At the AEA meetings . . .
I don’t expect to do much blogging in the next few days, as I’ll be at the AEA meetings. Here’s a few interesting posts:
1. Bill Woolsey discusses Divisia indices. I found this very helpful in terms of getting a better sense of what they are all about. However I believe Bill confused weights and prices in his first paragraph. William Barnett provides lots more explanation in the comment section of this earlier post. He literally wrote the book on Divisia monetary indices.
2. The Fed may be about to take some baby steps toward an explicit target. Unfortunately the steps are so tiny that the policy may fail for reasons explained by David Beckworth.
2. Bryan Caplan has a very powerful critique of Jonathan Gruber’s book on health care reform. I’m in awe of well-informed bloggers like Caplan; I don’t know how they are able to read so much. I’m not quite as bad as a former department chair I had (who used to boost that he’d written more books than he’d read) but that’s only because I have yet to publish my first book.
3. Ryan Avent says some nice things about this blog. I read his post after the Caplan post, and it made me realize that my success must be partly due to luck. I’m simply not as talented as most of the bloggers that I like to read. I think I do have good intuition about monetary economics, but I also believe that much of my success is being in the right place at the right time with the right set of tools. The most important tool is an understanding of the importance of nominal shocks, i.e. monetary shocks. I often read macroeconomists who seem much talented than me, but miss the big picture. No matter how much macro you know, you don’t know anything unless you understand monetary economics. You need to be able to see the economy as a real phenomenon, and also as a monetary phenomenon, and have a sense of how the two fit together. Almost like the vase/profile optical trick. You need to understand that almost everything we see in the news regarding “the economy” is a monetary phenomenon, even though the real side of the economy is 10 times more important. Matt Yglesias points out that we are richer than in 1998, but we feel poorer. That’s because we notice the monetary shocks that make us poorer much more than we notice the real shocks that make us richer.
Most macroeconomists simply can’t believe that something as seemingly trivial as nominal shocks could generate the macro instability that we all obsess over. But it’s true. If it weren’t there’d be lots of mini-recessions in the US. Instead they almost never occur.
PS. I’ve been so busy that I haven’t had time to focus on Nick Rowe’s burden of the debt argument. Last night I finally figured out what he was driving at, and now think he’s right.
I will try to get to comments, but expect long delays.
Tags:
4. January 2012 at 21:33
Scott, as a layperson reader, let me give you my two cents about why I think you are successful.
1. You explain your ideas painstakingly and often and in a range of relevant contexts.
2. You critique and discuss other bloggers’ views, giving their posts their most favourable interpretations and explaining where you disagree and why, freely admitting what you don’t know
3. You respond to comments promptly, patiently and politely
4. You have passion and zeal, which is a good thing in combination with the above
I wouldn’t call all that luck. I would call it conscientiousness and good faith, the secrets of success in many fields. A lot of academic bloggers are not able to manage their egos sufficiently to emulate your performance.
4. January 2012 at 22:11
I really like this “That’s because we notice the monetary shocks that make us poorer much more than we notice the real shocks that make us richer.”
5. January 2012 at 01:35
Scott, I second Rajat’s points completely. Hardly any blogger out there takes this much effort to explain and convince, with very little (OK, a little sometimes!) smugness about it. You do in writing, in your blog, what an ideal PI would normally do with his grad students in informal discussions. No one does that, certainly not _real_ PI’s to _real_ grad students.
5. January 2012 at 03:10
“Matt Yglesias points out that we are richer than in 1998, but we feel poorer. That’s because we notice the monetary shocks that make us poorer much more than we notice the real shocks that make us richer.”
That’s because Matty is a liberal and so are his surroundings.
Conservatives KNOW we are better off, we know how we got here, we know what really matters, and that’s why we don’t spend any time worrying about the plight of those at the bottom.
Technology and its productivity advances are the only thing that improve the lot of man. Conservatives are able to rationally hold on to this fact, and it gives them a clear view of 1998 vs. 2012.
To Matty the free cheese of yesteryear tastes better than the free cheese today – in fact, the free cheese hasn’t tasted as good since 1996 when Bill Clinton ended the Welfare Queen as we knew her.
5. January 2012 at 04:10
“I’m not quite as bad as a former department chair I had (who used to boost that he’d written more books than he’d read) but that’s only because I have yet to publish my first book.”
