Perhaps the Bank of Hungary took Krugman’s “promise to be irresponsible” thing too literally

Here’s one way to credibly inflate:

The National Bank of Hungary bought 200,000 rounds of live ammunition and 112 handguns for its security company, according to documents posted on a website for public procurements.

Additional protection is needed due to the rise of “international security risks” including bomb and terror threats and migration, central bank Governor Gyorgy Matolcsy said . . . The central bank’s assumption of the role of financial regulator and the related increase in the number of its properties also contributed to the need for further defenses, he said.

The security measures added to public scrutiny of the running of the bank, which under Matolcsy earmarked 200 billion forint ($718 million) to set up foundations to teach alternatives to what he called “outdated neoliberal” economics. Another $108 million fund used for buying fine art including a painting by Titian also drew criticism from opposition parties, as did a series of investments in office buildings and villas.

Matolcsy, an ally of Prime Minister Viktor Orban, has argued the central bank has the right to spend its profits, which have been boosted in recent years as the weaker forint increased the value of its foreign currency reserves. The central bank has traditionally paid its profit into the government budget, while taxpayers are required to cover any losses by the regulator.

Titian?  Well at least they have good taste in art.  And every central bank needs a few villas.

Interesting that the new left and the Hungarian fascists share a distaste for neoliberalism.

PS.  James Alexander sent me an interesting series of tweets on how Sweden is rapidly becoming a cashless economy. But the more interesting story may be the tax change that brought household work out of the underground economy.

James also has a very interesting post, showing how NGDP targeting keeps making more and more progress.  The idea seems unstoppable to me, unless some unexpected flaws are found.

HT:  Marcus Nunes


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51 Responses to “Perhaps the Bank of Hungary took Krugman’s “promise to be irresponsible” thing too literally”

  1. Gravatar of Ray Lopez Ray Lopez
    18. February 2016 at 19:18

    Ah, as predicted, Sumner is jumping on the ‘cashless society’ bandwagon…sigh. Fashion is fashion.

  2. Gravatar of Major.Freedom Major.Freedom
    18. February 2016 at 19:41

    “The idea seems unstoppable to me, unless some unexpected flaws are found.”

    That’s rich, considering how the flaws have already been explained numerous times, and in all cases you are unable or unwilling to even understand the arguments.

    Your theory prevents you from graspng the flaws. Please don’t pretend that you are an open minded thinker when it comes to NGDPLT. It is your religion.

  3. Gravatar of ssumner ssumner
    18. February 2016 at 19:41

    Ray, There are levels of stupidity that are so implausible they are no longer funny. No one is going to seriously believe you are this clueless, so please stop pretending. Let’s see what the real Ray is like.

    It was kind of fun for the rest of us when we all thought you were a fool. But now that it’s clear that you are just pretending to be stupid, it kind of takes the fun out of it.

  4. Gravatar of E. Harding E. Harding
    18. February 2016 at 21:36

    “Titian? Well at least they have good taste in art. And every central bank needs a few villas.”

    :-)

    “Interesting that the new left and the Hungarian fascists share a distaste for neoliberalism.”

    -If you knew anything about the country, you’d know that the present Hungarian government is strongly anti-fascist.

  5. Gravatar of E. Harding E. Harding
    18. February 2016 at 21:38

    ssumner, Ray is a bigger fool than any of us originally thought. The mindlessness deepens. Sadly, Ray is that massively clueless.

  6. Gravatar of Daniel Daniel
    19. February 2016 at 01:16

    As an actual Eastern European myself, I can tell you this – we’re sick of Western hipocrisy.

    They speak of free markets and free movement of people, only to flood us with third-world savages.

    You’d have to be an idiot not to be suspicious of their motives.

  7. Gravatar of Handle Handle
    19. February 2016 at 06:16

    “But the more interesting story may be the tax change that brought household work out of the underground economy.”

    I’m having trouble finding the link to that story. Could you please post it? Thanks.

  8. Gravatar of Authoritarian Authoritarian
    19. February 2016 at 06:28

    if only we could tax those blackmarket housewives who are basically stealing money from the coffers of governments to feed their husbands and children CO2 polluting steaks!

