Sentra):


I went to Zillow, and randomly pulled off an ad for a 2800 sq foot condo in Chelsea—this one priced at $11 million.  And here’s a random 2600 sq. foot condo in Oklahoma City, priced at $260,000.  The NYC unit is more tastefully designed by NYC standards, but the OKC unit is more luxurious by OKC standards. In the Chelsea unit, you might want to have a $4000 midcentury-modern Poäng chair designed by Alvar Aalto:


In the OKC home you could install the Ikea version of the chair (shown above) for $79, down from a (inflation-adjusted price of) $350 in 1990.  How much utility does one get from the $4000 chair?  How much from the $79 chair?  It’s depends how you think about it–it’s the same chair.

Over at Econlog, I recently did a post about our post-stuff economy.  I grew up in the “stuff economy”, and I don’t think I’ll ever adapt to this new one.  But I suppose the millennials are right, it’s stupid to accumulate lots of stuff, for all the reasons that philosophers have emphasized down through the ages.  The upshot of all this is that the concept of “economic inequality” will become increasingly amorphous.  It won’t disappear by any means, indeed it might get “worse” in some sense.  But it will be harder to measure.  As an analogy, both cancer patients and hypochondriacs feel lots of pain. In both cases, the pain is “all in their heads”. That’s where you feel pain.  And that’s also where you register utility. What’s new is that it’s increasingly difficult to connect utility with physical objects (tumors in my medical analogy). (By the standards of peasant life in the Middle Ages, we are all a bunch of hypochondriacs—every one of us.) This has implications for everything from measuring the “Great Stagnation” to adjusting Social Security for “cost of living” (what does that even mean?) increases.

PS.  OK, maybe it’s not all in your head. I can’t really deny that this guy is better off than I am.  I’m jealous:screen-shot-2016-10-21-at-3-30-07-pm

PPS.  Did Donald leave a window open?  Look at Melania’s dress.

PPPS.  Seriously, this is more my style.

PPPPS.  Off topic.  The rich plan to vote Democratic this time.

Shun people for their actions, not their beliefs

[I have a new macro post over at Econlog]

Tom Brown pointed me to a report by David French, on the abuse directed at conservative reporters who stood up for their principles:

I distinctly remember the first time I saw a picture of my then-seven-year-old daughter’s face in a gas chamber. It was the evening of September 17, 2015. I had just posted a short item to the Corner calling out notorious Trump ally Ann Coulter for aping the white-nationalist language and rhetoric of the so-called alt-right. Within minutes, the tweets came flooding in. My youngest daughter is African American, adopted from Ethiopia, and in alt-right circles that’s an unforgivable sin. It’s called “race-cucking” or “raising the enemy.”

I saw images of my daughter’s face in gas chambers, with a smiling Trump in a Nazi uniform preparing to press a button and kill her. I saw her face photo-shopped into images of slaves. She was called a “niglet” and a “dindu.” The alt-right unleashed on my wife, Nancy, claiming that she had slept with black men while I was deployed to Iraq, and that I loved to watch while she had sex with “black bucks.” People sent her pornographic images of black men having sex with white women, with someone photoshopped to look like me, watching.

As you read the article (and you really should read the entire piece) keep in mind that while Trump may or may not be alt-right, it is beyond dispute that his message is extremely popular among the alt-right, and that his campaign chairman previously ran Breitbart, a leading media outlet for the alt-right.

Erick Erickson experienced his own ordeal more than a month before we did. After Erickson dis-invited Trump from his Red State gathering, angry Trump supporters showed up at his house. A grown man yelled at his children at a store, condemning their father for opposing Trump. Erickson wrote in the New York Times that his son is still fearful that Trump supporters will come back to their home.

In March, writer Bethany Mandel related her own experience. After tweeting about Trump’s anti-Semitic followers, she was called “slimy Jewess” and told that she “deserves the oven.” It got worse:

Not only was the anti-Semitic deluge scary and graphic, it got personal. Trump fans began to “dox” me — a term for adversaries’ attempt to ferret out private or identifying information online with malicious intent. My conversion to Judaism was used as a weapon against me, and I received death threats in my private Facebook mailbox, prompting me to file a police report.

Nor are these isolated incidents:

Earlier this month, Mi-Ai Parrish, president of the Arizona Republic, wrote a powerful response to the deluge of threats and bullying prompted by the paper’s endorsement of Hillary Clinton. An Anti-Defamation League report identified 800 journalists who’ve been targeted with anti-Semitic tweets, ten journalists (including NR’s own Jonah Goldberg) who’ve borne the brunt of the attacks, and one — my friend Ben Shapiro — who’s received a staggering amount of hate:

The article is full of many more examples, including death threats.  And for these reporters and their families the abuse never ends.  Some are buying guns to protect their families. We are becoming more like Russia, where it’s open season on reporters.  No wonder the alt-right likes people like Putin and Trump, who have total contempt for a free press.

Trump and his sleazy alt-right supporters still have a 17% chance of winning the election next month. Imagine waking up Nov. 9th into that sort of America.

Yes, the alt-right is only a small share of Trump supporters, and there are crazy people in all ideologies.  But I think it’s fair to say that the conservative opposition to the Trump campaign (especially the Jewish conservative opposition) has been attacked with an unprecedented level of vitriol and abuse. This is not like other elections, and it’s because of one man.

This is even worse than political correctness.  They are just as intolerant as the left-wing campus PC police, and fight for a far more disgusting cause.

An Australian named Lorenzo is one of my most thoughtful commenters.  In the comment section of a previous post on PC run amok, he made the following observation:

The classical liberal tradition is that your worth as a person gave you the freedom to express your opinions.

The underlying PC principle is that your opinions set your worth as a person, which is, of course, exactly the same principle that Mao operated under, particularly during the Cultural Revolution.

Respect people who have different opinions from you, disrespect people who behave like bullies.