So, after you have published your first book, will you then be able to boost like your former department chair? =)
5. January 2012 at 05:20
That is because Yglesias is Panglossian. Who is the “we” who are better off? I remember Burger King hiring in at 8.00/hr in 1998. It is 7 or 7.50 today, in nominal dollars. A real wage cut for many. Starting salary for a GM line worker was 20/hr, today it is 12 or 14. Again nominal dollars. If you are one of those workers is this the best of all possible worlds?
5. January 2012 at 05:37
Dear sir,
Just discovered your site via the Economist. The issue is not monetary policy per say.
The issue is the change in the capital structure that occurs at moments in time due to credit default swaps.
The combination of buying bonds and selling default swaps provides a higher yield than buying bonds alone. This has the effect of transferring capital from risk taking equities to yield strategies among other things.
This capital structure change is driving the economic condition we are facing.
If you have the ear of the FED this dynamic is the most fundamental change between now and the 30’s.
Yours Sincerely,
Adrian Burridge
CanadianInvestors.com Inc.
5. January 2012 at 07:08
‘No matter how much macro you know, you don’t know anything unless you understand monetary economics…You need to see the economy as a real phenomenon, and also as a monetary phenomenon. You need to understand that almost everthing we see in the news regarding the economy is a monetary phenomenon even though the real side of the economy is ten times more important.”
Thanks so much for these words. When I began my studies almost eight years ago, I would call money the ‘crest of the wave’. Just for fun I would collect newspaper articles that seemed completely different on the one hand but always had an underlying reality…not enough money! That became my obsession: how to get things done in a world that never has enough money? So you reminded me today that I have to be patient even though I am climbing the walls, to just complete my work before I go back out into the ‘real’ world. Perhaps it means a couple more years of figuring this all out.
5. January 2012 at 07:14
Most macroeconomists simply can’t believe that something as seemingly trivial as nominal shocks could generate the macro instability that we all obsess over.
they don’t believe it, or don’t care and look to set a zero inflation rate hoping to wring out nominal rigidities?
A lot of the literature on the theory of nominal rigidities (for example lock-in contracts) also asserts that the optimal inflation rate is zero (in order to “wring out” the rigidities, as one fed member put it). then there are menu costs, shoe-leather costs… but in a lot of these models the optimal inflation rate is still close to zero. Even when there is an averse productvity shock that results in deflation, some assert that the resulting deflation merely results in redistribution from debtors to creditors. The fact that debtors can no longer pay their debts to a bank that is leveraged to nominally denominated contracts, resulting in (potentially) a massive credit contraction…just hold more capital or ration credit!
maybe they don’t believe it, but my inclination is the latter, they would prefer zero inflation to wring out the nominal rigidities (after all, the debt-deflation channel for financial instability really goes back at least to Fisher). I think it comes down to incentives. every academic and Fed economist feels the minor cost of a small inflation rate, none feel the sting of unemployment (its their own fault for losing their job, after all). just my opinion.
5. January 2012 at 07:29
… in other words, to really convince certain people, I think its necessary to convince people unemployment incurs a much higher welfare cost than assumed and that nominal rigidities are a permanent feature of the economy that can never be wrung out no matter how deep or severe the recession.
5. January 2012 at 07:31
Benny, you really think Burger King workers is the measure of things?
Ok, let’s look at the Big Mac Index from 1998:
http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0CDUQFjAB&url=http%3A%2F%2Fciteseerx.ist.psu.edu%2Fviewdoc%2Fdownload%3Fdoi%3D10.1.1.194.3613%26rep%3Drep1%26type%3Dpdf&ei=MsEFT7LfOez4sQLDq6GQCg&usg=AFQjCNEBcaA2RA2JhDY5j0s7c1fziNx-qA
5. January 2012 at 07:54
dwb, it is hard to convince people about Unemployment because:
1. Inflation hits us all.
2. The least productive workers are the ones unemployed.
The correct solution is my Guaranteed Incomes system to auction the unemployed.
The incorrect solution is to ask everyone to have their money be worth less to make believe the least productive are profitable a the labor rates they feel comfortable with.
5. January 2012 at 08:02
dwb,
I find it completely crazy that a trained economist would believe you can “wring out” nominal wage rigidity by keeping inflation at 0%. What basis would one have for this thinking, in either empirical data or theory? It strikes me as completely wishful thinking.
5. January 2012 at 08:34
Johnleemk I don’t think what dwb said is true.
