Odds and ends

I have a short piece over at CapX, where I make the case for NGDP targeting.  (You can think of it as complementing my recent longer piece on the subject.)  Here’s how I conclude:

Economists are beginning to understand that NGDP is the variable we should actually be concerned about. Instead of worrying about what might happen to inflation under NGDP targeting, we should consider what happens to NGDP if we insist on targeting inflation.

I leave for Japan tomorrow, so I won’t do much blogging in April.  And most of what I do write will be over at Econlog.  Here are a few interesting pieces I recently came across, starting with an analysis of the new GOP budget:

It fully funds Planned Parenthood. It increases outlays for Pell Grants and Head Start, and boosts funding for the Department of Labor and the Department of Education not only above the requests Trump had made, but above the levels in Obama’s last budget. It fails to deregulate the private health insurance market or to reform federal permitting rules on construction projects. Not a single agency was eliminated, though Trump’s original budget proposal had called for 18 to be scrapped. It makes no changes to entitlement programs, and oh, here’s something interesting, it actually forbids construction of a border wall in the Santa Ana National Wildlife Refuge in the Rio Grande Valley — the very place Trump supposedly wanted to begin construction.

This article suggests that refugees are good for America:

This year’s refugee quota, 45,000, is the lowest in three decades, and is not expected to be met. Mr Trump also excluded a lot of wretched people from it, by temporarily placing additional restrictions on anyone from a secret list of 11 countries, which is said to include South Sudan, as well as Syria and Iraq. A low-cost nativist signal to his supporters, these are the biggest changes Mr Trump has made to America’s immigration regime. They are also counter-productive, as well as cruel, a typical case of nativists mistaking American strengths for weakness.

The argument against refugees, which Republican governors in Texas and Michigan were making even before Mr Trump’s election, is that they are a financial burden and security threat. Both charges are unfounded. For though it is true that refugees represent a bigger upfront cost than other migrants—America spends between $10,000 and $20,000 resettling each one—they repay that in spades. A decade after their arrival, the average income of a refugee family is close to the American average. Mr Makender has paid over $100,000 in taxes. Americans can also relax about their odds of being killed by a refugee. None of the 3m-odd fugitives America has taken since 1980 has been involved in a fatal terrorist attack. That reflects the rigour of America’s vetting, refugees’ hunger for advancement—and America’s ability to feed it.

This article on teenagers in Russia (called “Puteens”) makes me more optimistic:

The internet unites the human race

This heightened sense of the world beyond their borders seems to make the Puteens more receptive towards it. The dynamic of constant confrontation with the West holds less appeal for them. Russia’s youngest adult cohort is more likely to have positive views of America and the European Union, and less likely to believe that Russia has enemies. (Their peers in the West also view Russia more favourably than older generations do.) They trust information from friends and relatives, and increasingly eschew the aggressive state-controlled news on television. Over 70% of 18- to 24-year-olds get their news online, compared with just 9% of those over 55; more than 90% of over-40s still rely on television. “They try to convince us that Americans all hate us; that Americans think Russia is a place full of evil people, bears on the streets and vodka,” says Lera Zinchenko, an aspiring actress from the Moscow suburbs. “I don’t think they hate us. I follow a few people on Instagram who travel all over the world, and there’s one girl who was in America and said people were super nice to her.”

This article suggests that China is becoming more like the West:

Start with administrative litigation, which usually involves private citizens suing government officials. Last year courts agreed to hear 330,000 such cases, more than double the total in 2013—the first full year of Mr Xi’s rule (see chart). Many of these involve disputes over land and housing, the most frequent sources of conflict between ordinary people and the state. Other common cases relate to pension benefits, compensation for workplace injuries and traffic tickets. Benjamin Liebman of Columbia Law School says that suing the government over such matters is becoming routine in China.

There have also been notable improvements in the arena of commercial law. Last year Chinese courts began hearings in 152,000 intellectual-property disputes, up nearly tenfold over the past decade. The explosive growth in IP cases has been fuelled by the growing litigiousness of domestic companies, which have more to protect as they become more innovative. But foreign companies are also benefiting. In August a court ordered three Chinese firms to pay 10m yuan ($1.5m) in damages to New Balance, an American footwear company. It was one of the largest trademark-related awards ever made by a Chinese court.