  9. Gravatar of ssumner ssumner
    19. February 2016 at 06:38

    Handle, There is no link, but here are a few I found elsewhere:

    http://www.eurofound.europa.eu/observatories/emcc/case-studies/tackling-undeclared-work-in-europe/tax-deductions-for-domestic-service-work-sweden

    https://www.skatteverket.se/servicelankar/otherlanguages/inenglish/businessesandemployers/declaringtaxesbusinesses/rotandrutwork.4.8dcbbe4142d38302d793f.html

  10. Gravatar of Ray Lopez Ray Lopez
    19. February 2016 at 07:14

    @Sumner – I’m a fool? Let’s review the facts:

    1) I, or my family, same thing, are in the 1% (minimum net worth USD $8M+)

    2) I am dating an Asian girl half my age

    3) I have an IQ of 120 or above

    4) I have read Ben S. Bernanke’s econometrics FAVAR paper of 2002, which shows the Fed has very little real power (money is largely neutral); you’ve specifically said you’ll not read it.

    5) I am a chicken farmer in the Philippines who is supplying protein to the masses. My business is expanding and I’m making a profit, meaning I’m enlarging the economic pie, not just dividing it up. Just today I finished a 100+ egg brooder, and will expand my offerings to turkeys and fighting cocks (cock fighting is legal in PH)

    6) I used to believe the Fed had power (in monetarism) but I changed my mind when I saw the facts. When the facts change, I change my mind. What do you do sir?

    7) I don’t have a family yet, unlike you, but hope to have one soon.

    Six out of seven areas where I’m superior to you. Now who’s the greater fool, fool? And yes, you’ll be pushing for a cashless society soon, bet on it, notwithstanding your purported love of cash (I was fully aware of that love when I made my OP, but cashless will allow negative interest rates according to MM, which is your religion as MF says).

  11. Gravatar of Steven Kopits Steven Kopits
    19. February 2016 at 07:48

    Why I left Hungary. $718 million for ‘alternatives to what he called “outdated neoliberal” economics’? I’m guessing that’s more than the entire higher education budget of the country.

    The proper interpret is ‘absolutely colossal, uncontrolled corruption’. That’s what I meant by nationalist, strongman policies, which are also rapidly evolving in China.

    My own internal analysis suggests a putsch in China is developing in the same vein, with the date looking like this weekend. The canary in the coal mine is Li Keqiang. You’ll know the putsch has happened if something bad happens to him. If Li’s not arrested / demoted / marginalized within three weeks, count on Xi being arrested as the alternative. That’s what the analysis suggests.

  12. Gravatar of Randomize Randomize
    19. February 2016 at 08:41

    Dr. Sumner,

    Thought you might be interested in this: http://finance.yahoo.com/news/oregon-lawmakers-approve-landmark-minimum-093607406.html

    Bad that they’re jacking up the minimum wage but good that they’re attempting to give some consideration to areas with lower wages & locals costs of living.

  13. Gravatar of Hrrmm Hrrmm
    19. February 2016 at 09:15

    Ray Lopez, is this the paper you’re referring to? http://www.federalreserve.gov/pubs/feds/2004/200403/200403pap.pdf

    If so, all I’m seeing is technical paper showing how FAVAR techniques are useful for modeling the effects of monetary policy.

  14. Gravatar of ChargerCarl ChargerCarl
    19. February 2016 at 10:46

    Ray Lopez is mentally ill.

  15. Gravatar of Morgan Warstler Morgan Warstler
    19. February 2016 at 10:50

    Scott,

    because you are a fan of Zizek, I’m fairly certain you’ll find this by Dilbert’s Scott Adams very enlightening:

    http://blog.dilbert.com/post/139541975641/the-trump-master-persuader-index-and-reading-list

  16. Gravatar of Morgan Warstler Morgan Warstler
    19. February 2016 at 10:51

    Ray, dude, read some Scott Adams:

    http://blog.dilbert.com/post/139541975641/the-trump-master-persuader-index-and-reading-list

    It’s totally topical

  17. Gravatar of Christian List Christian List
    19. February 2016 at 13:15

    “Interesting that the new left and the Hungarian fascists share a distaste for neoliberalism.”

    Scott, you use the term fascist so inflationary that it loses its meaning.

    It is true that a lot of people from the left and the right hate neoliberalism. This is known since the Weimar Republic but mostly forgotten. Neoliberalism was (and is) the scapegoat, the classical “enemy image”, that (in my opinion) was a very important factor in the rise of Communism and Nazism.

    But I think we as “neoliberalists” should not make similar mistakes and search for similar enemy images, where there aren’t any. And by this I mean for example the inflationary use of the term “fascist”.