Now, in /really simple/ NK DSGE models, there is a theoretical basis that zero inflation prevents nominal rigidity from having any distortion on output, because it becomes irrelevant under that scenario. However the idea that stabilizing prices will stabilize output under this situation is regarded as a ‘divine coincidence’ (read unlikely) by NK economists, because this requires setting the nominal interest rate to the ‘natural one’. This results in two problems, it is often impossible to observe the real interest rates. Secondly, equating the interest rates results in a set of simultaneous equations where zero inflation is ONE solution, but one of many, as other equilibrium solutions exist due to self fulfilling expectations. As such, optimal policy rules like that are regarded as unrealistic, and instead they prefer simple rules, such as the Taylor rule.
5. January 2012 at 08:38
Err sorry, that should read “it is often impossible to observe the NATURAL real interest rate”
5. January 2012 at 08:54
I’m sure luck has had something to do with it, but I notice that the more persistently you blog, the luckier you get.
5. January 2012 at 09:59
I find it completely crazy that a trained economist would believe you can “wring out” nominal wage rigidity by keeping inflation at 0%.
Google search Poole and “is inflation too low?” {keep in mind Poole is talking about zero actual inflation vs zero measured inflation}
its not crazy in the slightest. it depends entirely on what you think causes unemployment or nominal rigidities. If you think its caused by nominal wage rigidity, then after a period of adjustment of sticky wage contracts and only a minor welfare loss all should be well and we should be back to full employment. How’s that working out by the way?
“Furthermore, it is plausible that downward rigidities, if present, would decline over time as monetary policy achieves credibility for maintaining a low-inflation regime.”
http://kcfed.org/PUBLICAT/ECONREV/PDF/2q08billi_kahn.pdf
see the section on sticky wages:
“…These effects would continue until the labor contracts
expired and new money wages could be negotiated,
taking the new expected inflation rate into account”
http://www.minneapolisfed.org/research/qr/qr1431.pdf
5. January 2012 at 10:18
Are you presenting at AEA? I work across the river, so if you need an entourage, let us know! I have all this leftover face paint due to the tragic downfall of the 2011 Chicago Bears season…
5. January 2012 at 10:31
I find it completely crazy that a trained economist would believe you can “wring out” nominal wage rigidity by keeping inflation at 0%.
as i say above, it depends entirely on what you think causes unemployment or nominal rigidities.
there is a post awaiting moderation from our esteemed host because it has two links, meanwhile here is another with a embedded link to The Macroeconomics of Low Inflation:
“In other words, those who think that once people just believe that wages and prices can fall, then wages and prices will miraculously become flexible, and the world will approximate a flex-price New Classical model, might be disappointed.”
http://www.econbrowser.com/archives/2010/08/downward_wage_r.html
so … yes, there are trained economists who believe that recessions will magically make the economy (e.g. wages) more flexible.
5. January 2012 at 11:19
“Benny, you really think Burger King workers is the measure of things?”
Did I say that? Or are you just trolling?
5. January 2012 at 12:12
No not trolling, its just that I’m more concerned with the number of Burger King workers that have a smart phone.. that’s what matters.
Once someone has a smart phone, the world is their oyster.
As to GM hires, well the UAW retirees are the ones screwing them… that’s just what happens with Defined Benefit plans and population fluctuations… end DBP and seniority based pay and you get far more productive results…. smart phones get cheaper faster…. and that’s what REALLY matters.
You don’t concern yourself with the advancement of technology, so you miss the important stuff.
5. January 2012 at 12:21
Great news – 50% of world’s richest 1% live in US.
http://money.cnn.com/2012/01/04/news/economy/world_richest/index.htm
Do we rock or what?!?
5. January 2012 at 12:37
Morgan – that is cool. I wonder if the individual who pulled that together has data that would go back far enough to show a time when that wasn’t the case.
5. January 2012 at 12:37
Scott…
First, Yglessias must be citing data on Mean income, not median… Big difference due to the massive increase in wealth inequality in the interrum. I’m really surprised. He’s also cherry-picking time period.
http://upload.wikimedia.org/wikipedia/commons/8/81/U.S._Real_Median_Household_Income_by_Race_and_Ethnicity.JPG
If you pick 1989, and you then extend the chart to 2010, median income is essentially flat. However, this is median income assuming the CPI basket of goods, which is bogus given fuel and food prices. 1994 was a dip, leading to a _slight_ improvement. MOREOVER, I will argue this is a current-consumption based approach, not a future-consumption based approach, and as such discounts the massive increase in debt levels over that time (primarily driven by per-household share of federal debt). So I must say, Yglessias is being a bit disingenuous.