And don’t be overly depressed by the rise of right-wing authoritarianism.  At the global level, things are still getting much better.  This article discusses the dramatic rise in fish farming in Bangladesh, as well as fast rising chicken production in Nigeria.  The bottom line is that the great mass of humanity is seeing a dramatic increase in living standards:

However much farmers struggle with the consequences of their success, it is a far nicer problem than the one they used to grapple with. Walking down a market street, Mr Haque dips his hand into a sack of maize and a sack of rice. The grains will be bought by farmers, who will grind them into pellets for fish and cattle. “Twenty-five years ago, people were starving for want of this,” he says, marvelling. “Now we feed it to animals.”

If you are depressed about the world, that’s a reflection of you, not the world.



28 Responses to “Odds and ends”

  1. Gravatar of Cloud Yip Cloud Yip
    31. March 2018 at 20:47

    May I suggest you read my recently published interview with Dani Rodrik on your way to Japan~ :)


    Part of it is about Macroeconomics and the “One true Model”, you might be interested

    “Rodrik: I do think that trying to come up with a “general theory,” say, of business cycles or employment, is not just a fool’s errand in the sense that it is not feasible; I think it also gets us astray. Because what happens is, instead of entertaining a variety of models that might be applicable at different times, we tend to fixate on a particular model that does well for a while; then, when the nature of the underlying realities change, and we need to shift the focus to another model, we are caught unprepared…

    …I still see this tendency among macroeconomists to develop the “one true model.” I think this is an unhelpful way of thinking about macroeconomics.
    We need models with all the intertemporal bells and whistles, and in some kinds of policy analyses, those would be extremely important. In some other types of applications, ISLM would work just as well. Instead of trying to come up with ‘the model” – the grand unifying model – we need to carry in our mind a collection of models. Depending on the context, the nature of shocks, and which causal mechanism seem to be much more important, we try to do a better job of figuring out how to switch from one model to the next….”

  2. Gravatar of ssumner ssumner
    31. March 2018 at 20:55

    Cloud, Good quote, I entirely agree. (Except I would not use ISLM)

  3. Gravatar of Cloud Yip Cloud Yip
    31. March 2018 at 21:19

    Thanks, Prof Sumner.

    But may I ask if ISLM is not in your toolkit, what are the other sets tools that you keep in the toolbox? I mean, I myself don’t know of enough different kinds of models in macro.

  4. Gravatar of ssumner ssumner
    31. March 2018 at 22:55

    Cloud, I use AS/AD, money supply and demand, loanable funds market, etc.

    For interest rates, I use the liquidity, price level, Fisher and income effects.

    For fiscal policy, I look at both demand and supply side effects.

    For exchange rates, I use different models for nominal and real exchange rates.

  5. Gravatar of salmo trutta salmo trutta
    1. April 2018 at 04:29

    Whether money is tight or easy depends upon its fulcrum, inflation (if inflation is falling or rising). Whether an injection of Central Bank deposits lowers rates or raises rates depends on tight or easy.

    Tight and easy depend upon the distributed lag effect of money flows, volume X’s velocity. The distributed lag effect of money flows, both short and long, have been mathematical constants for over 100 years.

    And this is remarkable in that the figures used for determining these flows are non-conforming, as determined by the limitations on all analyses based upon broad statistical aggregates, namely, data cannot be compiled accurately or in a manner which conforms to rigid theoretical concepts.

    There is much room for improvement in these #s. As William Barnett (Divisia Monetary Aggregates) is right, in that the Fed should establish a “Bureau of Financial Statistics”.

  6. Gravatar of Ol’ George Ol' George
    1. April 2018 at 09:27

    Question for prof Sumner.

    Economists like to speak of “revealed preferences”.

    Your choice upon retirement is NOT to move to Kinshasa. Or Mogadishu. Or Bangladesh.

    Now what does that say about your ACTUAL (as opposed to stated) preferences ?

  7. Gravatar of Scott Sumner Scott Sumner
    1. April 2018 at 11:27

    George, That I prefer to live in a state where whites are in the minority?

  8. Gravatar of Michael Sandifer Michael Sandifer
    1. April 2018 at 13:56


    In case you’re interested, here’s an excellent presentation by Lars Christensen on why real interest rates are low in many countries:


    The first two-thirds or so of the video is his argument that money has been tight since the Great Recession.