    People like Orban and Matolcsy are clearly not fascists. They are pretty typical Central European and Eastern European conservatives. The conservatives in these regions are unfortunately not like the neoliberal conservatives in the US or the UK. They dislike a liberal economy; they dislike neoliberalism – but they are not fascists.

    In fact, the situation is even worse for neoliberalists in Continental Europe. They are not only the enemy image of communists, socialists, social democrats and fascists, but also the enemy image of many conservatives.

  18. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    19. February 2016 at 14:16

    Well, Venezuela has managed to commit to being irresponsible and produced something amazing;

    http://elpais.com/elpais/2016/02/19/inenglish/1455885324_035186.html

    ‘Venezuela’s Central Bank (BCV) gave a grim outlook of the situation by listing inflation at 180% and reporting a 5.7% contraction of GDP last year.’

    That’s the economic system Bernie Sanders wants for the USA, Democratic Socialism.

  19. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    19. February 2016 at 14:21

    Then there’s Democratic Socialist Greece:

    http://www.ekathimerini.com/206182/article/ekathimerini/business/govt-plan-for-forced-use-of-cards-runs-into-the-markets-failure-to-adapt

    ‘The government’s has told taxpayers that they will have to spend up to a certain amount of their incomes via bank and card transactions in order to qualify for an annual tax-free exemption. However, a large proportion of stores still don’t have the card terminals, or PoS (Points of Sale), required for card payments, while plastic is accepted by very few doctors, plumbers, electricians, lawyers and others who tend to account for the lion’s share of tax evasion recorded in the country.’

  20. Gravatar of Carl Carl
    19. February 2016 at 14:27

    Ray
    I’m wondering if you should give yourself two points for dating an Asian girl half your age. And, just between you and me, you might want to consider dumping her for a girl one quarter your age so you could pick up even more points. I haven’t seen Scott post his IQ but I assume that he must have already conceded privately that yours is higher. I know you wouldn’t have scored that point for yourself otherwise. Thanks again for providing us all with protein. And, good luck procreating. I’m looking forward to you getting the clean sweep over Scott.

  21. Gravatar of Steven Kopits Steven Kopits
    19. February 2016 at 14:45

    Re Hungarian fascists: I think you are being a wee bit generous there, Christian. There are significant fascist tendencies in the Orban government.

    As for not liking a liberal economy, not true. Hungarian leaders love buying stuff–nice cars, nice home, nice girlfriend (to complement the wife!). They just don’t like liberals, that is, people who fail to defer to leadership or are different in some regard. But that’s the great thing about authoritarian nationalism–the perks!

  22. Gravatar of E. Harding E. Harding
    19. February 2016 at 15:18

    “There are significant fascist tendencies in the Orban government.”

    -Totally:

    http://www.thedailybeast.com/articles/2014/10/07/american-racist-richard-spencer-gets-to-play-the-martyr-in-hungary.html

  23. Gravatar of Scott Sumner Scott Sumner
    19. February 2016 at 15:21

    Ray, You are a chicken farmer in the Philippines? Well why didn’t you say so! It’s well known that Filipino chicken framers tend to have Einstein-level intelligence. Sorry to suggest otherwise.

    Steven, That’s quite a prediction—kudos to you if it turns out correct.

    Randomize, Interesting.

    Morgan, Am I a fan of Zizek? I didn’t recall that. Perhaps he has good taste in films, but otherwise?

    And whatever that was it was deemed racist on the hotel computer, and blocked. I’ll have to wait until I get home.

    Christian, You said:

    “Scott, you use the term fascist so inflationary that it loses its meaning.”

    Don’t blame me, it was Hitler who ruined the meaning of fascism. People now associate the term with Hitler.

    BTW, Stalin was a socialist, is Sanders?

    Patrick, Yes, and don’t forget Brazil, whose government was praised by Krugman about 4 years ago.

  24. Gravatar of Steven Kopits Steven Kopits
    19. February 2016 at 15:39

    As for non-liberal economics. About fifteen years ago, I had lunch with my uncle George, perhaps as good an economist as Hungary can muster, and a relative of his, a guy named Zoli (related to the Matolcsys, I might add, as am I via my uncle). Now, my uncle George is a long-time IMF veteran, Brookings, the whole bit. A real neo-classical economist, call him center-left.