Caplan’s critique is good, and is more or less unchanged since 2009 when the obamacare debate was in full swing. Yet no one has the wherewithal to determine who will live and who will die. There is simply no more salient political issue.
Caplan, however, does not give full credit to an element of reality that is rooted in psychology (and, hence, behavioral economics). We _know_ that human decisions are biased by immediacy. Moreover, marketers exist in order to create immediacy. The immediacy of cancer therapy that costs 200k over 6 months drives that choice instead of spending the 200k on healthier lifestyle for several children. Many private companies exist purely due to the immediacy bias of human decision making (to create or exploit it).
This is not simply time immediacy, but immediacy of narrative too. We may KNOW the facts regarding CAT scans, but one story of someone who’s life was saved by an unnecessary CAT scan can undo all of the motivational aspect of that knowledge. We are irrational, and we can’t help it, and companies profit from this – and, indeed, from encouraging irrationality.
One of the arguments that Caplan fails to make well, however, is that – when properly structured – markets can create immediacy in actions that are long term. The bond market does this, for example, with regard to disciplining government spending. Thus, someone who might not respond to a 100k heart treatment cost in 20 years might respond to a 1k cash payment for losing 20 pounds and keeping it off for 6 months. Cash payments for smoking cessation do actually help. The issue becomes separating controllable and uncontrollable risks. This is the fundamental piece that government needs to do, and is proving unable to do. Once the risk is separated, private industry is much better at reducing the controllable risk than govt. programs.
That was the great dissappointment of obamacare. That, and the refusal to establish any rationing – monetary or otherwise. By contrast, Britain is simply refusing to pay for certain drugs (like Avastin for certain indications). We can’t manage to do that in the US.
I am dissappointed that one of the fundamental lessons of 1994 – the clinton/gore years – was lost, which is that properly structured oversight can get the private sector to work with instead of against the interests of the public even in cases where there are deep rent-seeking incentives.
5. January 2012 at 12:43
I’ve been following the Rowe debt debate quite closely, and contributed a bit as well. If you only have time to read one article, read this one. Each side disagrees about the fundamentals less than they think they do.
5. January 2012 at 12:49
Hi scot:
For those of us attending the aea meetings as well, do you have any recommended sessions? Alternatively, any times that you will be available to speak?
Thanks
5. January 2012 at 13:10
“Most macroeconomists simply can’t believe that something as seemingly trivial as nominal shocks could generate the macro instability that we all obsess over.”
I think this is absolutely one of the biggest reasons why the monetary nature of this recession hasn’t been getting much play among many macroeconomists. I’m an undergraduate right now, and I just started an Advanced Macro course taught by Ed Prescott, probably the smartest professor I’ve ever had (I realized this after about ten minutes). He started class off by asking students right off the bat what the cause of the troubles in Europe and the U.S. was, and I piped up that a large part is a failure of monetary policy. He responded by largely brushing off a lot of what the Fed was doing as irrelevant, and said that our first goal should be to build models that “abstract away from things like money” and get to the REAL factors that are underlying what’s going on. That was the last time money was mentioned during the lecture.
I think that his response most of all helped me realize what the issue is: since Econ 101 all of us Economics students have it drilled into us that money isn’t important to “what’s really going on.” The fact that it’s true and relevant and essential to understanding the economy is a large part of why it has to be drilled in from the get-go. The problem is, that also produces an instinctual urge to abstract money out of the model entirely, meaning that when there are problems where money actually is relevant, there’s the knee-jerk response of “what are the real factors?” If you go out of your way to make models that either a) treat money as irrelevant or b) treat it as an afterthought, it’s going to be very difficult to actually say much about actual problems stemming from monetary policy failure.
Incidentally, as useful as it is, I feel like the use of the term “Real” can often be very misleading, since it leads people to discount the importance of nominal variables. The only problem is, I don’t think there’s a way to express the concept concisely in any way that avoids that.
5. January 2012 at 13:48
Stats how many people could afford smart phones in 1989? Remember…. that is all that matters
5. January 2012 at 14:01
I’m not quite as bad as a former department chair I had (who used to boost that he’d written more books than he’d read) but that’s only because I have yet to publish my first book.