  9. Gravatar of E. Harding E. Harding
    1. April 2018 at 15:58

    “This article on teenagers in Russia (called “Puteens”) makes me more optimistic:”

    Sumner, are you seriously incapable of distinguishing age effects and cohort effects? Young people are more dovish and open to outsiders in all times and in all places. The same teens who voted for George McGovern are the staunchest of militarists now. The same people who voted for Remain in 1975 voted Brexit in 2016. Partisanship sticks as one gets older. Views on the issues do not. Do these facts stick in your head?

    Sumner, the Non-Hispanic White population of California has been declining consistently since the early 1990s recession.

    “None of the 3m-odd fugitives America has taken since 1980 has been involved in a fatal terrorist attack.”

    Notice the weasel wording.

  10. Gravatar of ssumner ssumner
    1. April 2018 at 18:23

    Thanks Michael.

    Harding, So you predict that the teens who now favor gay marriage will turn against it when they get older. We’ll see.

    You said:

    “The same teens who voted for George McGovern are the staunchest of militarists now.”

    I doubt it.

  11. Gravatar of E. Harding E. Harding
    1. April 2018 at 18:40

    So you predict that the teens who now favor gay marriage will turn against it when they get older.
    Uh, no. All generations increased their support for SSM since 1990 (due to MSM and WJC-era Democratic propaganda, which tends to closely parallel the opinions of college-educated liberals), and there’s no sign that that’s going away.

    “I doubt it.”

    The polls are consistent with it:

  12. Gravatar of Heskey Heskey
    2. April 2018 at 06:14

    Regarding the article on refugees, unless I missed something, it only compares directly costs of resettlement to tax paid, without factoring anything else. This seems a bit disingenuous to me.

    Surely one would have to include costs of public services/spending as well? I can’t say much about the US, but from a Western European perspective, costs of social insurance, healthcare etc seems like the wages needed to contribute more than is spent would be quite high.

    Of course, this completely ignores the economic benefits (the main point of the article), merely contributions/costs to government budgets.

  13. Gravatar of Benny Lava Benny Lava
    2. April 2018 at 07:52

    Teens didn’t even vote for Mcgovern. The teen vote went for Nixon. Check your facts.

  14. Gravatar of mpowell mpowell
    2. April 2018 at 07:56

    Heskey, you have to imagine that the private sector economic impact (most likely positive) is quite minor in comparison to the impact to public finance. Its amazing to me how much this gets ignored. It would be simple to argue that this ignorance is intentional – it certainly gets awkward when you start to discuss the percentage of citizens that are actually a net cost to the public – but I don’t think that really makes sense with someone like Sumner.

  15. Gravatar of E. Harding E. Harding
    2. April 2018 at 11:20

    “The teen vote went for Nixon.”

    No, it didn’t. The 23+ year-old vote went for Nixon, though.

  16. Gravatar of Benjamin Cole Benjamin Cole
    3. April 2018 at 04:39

    OT but worth pondering:

    “[TOKYO] Corporate Japan expects to see only minimal inflation in a year and barely any change in the next three to five years, a central bank survey showed on Tuesday, highlighting yet again the difficulty the Bank of Japan faces in reaching its elusive 2 per cent inflation target.

    Companies surveyed by the Bank of Japan expect consumer prices to have risen 0.8 per cent a year from now, unchanged from their projection three months ago.

    Firms also expect consumer prices to have risen by an annual 1.1 per cent three years from now and 1.1 per cent five years ahead….”


    Okay, the BoJ has tried QE robustly (and I think they should), and has negative interest rates on some bank reserves, though not all. The BoJ holds 10-year JGBs at zero. The is little unemployment in Japan.

    At what point do we say, “Okay, go to money-financed tax cuts.”

    And in the next recession, should we ponder money-financed tax cuts as the first option? Why keep the effective player on the bench?

    There have been three Fed studies that contend QE was more or less inert. Small potatoes stuff.

    So why QE?

  17. Gravatar of Benny Lava Benny Lava
    3. April 2018 at 08:28

    The under 30 vote was solidly Nixon in 72:


    Polling data for 18-19 year old is unavailble

    Check your facts!

  18. Gravatar of Benjamin Cole Benjamin Cole
    4. April 2018 at 01:36

    The economics does not want to be taken seriously.

    “Japan’s economic output exceeded its full capacity by the most in a decade in the October-December quarter, the Bank of Japan estimated, a positive sign for the central bank as it seeks to accelerate inflation to its elusive 2 percent target.”

