Here are some recent links that might be of interest:
2. Bob Murphy has a very amusing post showing a previous example of Paul Krugman throwing insults at a Chicago economist for saying something that was true. Only in this case a few months later Krugman himself made the same claim, seeming to forget his earlier comment that only the truly uninformed could believe such rubbish. Someone should send Murphy’s post to Mulligan.
3. Russ Abbott, who is a computer science professor at Cal State LA, sent me an ingenious plan for having the Fed use fiscal policy to stabilize the economy. It involves sales tax rebates when times are bad and tax surcharges when times are good. It would be easiest to implement in an economy that already had a VAT, and/or state sales taxes. I see it as analogous to my proposal to makes cyclical adjustments to the employer-side payroll tax rate. These plans tend to work best when the central bank is targeting inflation. Of course an even better policy is to directly target NGDP expectations.
The entire paper is only 2 pages, a model of clarity and concision.
4. Here’s Paul Krugman making a case for tax simplification:
But in the real world, governments must collect taxes, and given that necessity, making that tax collection as simple and efficient as possible can easily trump more rarefied notions of efficiency.
The best way to do this is to abolish the highly complex personal and corporate income taxes, and replace them with a VAT, a progressive payroll tax, a subsidy for low wage workers, and some taxes on negative externalities. No more confusing 1040 forms to fill out. But Paul Krugman wants to increase tax rates on capital. Interestingly, he does understand that the standard argument for doing so (i.e. the claim that all income should be taxed equally) is completely bogus. Krugman may be wrong on occasion, but he’s not stupid:
So, the case for low rates on capital gains is that by taxing investment income as ordinary income, we effectively discourage saving: if you spend your income now, you pay taxes only once, while if you invest for the future, you pay taxes twice, so eat, drink, and be merry.
There is, however, no evidence that this effect is at all important.
Of course 99% of his readers would skim right over that point. He’s saying that if you have twin brothers, each making $100,000 a year for life, and one spends it all on eating, drinking, and being merry, while the other saves and invests to boost the capital stock, which boosts worker productivity and real wages, then he’d like the thrifty guy to not just pay more taxes, but pay a higher rate as a fraction of lifetime consumption.
4. Rather than the Keynesian cross, Paul Krugman should have argued that I was clueless about how research works in my own field:
So, the starting point for me, when thinking about how economics works as a discipline, is to realize that the traditional model of submit, get refereed, publish, and then people will read your work broke down a long time ago. In fact, it had more or less fallen apart by the early 80s. Even then, nobody at a top school learned stuff by reading the journals; it was all working papers, with the journals serving as tombstones.
And how did you know which working papers to read? In the fields I worked in, NBER Working Papers “” yellowjackets “” became the principal outlet for new research. If you were an associate, you got those papers in the mail, and at least checked out the abstracts “” and if you were in the loop, you got to put out your own work the same way.
And who was in the loop? Well, there were groups of people in each subfield that were the real centers of information and reputation. I was part of two such groups, one in real trade, one in international money. I referred at the time to the “floating crap game”, hence the video above “” there would be various conferences around the world, but the same 30 or so people would show up at each conference, like Nathan Detroit’s gamblers finding different hideouts each night.
I started out in the early 1980s, and for 25 years submitted papers to journals, and then patiently twiddled my thumbs and waited for referee reports. Since my papers came from a small school, made bold claims, were very counterintuitive, and were poorly explained, you can imagine what happened. Indeed it kind of reminds me of my recent dispute with Krugman and Wren-Lewis. At first I’d be rejected, then I’d write the editor explaining why the referee was wrong. On three occasions (including one at the JPE) the decision was overturned. That generally doesn’t happen, but I was an unusual case of someone making a rather poor first argument, but being able to strongly defend my position when attacked. And I’d guess that’s carried over into blogging. The difference is that blogging is a pure meritocracy and doesn’t require any connections, so I’m more successful in this field. Also my writing style is less bad than it used to be.
Update: W. Peden just sent me this link from the Guardian:
The British government, along with other western governments, must replace its redundant inflation target with a target for the growth of the value of the goods and services we produce – the growth of GDP in cash terms.
NGDP targeting continues to gain in popularity.