Written or published?
5. January 2012 at 14:38
@Morgan
“Stats how many people could afford smart phones in 1989? Remember…. that is all that matters”
I’m sorry, are you joking? Remember that CPI is weighted by basket size, but the median family’s allocation to gas/food is higher than the average family’s allocation to gas/food.
ALSO, while the CPI now adjusts for quality improvements in things like computers, it does a poor job of adjusting for quality LOSS in food. For example, rBGH and rBST were introduced by Monsanto to boost milk production. Not everyone agrees with the CPI calculations that the quality was not harmed.
Likewise, we can talk about invisible improvements in the standard of living, but this cuts both ways – the average american spends twice as long in traffic commuting as just a few decades ago. We can talk about the wonders of cell phones, but we don’t seem to talk about the impact on sleep/health/utility of being constantly tethered to clients.
I’m NOT saying the median quality of life has worsened, but it’s NOT clear it’s gotten better.
5. January 2012 at 15:40
Stats, you aren’t getting my point…
There is an exact basket of goods, the have-nots can receive, after which our obligation to concern ourselves with their welfare ENDS – charity does not go on forever.
And we are SOOOOO CLOSE to reaching that full bucket.
A smart phone, a two bedroom apartment, enough calories to grow fat, 500 TV channels (including free college but not college loans), some low grade out of patent health care (think $4K per man per year), and we will no longer have to worry about the middle class haves feeling guilty.
Technology makes it cost less over time to pay off our conscience as it should, because after all, why shouldn’t that get cheaper too?
5. January 2012 at 16:37
“I’m more concerned with the number of Burger King workers that have a smart phone.. that’s what matters.”
Why? This seems completely tangential to my argument. I’m pretty sure now that you are trolling.
5. January 2012 at 16:43
StatsGuy,
Yglesias thinks that eliminating a manufacturing job that pays 40/hr and replacing it with a job as a yoga instructor making 13/hr is ideal. Moreover he thinks the yoga instructor has artificially restricted the labor market for yoga instructors and that there should be more of them, and they should earn less. And that this is ideal.
If you look at median household income from 2001 to 2010 it declined in real dollars, but real cost of living expenses like gas has increased. Thus there is a real decline in purchasing power, which explains a lot of the appeal of the goldbugs and their talk of inflation.
That some smart people can’t figure this out still amazes me.
5. January 2012 at 16:54
@Benny Lava,
Morgan is not trolling. He has a colorful way of making his argument but it is entirely serious. If you can work a minimum wage job and support yourself with a fairly basic lifestyle and a smart phone, you’re extremely well-off by historical standards. Moreover you have instant access to the vast majority of human knowledge through your smart phone’s internet connection, and thus the tools to better yourself if you’re motivated. If you’re not motivated to benefit yourself, society certainly has no obligation to MAKE you better off.
5. January 2012 at 18:36
Cthorm, the question is if you get it, what mental part of Benny keeps him from getting it?
Benny,
Look dude, Matty is a young man on an intellectual journey to becoming a libertarian. It is fun to watch for me, for you it is instructional.
Just as with the smart phone argument, which you literally can’t comprehend, what Matty is coming to terms with is this:
1. global workforce competition drives down value of manufacturing UNTIL we 3D print and robot everything here and don’t even need cheap assed Chinese iPad makers any more. This means THERE IS NO $40 per hour manufacturing job. It’s GONE. Like the buggy whip. And you are an buggy whip fetishist. And no we aren’t gong to freeze capital or play protectionist to hold on to the past.
2. This means that service jobs ARE WHAT IS LEFT for the bottom half on American workers… BECAUSE service jobs have to be local – I need the massage / gym within 5 miles of me.
It also means we want to let every single person on the planet with the skill set to earn say $50K a year to move here, so we can let our bottom half cut their hair and teach them yoga… more rich talented people living here = more demand for local service labor.
Benny don’t fret, I advocate a Guaranteed Income for every citizen who wishes to work in America:
http://biggovernment.com/mwarstler/2011/01/04/guaranteed-income-the-christian-solution-to-our-economy/
5. January 2012 at 18:57
Cthorm,
Sorry but Morgan most certainly is a troll.
“If you can work a minimum wage job and support yourself with a fairly basic lifestyle and a smart phone, you’re extremely well-off by historical standards.”