  19. Gravatar of E. Harding E. Harding
    4. April 2018 at 17:36

    Uh, Benny, that poll shows that Nixon won the under-30 vote by a measly 4 pts. That’s… not a lot.

  20. Gravatar of salmo trutta salmo trutta
    5. April 2018 at 14:51

    Take special note of what Larry Summers said: “Since the 1990s, he says, the U.S. has alternated between bubbles and busts.”

    There’s an obvious macroeconomic reason for that demarcation. It all neatly ties together.

    No, savings never equals investment. Take the “Marshmallow Test”: (1) banks create new money (macro-economics), and incongruously (2) banks loan out the savings that are placed with them (micro-economics).

  21. Gravatar of salmo trutta salmo trutta
    6. April 2018 at 12:27

    Lemmings like George Selgin (who just testified before Congress) say:

    “None of this would matter if the Fed acted as an efficient savings-investment intermediary, as commercial banks are able to do, at least in principle.” And: “This is nonsense, Spencer. It amounts to saying that there is no such things as ‘financial intermediation,’ for what you claim never happens is precisely what that expression refers to.”

    Or take Martin Wolf, chief economics commentator at the Financial Times writing in his book:

    “Charles Goodhart of the London School of Economics, doyen of British analysts of finance, responds to such suggestions as follows:

    A problem with proposals of this kind is that they run counter to the revealed preferences of savers for financial products that are both liquid and safe, and of borrowers for loans that do not have to be repaid until some known future distant date. It is one of the main functions of financial institutions to intermediate between the desires of savers and borrowers, i.e., to create financial mismatch, to make such a function illegal seems draconian.”

    Take Daniel Thornton:
    Re my comment: “Savings are not a source of “financing” for the commercial bankers”

    Dr. Dan Thornton’s response:
    Thu 3/9, 2:47 PMYou
    See the graph below.

    Not only are the Fed’s econometric models wrong, but their macroeconomic concepts reflect this. These McCarthyites have learned their catechisms, that there is no difference between money and liquid assets (the Gurley-Shaw thesis).

    -Michel de Nostredame (the best seer in economic history)

  22. Gravatar of salmo trutta salmo trutta
    6. April 2018 at 12:31

    Qui vive! This business cycle [sic] is historically different. My signals got crossed last year (wasn’t paying attention). So I’ve gone with the new stream (no speculator should “swim upstream”). I think the difference in this expansion has to do with dis-savings (which will ultimately make the next depression worse, a Hyman Minsky “displacement”).

    Dis-savings, as measured by the deceleration in non-M1 components (relative to M1 components), have perversely increased / supplemented money velocity and thereby aggregate demand, AD. We saw this same phenomenon, albeit with different metrics, in 2009/2010, during the early part of the GFC.

    Historically non-M1 components have moved in the other direction, and counterintuitively slowed any expansion. This works in conjunction with Philip George’s theory:

    See: “The riddle of money, finally solved” BY PHILIP GEORGE

    It works in conjunction with the smartest economist, Dr. Leland James Pritchard, Ph.D., Economics, Chicago, 1933, MS, Statistics, Syracuse.

    Money flows, volume X’s velocity, parse dt; R-gdp, inflation

    01/1/2018 ,,,,, 0.09 ,,,,, 0.27 peaks
    02/1/2018 ,,,,, 0.07 ,,,,, 0.25
    03/1/2018 ,,,,, 0.04 ,,,,, 0.21
    04/1/2018 ,,,,, 0.02 ,,,,, 0.17
    05/1/2018 ,,,,, 0.03 ,,,,, 0.18
    06/1/2018 ,,,,, 0.02 ,,,,, 0.15
    07/1/2018 ,,,,, 0.04 ,,,,, 0.15
    08/1/2018 ,,,,, 0.01 ,,,,, 0.13
    09/1/2018 ,,,,, 0.00 ,,,,, 0.13
    10/1/2018 ,,,,, -0.02 ,,,,, 0.12
    11/1/2018 ,,,,, -0.01 ,,,,, 0.11
    12/1/2018 ,,,,, 0.00 ,,,,, 0.07

    These #’s require some interpretation, but what’s remarkable is the comparative deceleration in the last column, inflation. My expectation is that the Fed won’t increase rates, and might even ease money policy.