    And Zoli was to all appearances a fascist. He says to George, “You know, George, the problem with you is that all you know is neo-liberal economics.” And George says (I may be parsing this), “That’s the only kind of economics there is.”
    Now, at the time, I agreed with George, but the comment really stuck with me, and I spent a good bit of the time in the next five years wandering the streets of Budapest in my free time (recommended, to use Tyler speak), and contemplating why the buildings erected before WWI were so beautiful, and the ones during the Communist era were absolutely awful.

    And I came to realize that Zoli was in certain respects quite right. There is fascist–if you like, group-based–economics. If you use the group, not the individual, as the unit of analysis, then you obtain different kind of economics.

    What matters in a group–a team, if you like–is the agent, not the principal. The individual has to fulfill a role, not to be self-actualized. Thus, in football, a receiver only catches the ball. He doesn’t coach, throw the ball or tackle people, even if he’d like to. And he’s rated on his ball catching skills, not his merit as a person. His job is to meet the requirements of the role, to be a cog in the machine. And he’s expendable. If he’s hurt, it’s next man up. Thus, group-based optimization (a winning team record or corporate profits, if you’ll have it) is not particularly concerned with the plight of the individual. It’s all about group success.

    Of course, there’s a tension between the person as agent and as principal, what he gets from the group as his pro rata share of group benefits and obligations. That’s the essence of principal-agent theory. Thus, non neo-liberal economics–if we take this to be fascist economic theory (ie of the group)–very much does exist.

    Of course, it’s not what either Matolcsy or our friend Zoli thinks, but it does exist, and we apply it–even if we don’t understand it–every day.

  25. Gravatar of Steven Kopits Steven Kopits
    19. February 2016 at 16:14

    Scott –

    Socialism is the use of force to reallocate wealth, income and other benefits from those above the median to those below the median. At issue is only the degree of force and the amount of reallocation. The more you reallocate, the greater the force required. Thus, the difference between Bernie and Stalin is one of degree, not quality. If you take 40% of my income in taxes or confiscate my house, well, it’s really only a matter of degree, isn’t it?

    This is also true for conservatives versus fascists. At stake is the degree to which group conformance is required. If it is mild, then we might call it conservative. If it is extreme, we’d refer to it as fascism. But it’s the same sentiment. So if you think abortion is wrong and lobby to restrict access, then you’re a conservative. If you round up the abortion doctors and throw them in prison, you’re a fascist. But there isn’t a conservative in his heart who wouldn’t think it might be nice to shut down Planned Parenthood by force.

  26. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    19. February 2016 at 16:20

    Biagio Bossone and Stefano Sylos Labini at voxeu;

    http://www.voxeu.org/article/ecb-s-original-sin-and-franco-modigliani-s-long-view

    ‘ Nominal GDP targeting

    ‘An alternative option to consider is for the ECB to targeting nominal GDP (Sumner 2014). Hitting the target avoids recessions in nominal terms by definition, and dampens recessions in real terms by supporting aggregate demand. More generally, nominal GDP targeting reduces positive and negative GDP fluctuations; in recessions, it focuses on returning the economy to a normal path; in an inflationary environment, it provides a gradual path to stability.’

  27. Gravatar of Benjamin Cole Benjamin Cole
    19. February 2016 at 16:52

    Hey Ray–

    I like you.

    I have 20 turkeys going in Thailand hope to get to 100. Trying guinea hens too, which are nice to look at. Cows too. Fruit trees.
    However you are superior to me, it sounds like, in all regards. Well, except for your posts.

    In an underutilized domestic and global economy, the Fed could print money for years and years to positive effect.

  28. Gravatar of Christian List Christian List
    19. February 2016 at 17:32

    @ssumner
    “BTW, Stalin was a socialist, is Sanders?”

    That’s a good example because it also explains why Orban’s government is not fascist. So far Sanders is a social democrat. Stalin was a communist. What’s the difference? It’s quite simple: Sanders respects democratic elections. He goes away if you don’t elect him anymore. It’s the same with Orban. He also will give his power away if people don’t re-elect him. There’s no such thing as a “democratic fascist” – it’s called a conservative.

  29. Gravatar of Scott Sumner Scott Sumner
    19. February 2016 at 19:22

    Steven, The key point is that it is a matter of degree. Also recall that so-called neoclassical economics is a pretty broad field, with models to handle lots of situations beyond perfect competition.

    Thanks Patrick, that sound hopeful.