This I understand, but this is really quite irrelevant to my thesis. The fact that Morgan tries to purposefully misconstrue my argument and then call me stupid is a classic troll move. I am sorry that I took the bait.
5. January 2012 at 19:06
Never thought I’d see Morgan get posted on an MMT site.
http://mikenormaneconomics.blogspot.com/2012/01/morgan-warstler-on-guaranteed-income.html
Bwahahaha
5. January 2012 at 19:53
Dustin, deep down MMT hates my GI, it auctions excess labor to the private market, the whole thing is worthless / ruined if the 25M recipients go to work for state run jobs. MMT is about gvt. control, nothing else.
Benny, I didn’t call you stupid. I did NOT call you stupid. I am saying you have true mental block to the obvious argument I was making… hell if you just read my follow on posts, you’d see:
“There is an exact basket of goods, the have-nots can receive, after which our obligation to concern ourselves with their welfare ENDS – charity does not go on forever.
And we are SOOOOO CLOSE to reaching that full bucket.
A smart phone, a two bedroom apartment, enough calories to grow fat, 500 TV channels (including free college but not college loans), some low grade out of patent health care (think $4K per man per year), and we will no longer have to worry about the middle class haves feeling guilty.
Technology makes it cost less over time to pay off our conscience as it should, because after all, why shouldn’t that get cheaper too?”
Either you were not a careful reader, or you see the words, but you don’t imagine the seriousness of them, can’t imagine the serious of them.
But to any rational discussion, they are certainly within the boundaries of that-which-must-be-refuted (or it is correct).
Note: I’m being more liberal than Vint Cerf, who argues Internet Access isn’t necessarily a human or civil right:
http://www.nytimes.com/2012/01/05/opinion/internet-access-is-not-a-human-right.html?_r=1&pagewanted=all
—–
Benny, the Internet changes fundamentally the ability of the left to demand an endless supply of goodies for their voters.
We’re very close to an Internet that caps what more the have-nots receive, allowing “income inequality” to soar past your greatest nightmares, because consumption equality will be so readily provable.
5. January 2012 at 21:49
Hey Morgan,
Was just about to drop you a line about the MMT post but I see Dustin beat me to it.
Over the last week or so, MMT supporters have been divided into two camps– those with Bill Mitchell/Warren Mosler who think a govt job guarantee is a core MMT policy and those with Cullen Roche/John Carney who think that’s a stupid idea, that American doesn’t need 5 million more TSA agents.
http://www.cnbc.com/id/45872602
Anyway, this afternoon I left a comment at that site (which precipitated the linked post) pointing out the only sort of job guarantee that could ever pass Congress would look like your GI plan.
I didn’t also point out that they should embrace you and seek your mentorship. Its more powerful when people figure things like that on their own. :o)
6. January 2012 at 06:46
beowolf, I’m amazed because I can’t fathom there are MMT folks who aren’t dirty hippies.
Altho, thinking back, there are a few who found it strange that I was so focused on the gvt. power side of their grand plan. So maybe there are some who come to it without grokking the deeper motives of Mosler and his ilk.
We’ll have to have a GI eventually, it is the only thing that embeds the Protestant work ethic into our welfare system. And once you assure voters that everyone is working, everyone has a boss, everyone has someone trying to find a return in their labor… you gain the social cohesion that a large mixed nationality country is missing.
6. January 2012 at 08:53
Scott, congrats for having gotten a favorable report card in the current issue of the London Economist.
6. January 2012 at 10:53
It is time Market Monetarists define the debate.
What the Fed and other monetarists are practicing is “theo-monetarism.”
Theo-monetarism, as practiced, is resulting in recessionary deflations in Europe and the USA, and a Japan-like economy.
Japan has an extremely strong yen. Japan has had 15 percent deflation in the last 20 years. Japan’s manufacturing output has fallen 20 percent in that time period, while stock and equity markets cratered by 80 percent. Banks suffer continual losses on real estate and loans in nominal yen.
You call that “theo-monetarism.” A faith that an undefined, oblique, ad hoc “tight money” policy works, despite abundant empirical evidence to the contrary.
Theo-Monetarism is a faith-based monetarism, for those who genuflect to gold and worship the idea of a stagnant paper currency.
6. January 2012 at 14:04
Morgan –
“Technology makes it cost less over time to pay off our conscience as it should, because after all, why shouldn’t that get cheaper too?”
… I get your point, but you forgot about video games. Absolutely crucial, fortunately very cheap, or free.
