“The art of macro is the art of learning what numbers matter. The US economy gains and loses over 30,000,000 million jobs a year. The numbers you cite have no cyclical impact.”

When one food joint closes and another opens and the wait staff loses and then gains jobs, this has no structural significance.

When skilled tradesmen and specialized finance people systematical are thrown put on the street with no hope of re-employment in the high skill work they have trained for, that is a systematic phenomena — once again the micro “data”, i.e. the micro causal relations matter for non-fake causal explanation.

Stay in the Ivory Tower with a mere computer link to reality –
then not so much.

As Ernst Mayr points out, this blocked advance in biology for 2 centuries — you can’t do natural selection and the rest of biology with Platonic kinds.

My neighbor lost his programming job with a builder in 2007. THIS year he lost his house and the lender took a bath. And it took him two years to find a lower paying replacement job.

You macroeconomists live in a world of Platonic aggregate entities unconnected with real world micro causal agents and factors and relations — and with “data” that only has meaning within the context of these micro agents and factors and relations.

Just as the aggrative Platonic entities assumed by pre-scientific “macrobiologists” were unconected to the real world of micro adaptive and selective causal
agents and factors and relations.

“The recession officially began in 2007″

2007 was a boom year, unemployment was the lowest of the past 8 years. So all those jobs lost in housing (and I agree tons of housing jobs were lost in 2007) didn’t seem to have much effect on the overall unemployment rate. Government dating of recessions is very misleading.

Yes, housing continued to contract after the economy tanked in the second half of 2008, but most of the huge rise in unemployment was due to falling NGDP, and had nothing to do with the housing contraction.

On the ground evidence means nothing. If I live in a town with a toaster factory, and it just down, I might assume the recession is due to the toaster industry. You need aggregate data to do macro, nothing else works.

The forclosure nightmare is still underway, businesses are still going out of business — dozens right in my little suburb.

The recession officially began in 2007. The effects of reduced wealth and lowered incomes and profits and reduced spending has slamming progressively from one disaggregated to another has taken time.

Your easy dismisal of all this based on zero on the ground evidence is absurd — and this is my point. The evidence that matters, the facts that matter — are diaggragated and not studied or dealt with or even acknowledge by macro “platonists” who only conceive of causation in terms of aggrate on aggravate interaction. Again, as if speciation and adaptation could be explained by admitting only interation
between Platonic natural kinds in biology — see Ernst Mayr for an account of how this type of thinking crushed scientific advance in biology, as I believe it does
in macroeconomics.

You wrote:

The art of macro is the art of learning what numbers matter. The US economy gains and loses over 30,000,000 million jobs a year. The numbers you cite have no cyclical impact. Real estate was in free fall for two years from mid-2006 to mid 2008. Plus we were being hammered by a massive oil shock. And despite all that the unemployment rate only rose by about 1% point. That’s small potatoes.

Imo, right now, a more effective alternative would be tax cuts, government spending cuts, and lowering the minimum wage.

“35,000 construction jobs have been lost in Orange County, CA in 3 years. 15,000 Real Estate and finance jobs have been lost in 1 year.”

The art of macro is the art of learning what numbers matter. The US economy gains and loses over 30,000,000 million jobs a year. The numbers you cite have no cyclical impact. Real estate was in free fall for two years from mid-2006 to mid 2008. Plus we were being hammered by a massive oil shock. And despite all that the unemployment rate only rose by about 1% point. That’s small potatoes.

Jean, I don’t agree. Unless you are implying the wage cuts cause monetary policy to miss its inflation target.

Marcus, Thanks, I might do a comment, but I found it hard to understand where he was going with all that. The bottom line is do we need more AD or not? I think Thoma thinks we need more AD. I agree. So why doesn’t he want a more expansionary Fed policy? The Fed doesn’t directly raise inflation. They raise inflation by raising AD.

LorenzofromOz, Yes, I was going to discuss Spain’s dual labor market, in which the better jobs are strongly protected by regulation. Thanks for pointing that out.

Declan, You said;

“I don’t think this is a fair characterisation of Krugman’s views – his argument is that the Fed has lost all traction at the zero lower bound (under current policy settings). That means that they (a) would not want to offset the effect of a fiscal stimulus on aggregate demand, but (b) don’t have any power to prevent the deflation that he assumes would follow from a nominal wage cut.”

Sorry, but you and Krugman can’t have it both ways. Krugman was rightly outraged when Bernanke said he preferred a lower inflation target than Krugman and DeLong prefer. But his outrage would have made no sense if the Fed was powerless. They are not powerless, they are targeting inflation at a rate lower than what Krugman and I prefer.

Nick, Thanks for translating my argument into mathematical terms.

You said;

“Back on topic: But Paul Krugman could argue that the AD curve of an economy with flexible exchange rates (US) might be very different in slope from an economy with fixed exchange rates (Spain).”

Actually, I don’t think that would address my argument, even if true. If the Fed is NGDP or inflation targeting, they will move the AD curve in response to fiscal and wage policies, in order to keep inflation or NGDP on target. That is the weakness in Krugman’s argument.

Lord, I’m not sure I agree, but even if you are right it would address Bryan’s argument but not mine. When you say profits would rise and asset prices increase, my response is that higher asset ptices tend to boost investment. But all of this is a moot point if the Fed is targeting inflation or NGDP–which I believe is the only reasonable assumption to use when considering fiscal and wage policy.

Statsguy, I meant the CA deficit, not the budget deficit. Maybe I misread your comment–I thought you were discussing the CA deficit for some reason.

“although I do regard the deficits as a separate issue”

Yes, and no. Most of the increase in deficit in 2009, and certainly from 1010 through 2017, is due to decreases in tax revenue and “automatic stabilizers”. But, of course, the fact the deficit was so high even during the 2005/2006 boom…