    Christian, Both Sanders and Stalin called themselves socialists, which shows that the term is pretty elastic. Other words like capitalism and fascism are also highly elastic. Is Hong Kong capitalist? How about Chile? Mexico? Denmark? Portugal? Canada? I have no idea where one draws the line. Obviously Orban is not as fascist as Mussolini, but it’s just as obvious that he has fascist tendencies, just as Sanders has socialist tendancies without being another Stalin.

  30. Gravatar of Ray Lopez Ray Lopez
    19. February 2016 at 19:27

    @Hrrmm – yes, that’s the paper. Do you see the table and the 3.2% to 13.2% quote about the Fed’s power? BTW, another paper (details on my HD) tries to say that this range should be higher since essentially Bernanke did not take the absolute value of variables, which would push this ratio higher. What this tells me is that monetarists are embarrassed by such a small range, even though Bernanke says it is ‘non-trivial’ and ‘statistically significant’

    @Morgan – you’re voting Trump right? Being from Texas you have thick skin no doubt, and that wall will help impoverished (and Democratic party) south TX. I’ve been to that area to meet a girl, at about the time of the 2012 cartel drug wars, it was pretty wild crossing the Rio Grande (no pictures allowed, and I pulled out my camera by mistake, oops!)

    @Carl- I have nothing against older women. I just want kids. It’s weird though dating a girl so young. We have different personalities (e.g., I like health foods, hard to find here in PH, she likes popular junk food) but we get along fine. I hope to procreate, thanks. My offspring should be like Sumner’s, mixed, which I like.

    @Scott Sumner – you’re too kind. I would stay we’re probably tied for IQ, maybe I’m a bit higher since a bit younger than you. I have nothing against NGDPLT and understand your professional concern to promote it (I’d do the same if I was you). Since money is largely neutral I even think it would be largely harmless, except for that bizarre “Keep Printing Money Until NGDP Hits Target” instruction you mentioned a while ago. Don’t you think that might become hyperinflation? Analogy (since you like expectations): grandpa always says to naughty kids: ‘clean up after yourselves or I’m going to kill you!’. The kids do some half-motions to comply but laugh behind grandpa’s back, since he’s never serious with his threats. Then, out of the blue, after publicly saying he now targets NGDP, he comes out with a gun and starts shooting at kids making a mess. Don’t you think that would cause panic? Crude analogy but you see the point. Public not ready to concede money is neutral and herd behavior might cause panic. On the other hand, if you believe ‘expectations’ logic, only grandpa actually shooting is a credible enough threat to scare the children into cleaning their mess. Adopting NGDLT has about the same chance of being adopted in the USA as it does in Germany, and about the same chance as banning physical currency and coin in the USA: less than 5%

    @Ben Cole – thanks, I spent a year in Thailand and you’re a better man than I. I will try and play more nice since you’re an expat too. My gf and I have a water buffalo, with the same caretaker arrangement as in Thailand (you buy buffalo and keep every other offspring of same). FYI, you know better than I, but I hear turkeys are hard to grow. Of course CX meat chickens are the easiest (my choice); I’m growing the latter profitably, 2:1 feed ratio. Some people free-range turkeys here, but are they smart enough to return to their roost at night? I’m afraid to let them out of their cage. BTW I had a guinea hen in the USA as a pet; we ate it after it was injured. Gamy dark meat, which I like. Asking price here for one is a very high $50 a bird; turkeys cost $8 by contrast. Fruit trees? Impossible I’ve heard in tropical climates since really good fruit trees need a cold spell to produce fruit. They import all the apples, oranges in PH from China and Australia. Plus tropic fruit trees have not been bred to grow big sweet fruit, historically, bananas and coconuts excepted (we have lots of those).

  31. Gravatar of Shmebulock, Crusher of Pussy Shmebulock, Crusher of Pussy
    19. February 2016 at 19:43

    It’s always interesting to see posts like this, given Scott’s well-known currying favor with power. He was a major Bernanke nut-hugger, clearly fantasizing that the beard was reading his lame-ass blog (here’s a newsflash, he wasn’t). And now he’s going full-hog for the new regime, eagerly wolfing down Yellen’s man-sausage.

  32. Gravatar of E. Harding E. Harding
    19. February 2016 at 20:03

    Ray, you are wildly underestimating Sumner’s IQ.

    “And whatever that was it was deemed racist on the hotel computer, and blocked.”

    -You don’t always carry around a USB stick with the Tor Browser for such occasions?