6. January 2012 at 15:09
@StatsGuy
With a subscription to OnLive the proles can even play graphic-intensive video games on their smart phones.
6. January 2012 at 23:52
“I’m amazed because I can’t fathom there are MMT folks who aren’t dirty hippies… deep down MMT hates my GI, it auctions excess labor to the private market, the whole thing is worthless / ruined if the 25M recipients go to work for state run jobs.”
Ha ha, you really should check out some of the MMT threads on this topic. I won’t bother linking, just google MMT JG and enjoy the schadenfreude.
“I was always under the impression that it had two components. The descriptive and the prescriptive. But now it’s becoming evident that MMT as originally conceived, is social capitalism… But now it’s clear that it’s not two parts at all. That’s bull shit. We’ve been totally misled. I feel like the MMTers have used this to push a political agenda. I FEEL DUPED!”
And on the other side, Job Guarantee supporters were horrified after I pointed out their only hope was to embrace MMT, Morgan Monetary Theory.
“I call Morgan Warstler a “Darth Vader Marxist”. Those are folks who seem to accept a whole bunch of Marx’s theorizing about class warfare, but who then try to encourage everyone to join the dark side of the greedy capitalists.”
7. January 2012 at 07:25
beowulf and morgan,
the sad thing is the equality aspect. If the MMTers truly believed in equality (some do but perhaps have not thought of it this way) and so sought to find equal time with one another through knowledge based skills, they would actually find the wealth they dream of.
7. January 2012 at 11:59
Read a bunch of it… eventually populations always learn, today is actually better than yesterday, its WHY I say Scott was wrong to assert the we’d get the same “BigGov” harms out of the crisis as we did out of the GD.
Frankly, I view GI as a perfect wedge issue in modern progressive thought.
Yes, it’ll fuck unions, particularly the public employee unions, because you’ll get all kinds of super low cost privatized shit like park clean-up, and janitorial services in public buildings, public transportation, etc.
BUT, it’ll make people LOVE public buildings, public parks, public transportation.
If you just dropped a geo-fence on labor, like you can’t be made to work at a place HQ’d more than 2.5 miles from your home, you’d get tons of upside from minority based businesses that would be closest to the low cost labor… without needing to run affirmative action.
You’d get a natural way to keep the elderly working, without putting onto coal miners… we can clearly define between strenuous jobs and non-strenuous jobs, and still keep 70 year old SS recipients doing something, they quit the coal mine, and their neighbors hire them to shuttle their kids around after school, fold laundry, maybe they answer the phone for a local biz.
The things is, to 20% of the population, they see 25M folks being auctioned in $40 per week auctions, and all they can think about is stuff they could do with this resource.
Needing to set up a bureaucracy to find PUBLIC works jobs for these people is like needing to find somebody to screw a Playmate.
All roads lead to Rome.
7. January 2012 at 12:47
Dude economics just got SO MUCH MORE fun!!!!!
And you were there Scott!!!
http://rogerpielkejr.blogspot.com/2012/01/revolutionary-coi-disclosure-from.html
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The upshot of this, is that we’re far more quickly going to evolve into my hegemonic political-economy analysis.
Real economists, do their best to describe the free trade of man, the free market, as a science. The market is GOD, and they are but humble priests.
Everyone else despises the free trade of man, HATES GOD, and calls their Satanism economics. If your concern is getting more for the folks at the bottom, if you concern is greater power to non-business people, what you do is not economics.
Economics is not sociology. Economics is not about justice. Science is not about justice. Math doesn’t care what happens to the lazy, ignorant, or timid.
7. January 2012 at 16:15
I always thought the way to figure out whether we are better off is instead of taking a bundle of goods from 1962 and pricing it out in 2012 dollars was instead to take a bundle of goods from 2012 and figure out what it would cost in 1962, e.g. cost of an iPhone if you wanted one in 1962…. umpteen times the entire world GDP.
7. January 2012 at 23:17
“Needing to set up a bureaucracy to find PUBLIC works jobs for these people is like needing to find somebody to screw a Playmate.”
What could possibly go wrong? :o)
In 2009, Obama dedicated $7.2 billion of stimulus funds to build “clean tech” jobs. He vowed to create 5 million jobs over the next decade.