    The #’s are not extrapolated (un-necessary), but nevertheless show the distributed lag effect of money flows (which contrary to Nobel Laureate Dr. Milton Friedman, have been mathematical constants for > 100 years), albeit, they do underweight money velocity.

    As Dr. Richard G. Anderson said (who should be Fed Chairman, the world’s leading guru on bank reserves), “RRs are driven by payments”, albeit RR’s are a non-conforming and surrogate metric.

    R-gDp just bottomed and N-gDp is still decelerating (big drops). 2nd qtr. R-gDp will be lower than 1st qtr. R-gDp. And if stocks are currently coupled with economic variables, then stocks should bottom by next week, bank squaring day. Whenever investors/speculators recognize these fundamentals (that’s why one uses technical analysis), the markets will turn.

    – Michel de Nostredame

  23. Gravatar of Mark Paskowitz Mark Paskowitz
    8. April 2018 at 23:54


    It’s my understand that the average (median?) household is a net recipient of public funds. If that’s the case, then a refugee family who takes a decade to get near the average income, plus additional resettlement cost, is almost certainly a financial burden. (Maybe not in every case. Depending on age at arrival, I could see less spending on, e.g. education, shifting the balance. I could also see generally poorer health leading to earlier mortality and lower Social Security receipts.)

    I’m not saying this is an ironclad case against refugees. I think that resettling and integrating some refugees is a good place to spend some public funds. I like the argument made later in the article that taking in refugees is a strong source of goodwill, both through their example and the money the send back to families in their country of origin.

    But I also think the Economist is trying to pull a bit of a fast one here, and I’m always put off by people making bad arguments, especially when I agree with the goal. It makes me think they couldn’t make the honest argument work.


  24. Gravatar of Viking Viking
    12. April 2018 at 09:22

    From article:

    “Americans can also relax about their odds of being killed by a refugee. None of the 3m-odd fugitives America has taken since 1980 has been involved in a fatal terrorist attack. ”

    Try telling that to the (surviving) victims of the Boston marathon bombing! Given this lax standard of fact checking, any reason the rest of the article should be believed?

    “Tamerlan was left in the care of his uncle Ruslan in Kyrgyzstan,[24] and arrived in the U.S. around two years later.[44] In the U.S. the parents received asylum and then filed for their four children, who received “derivative asylum status”.[45] They settled on Norfolk Street in Cambridge, Massachusetts. Tamerlan lived in Cambridge on Norfolk Street until his death.[46]”



  25. Gravatar of E. Harding E. Harding
    17. April 2018 at 10:46

    Another example showing “conservative” does not necessarily mean “supports conservative policies”.

  26. Gravatar of Massimo Heitor Massimo Heitor
    17. April 2018 at 11:13

    “the rise of right-wing authoritarianism.”

    This is partisan rhetoric. It’s a phrase used by politicians for strategic reason. Not by academics purportedly seeking to elucidate truth.

    Can Sumner comment on Japan’s ultra-strict policy towards immigration and refugees: https://www.independent.co.uk/news/world/asia/japan-immigration-shinzo-abe-refuse-relax-rules-prime-minister-policy-shrinking-population-foreign-a8065281.html

    “Japan’s Prime Minister Shinzo Abe has insisted his administration has “no intention” of loosening the country’s strict immigration policy…”

    “His reluctance to relax the rules for migrant workers is facing mounting criticism in Japan, where less than 2 per cent of the population are foreign born. That compares with more than 20 per cent in the UK.”

    I’d also note that many of the foreign born in Japan, are from Asian countries like China or Korea and are ethnically similar to Japanese.

    “But when it comes to refugees, Japan is even less welcoming. In the first half of 2017 it accepted just three asylum seekers.”

    Or will you pull a Noah Smith and refer to Japan as an extremely open society that makes it easy for foreigners/refugees/etc to move and live there? https://www.bloomberg.com/view/articles/2017-11-30/japan-wants-immigrants-the-feeling-isn-t-mutual

  27. Gravatar of ssumner ssumner
    17. April 2018 at 16:49

    Massimo, You said:

    “I’d also note that many of the foreign born in Japan, are from Asian countries like China or Korea and are ethnically similar to Japanese.”

    Chinese are similar to Japanese? Who knew?

  28. Gravatar of Massimo Heitor Massimo Heitor
    18. April 2018 at 10:42



    Who knew? People who study this stuff knew. And people who can google and read summaries from other people who study this stuff knew.

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