    “If you round up the abortion doctors and throw them in prison, you’re a fascist.”

    -Chile: a fascist country.

  33. Gravatar of Shmebulock, Crusher of Pussy Shmebulock, Crusher of Pussy
    19. February 2016 at 20:04

    I’ll bet Benjamin Cole is creaming in his pants with the news today that there was an uptick in inflation.

  34. Gravatar of Major.Freedom Major.Freedom
    19. February 2016 at 22:30

    This post is a good example of how being pro-central bank and NGDPLT and all the rest, compels Sumner to coyly and without much ado refer to the actions of the Hungarian central bank in buying ammunition as being “perhaps” irresponsible, and “one way” to credibly inflate.

    When you begin to worship the NGDPLT God, thou shalt not cease to believe in Him even if He prints money to encourage the production of weapons of war.

    Maybe one day the light will go off in his head that choosing to buy ammunition is no more a “fiscal” decision than choosing to buy the debt of the Treasury.

  35. Gravatar of Benjamin Cole Benjamin Cole
    20. February 2016 at 00:17

    Ray: so far so good with turkeys, although they can catch a disease from chickens and then die. And there are plenty of chickens around here. They say guinea hens sell for 2000 baht. But who would pay that? Anyway my ex-laws will figure out a way to capture all profit.

    You must be joking about fruit trees. Have you never heard of mangoes? jackfruit? Also maprang. Of course bananas and coconut. Some others too but I forget their names.

    Also you might do well with cactus dragon fruit. I am starting with a couple hundred. Easy care.

    Good luck in the Philippines. The only people friendlier than Thai might be your countrymen.

  36. Gravatar of ssumner ssumner
    20. February 2016 at 06:17

    Ray, Both NGDP targeting and currency bans are coming. Not in my lifetime, but in yours. Remember me when it happens.

    Crusher, What’s more embarrassing, your comment, or the fact that you posted in in the wrong place?

  37. Gravatar of Morgan Warstler Morgan Warstler
    20. February 2016 at 06:31

    “And whatever that was it was deemed racist on the hotel computer, and blocked. I’ll have to wait until I get home.”

    What country are you in that won’t let you read Dilbert?

    —-

    “Shmebulock, Crusher of Pussy”

    Ray & MF, you guys are in serious jeopardy of losing your Sumner Troll badges. – the management

    —-

    Scott, Twitter – more and more CB officials, you can directly publicly engage with to a far more targeted audience.

    —-

    Ray, I’m leading the “DC must have a 4-8 year Recession or it’s bullshit” crowd:

    https://twitter.com/morganwarstler/status/701033690806104064

    I think Cruz would easily deliver more of a DC recession than Trump, whats crazy, as you see with the above Jonah Goldberg thing, getting the NRO / GOP Establishment to SELL CRUZ AS THEIR TRUE DESTROYER is nigh to impossible… and I actually have “access”I have explained these facts at the highest levels – nobody YET can get their head around American GOP hates GOP In DC, even though we pay them to make life in DC suck.

    Since the founding, team States’ Rights have paid our cheerleaders to go to DC and delight in BEING A POWERLESS TOILET – it’s our DNA!

    That’s all that’s been forgotten… REPUBLICANS RENT IN DC, bc if property values in you DC home go up, you are fired.

  38. Gravatar of Ray Lopez Ray Lopez
    20. February 2016 at 08:01

    @B. Cole, thanks, I studied ‘blackhead disease’ and will make sure the turkeys are dewormed and/or separated from chickens. Right now I have them in a former chicken coop so I’ll have to move them.

    @ssumner who says “Ray, Both NGDP targeting and currency bans are coming. Not in my lifetime, but in yours. Remember me when it happens” – I’m only about 10-15 years younger than you, so unless you have some incurable disease, which I hope not, you’re being a bit melodramatic.

    @Morgan Warstler – your ‘peace is my disaster’ as the poem says, as my family got rich from DC real estate. It’s unlikely DC real estate will fall. Big Government is here to stay. Now get back to work and keep me rich, don’t forget to pay your taxes, and no cheating on deductions either young man, thanks!

  39. Gravatar of Morgan Warstler Morgan Warstler
    20. February 2016 at 08:30

    Ray, over the next 20 years, the public sector will go the way of agriculture and manufacturing. We have 23M public employees, we will end up with less than 5M, they will be paid more, the rest will be gig driven private service sector human touch specialists.