So far, that effort has “created or retained” just 7,140 jobs, according to the Environmental Protection Agency. That’s about $1 million per job… Audit reports by the Energy Department’s Inspector General Office offer some clues as to why: Trying to comply with federal regulations such as the Davis-Bacon Act, the National Environmental Policy Act and the Buy American Act has stalled many projects…
Regulations were a key reason. Federal officials were slow to give guidance, providing it piecemeal over 18 months. And Davis-Bacon laws proved dauntingly complex.
“Many of the smaller jurisdictions we are funding have never had to deal with prevailing wage (issues) so it’s been a huge learning curve for them and requires more assistance from our agency,” Garfield said.
http://www.nationalreview.com/corner/275927/labor-rules-thwarting-green-jobs-agenda-andrew-stiles
8. January 2012 at 15:02
beowulf, I actually sat very very close to the “weatherization” plans Obama put out, and watched them happen at the local level in two different states – places where I knew contractors who actually SAT THROUGH the meetings all the way to doing a couple houses.
Worse than ugly. From catered lunches to administrators letting everyone out of the mandatory 8 hour meetings early, to unions insisting these workers needed $50 per hour, to the labor dept demanding polling done across the country to determine the proper wages… I’m convinced it was weatherization that caused Obama to decide there is no such thing as shovel ready jobs.
Look, when you get a couple of bucks at a non-profit, that is run by some salt of the earth preacher who knows a couple little old ladies who will be GRATEFUL to get their house weatherized, and gets everyone to kinda chip in and get it done at minimum wage… you MAY be able to prove that the cost of weatherization works in that instance.
But at scale, you are talking about the 1M+ professional disability leeches in America that own a home being lined up and each being sold on letting people come in and do this to their house will increase the property value – that they are very likely about to lose to the bank.
It is always like this. Public schools don’t happen by accident.
But everyone one of us has 10 things around the house we’d like to have someone do.. if only there were 30M people unemployed who’d work for whatever we could afford to pay.
8. January 2012 at 21:25
Yeah, after I posted that I came across an even better (that is, worse) article at ABC News:
The Department of Labor spent most of the past year trying to determine the prevailing wage for weatherization work, a determination that had to be made for each of the more than 3,000 counties in the United States, according to the GAO report.
http://abcnews.go.com/WN/Politics/stimulus-weatherization-jobs-president-obama-congress-recovery-act/story?id=9780935#.Twp4ryP5l7E
That’s astounding and it was for a single job classification! Every single job included in govt ELR program would require a separate prevailing wage determination (x 3000).
9. January 2012 at 06:15
Thanks Rajat, John Hall and mbk.
Morgan, I don’t think GOP candidates believe things are getting better.
Peter, I delivered that softball on purpose–thanks for hitting hit.
Benny, I think most people are better off in consumption terms.
Adrain, I don’t agree, and have many posts explaining why–take a look at links to key posts in the right column.
Thanks Becky.
dwb, Most models that consider the welfare costs of inflation merely consider one or two factors, and hence are worthless.
And many economists are simply blind to the obvious money illusion at zero nominal wage growth.
Thanks Patrick.
ChacoKevy, Yes I presented. And the loss of the Bears was no tragedy–when the Packers lose it will be a tragedy.
Statsguy, You said;
“First, Yglessias must be citing data on Mean income, not median… Big difference due to the massive increase in wealth inequality in the interrum.”
I think he used average income, but should have used average consumption, which is highly correlated with median consumption.
Regarding healthcare, I agree that people can be irrational about things like CAT scans, but by far the biggest problem is that people overuse CAT scans because they don’t have to pay out of pocket–and even 40% of the insurance cost is picked up by the Feds because of tax deductibility.
James, Thanks for the link.
Federico, Sorry, I didn’t read this until afterwards.
Alex, Very good observation about real and nominal.
Josiah, It’s written, but not yet published.
Thanks Bob paglee.
Ben, Yes, Theo-monetarism is a good term.
Morgan, It’s science and sociology.
dtoh, Even better, ask people which lifestyle they’d prefer.
9. January 2012 at 07:39
>40% of the insurance cost is picked up by the Feds because of tax deductibility.
That strikes me as a funny way to look at it. It’s not quite as snappy but I’d say:
tax deductibility -> overinsurance -> higher prices (indirect pricing)
and overinsurance -> higher consumption -> even higher prices
So I wouldn’t say the Fed’s pick up 40% of the cost, but that they raise prices 40% and then set a higher inflation rate for that industry forever.
10. January 2012 at 07:13
Cthorm, Good point.