    It’s what I do for a living… nothing, not even govt can withstand what tech wants.

  40. Gravatar of Steven Kopits Steven Kopits
    20. February 2016 at 09:35

    There is no established theory of conservatism, Scott. There are Rothbard and Burke, which comes down to conservatives don’t like change.

    If you’re telling me there’s a branch of economics that uses the group as the unit of analysis, well, I’m all ears. I have never read or heard of anything such thing.

  41. Gravatar of Scott Sumner Scott Sumner
    20. February 2016 at 15:36

    Morgan, I’m at the Liberty Forum event in the Live Free or Die state.

    Steven, Cartel theory? Public choice?

  42. Gravatar of Jose Romeu Robazzi Jose Romeu Robazzi
    20. February 2016 at 15:45

    I don’t like the idea of a cashless society, not because of the lack or cash itself, but because individuals will lose anonymity. This is much bigger than just economics …

  43. Gravatar of Ray Lopez Ray Lopez
    20. February 2016 at 19:02

    @Jose Romeu Robazzi – “I don’t like the idea of a cashless society, not because of the lack or cash itself, but because individuals will lose anonymity.” – you’re already not that anonymous. Your IP provider knows who you are, what you post in plaintext (most email is plaintext if POP format like Outlook is), and even when https (secure) Google or whoever is on the other end of the secure connection can see everything you upload, and you should be aware the CIA/NSA/etc had/have “back doors” on Google servers so they could read everything coming in. Even Bitcoin is not 100% anonymous–with a bit of traffic analysis one can, with sufficient resources and maybe a choice subpoena or two, find out what computer (and thus what person) initiated any Bitcoin transaction. As for cash, I can see how the government can require Point of Sale merchants to scan every dollar received, and they can then correlate serial numbers on the currency with geographic location information and/or CCTV information to determine who/where the cash was spent. It’s something Oracle gets a wet dream over, and as computing hardware and storage costs decline it could happen. Welcome to a Brave New World.

  44. Gravatar of Steven Kopits Steven Kopits
    21. February 2016 at 15:17

    Scott –

    Cartel theory has some limited application, but not too much.

    Public choice theory seems to emphasize policy-making glitches and behavioral things people get wrong.

    Conservative theory is related to, but not the same as these. Let’s take the example of rent-seeking, a favorite of my old professor, Jagdish Bhagwati, and a topic sometimes considered under public choice theory.

    The essential foundation of conservative theory is increasing returns to scale. Thus, if a group can produce more than the sum of its members individually, then we have reason to construct a group. These groups are typically physical jurisdictions (eg, nation-states), corporations, and families, but I could throw in the military and churches, too.

    The central challenge of the group is the allocation of risk, reward and effort (which we refer to as ‘culture’) and of course group decision-making, ie, who can decide about what. Thus, conservative theory deals heavily with issues of the allocation of group resources, obligations and associated risks.

    Rent-seeking would come under the category of ‘Courtier Behavior’ (for want of a better name). Courtier behavior involves using the hierarchy and culture of the group to maximize the individual’s pro rata share of group resources. In this category would belong social climbing, ‘yes-man’-ing, ass kissing, face timing and rent seeking. All of these seek to use the hierarchy of the group and selective access to information to direct resources to a given individual or faction. It’s all about maximizing the pro rata share of group resources by working the system.

    There is much, much more to conservative theory, but I think that gives an initial sense of it.

  45. Gravatar of Eliezer Yudkowsky Eliezer Yudkowsky
    21. February 2016 at 17:29

    So, question. Why do central banks *think* they are supposed to hit their 2% inflation target? I mean, what do they consider themselves to be doing if not ensuring sufficient money-flow/NGDP? Do they think they’re trying to decrease the value of debts to help their economy deleverage, or something else where 1.5% inflation seems pretty much as good as 2% inflation? What’s the story as they see it?

  46. Gravatar of ssumner ssumner
    22. February 2016 at 07:23

    Jose, I agree.

    Steven, You said:

    “Thus, if a group can produce more than the sum of its members individually, then we have reason to construct a group.”

    Isn’t that just Coasian economics?

    Eliezer, Good question and I don’t have a complete answer. I would mention two possibilities:

    1. When inflation got high in the 1960s and 1970s, people tended to think that inflation was “the problem”, not fast NGDP growth. I’d argue this is a fallacy, as it confuses the broad problem of nominal instability, with the “housewife” view of inflation–that it reduces living standards. The Fed actually can’t do anything about the sort of supply-side inflation that reduces living standards. And the problems flowing from demand-side inflation are arguably better proxied as resulting from high and unstable NGDP growth.

    2. Early research on nominal shocks and business cycles was seen as inconsistent with the sticky wage theory, for the wrong reason in my view. They found real wages were not consistently countercyclical, as the sticky wage theory seemed to predict. But in 1989 Steve Silver and I showed that real wages were countercyclical in the face of demand shocks. In any case, attention turned to sticky price models. In those models there was sometimes a sort of “divine coincidence”, where stable inflation also led to smoothing of business cycles, thus hitting both sides of the Fed’s mandate.

    In my view stable NGDP better smooths the cycle, and better addresses the “welfare costs of inflation”.

  47. Gravatar of Christian List Christian List
    22. February 2016 at 13:37

    @ssumner
    “Both Sanders and Stalin called themselves socialists, which shows that the term is pretty elastic.”

    That’s another great example. It’s weird because I was actually thinking the exact same thing. But my emphasis/focus is a bit different:

    Sanders and Stalin call themselves socialists, so there’s nothing wrong with calling them socialist. It’s not a meaningless insult, it’s exactly how they want to be called. (I think this says a lot about Sanders).

    The terms “fascist” and “fascism” are totally different. The terms were used for a very shot period by Mussolini but both terms were (and are) mostly defined by its opponents. That’s a very important point I think. Socialism is mostly defined by it’s supporters, Fascism is mostly defined by its opponents – and used as an insult.

    Or as George Orwell wrote in 1944: “The word ‘Fascism’ is almost entirely meaningless … almost any English person would accept ‘bully’ as a synonym for ‘Fascist’.”

    Orbán calls himself a conservative, so I think you need to have a very good reason to call him a fascist. – The problem is that there is no good reason at all.

    “but it’s just as obvious that he has fascist tendencies”

    American Presidents have “fascist tendencies”, too. That’s not because they are fascists but because the have a lot of authority and power – and because their ideologies allow them to use this power in pretty authoritarian (aka “fascist”) ways. Obama for example has the power of life and death directly in his hands – a power Orbán does not have at all. Obama is using this power in the authoritarian ways I mentioned – think of the death penalty, think of his drone strikes.

    Does this make him a fascist? No, it doesn’t. It’s just that American conservatism and American progressivism both have pretty deep authoritarian roots/tendencies. The same applies to Hungarian conservatism. Orbán is a very typical Hungarian conservative – without the death penalty and the drone strikes.

    There’s a party in Hungary that could be called fascist. It’s called “Jobbik”. But this party has nothing to do with Orbán. Jobbik got the very two characteristics that are essential for a fascist party. First: Their party members wear black uniforms and are organized in paramilitary groups. For them violence is just another way of continuing the “political debate” against their opponents. Second: You can be pretty sure that Jobbik won’t care for elections anymore as soon as they grab enough power.

  48. Gravatar of ssumner ssumner
    22. February 2016 at 15:00

    Christian, Yes, I’m using it as an insult.

  49. Gravatar of Steven Kopits Steven Kopits
    23. February 2016 at 12:26

    “Isn’t that just Coasian economics?”

    Yes, absolutely. I wasn’t trying to be original, but rather to state something obvious.

    But here’s the critical thing, Scott. Coasian economics are the principal drivers of evolution in social animals. Language and the very concept of agency derive from increasing returns to scale. Indeed, increasing returns to scale explain the very nature of multi-celled creatures. So conservative (group) economics is all about agency. So we would ask not, “What does the rational principal do?” but rather “What would the rational agent do?” And these yields differ results.

    Susan works all day and comes home. She’s dead tired. So she takes a nap. Mom works all day and she’s dead tired. What does she do? Make dinner. Same person, different result.

    Liberal economics is about the individual as principal, Conservative economics is about the individual as agent, and the agent’s relationship to the group.

  50. Gravatar of Darth Jimbobway Darth Jimbobway
    23. February 2016 at 14:35

    Just curious, is the Federal Reserve prohibited from buying certain kinds of assets? Could it buy guns, art, and real estate as well?

  51. Gravatar of ssumner ssumner
    25. February 2016 at 13:10

    Darth, I’m not sure precisely what they can buy, perhaps someone else can answer that question.

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