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Scott Sumner: January 2015

An Author Archive by Month (19 entries)
After my previous post, commenters James (in London) and Jeff directed me to the official CBO forecasts of August 2012, with and without austerity: CBO's Baseline: Taking into account the policy changes listed above and others contained in current law,... MORE

I'm seeing lots of comments to the effect that the 2013 austerity was not a big deal, and or the dreaded "fiscal cliff" never happened. OK, let's see some numbers. After all, if my critics just know that I am... MORE

Stone Age Economics

Labor Market
Scott Sumner
Back in 2000, Robin Hanson wrote a paper entitled "Shall We Vote on Values, But Bet on Beliefs?", which offered a way forward for economics in the 21st century. Unfortunately his ideas were ignored (and even ridiculed) and today we... MORE

Monetary offset: Reply to my critics

Fiscal Policy
Scott Sumner
Not surprisingly, there has been lots of criticism of my claim that the Keynesian test of 2013 failed. Let me respond to some of the points: 1. I was accused of cherry picking dates, as I compared growth in the... MORE

The Keynesian shell game

Fiscal Policy
Scott Sumner
Ever since the spectacular implosion of Keynesian economics in 2013, I've seen increasingly desperate attempts to somehow salvage the model. In this post I'll outline some of the arguments that I run across, and explain why they are misleading. I... MORE

Ralph Hawtrey

Monetary Policy
Scott Sumner
When I was appointed director of the monetary policy program at Mercatus, I was given the opportunity to name the "chair" I will occupy. Tyler Cowen made several suggestions, from which I chose Ralph Hawtrey, an outstanding British monetary economist... MORE

Exchange rate pegs are usually a bad idea

Monetary Policy
Scott Sumner
Tyler Cowen has a post discussing the pressure being placed on the Danish krona, which is pegged to the euro: And if the Danes cut their peg, I am loathe to call this a "mistake" (even though it likely will... MORE

Central banking in a negative seignorage world

Monetary Policy
Scott Sumner
In the standard model, central banks earn seignorage (sometimes called "inflation tax revenue") because their liabilities (cash and bank reserves) pay zero interest and their assets (government bonds) are interest earning. Thus imagine the Fed back in 2007, with a... MORE

In most areas of life, lofty goals require hard work. Monetary policy is the exact opposite. The more modest the objective the harder a central bank must struggle to achieve those objectives. For instance, the Reserve Bank of Australia has... MORE

I see at least three problems with macro, as practiced at the elite level: 1. Academics who don't know the stylized facts of macro over the past 100 years. (Fifty years is not enough, as most of the great natural... MORE

Last November a lot of pundits were telling us that falling oil prices were good for the economy. I criticized that view: Rising oil production is likely to lead to faster global growth. Falling oil production is likely to lead... MORE

There is probably no issue in macroeconomics that is more misunderstood than the zero interest rate environment. Let's go over some of the misconceptions: 1. Most people correctly understand that the zero bound is bad news for monetary stimulus, but... MORE

It's all in EC101

Scott Sumner
Here is the mainstream media: WASHINGTON (AP) -- This isn't explained in Econ 101. Month after month, U.S. hiring keeps rising, and unemployment keeps falling. Eventually, pay and inflation are supposed to start surging in response. They're not happening. Last... MORE

Simon Wren-Lewis on expansionary austerity

Fiscal Policy
Scott Sumner
Everyone from market monetarists to Jeffrey Sachs have recently been pointing out that the Keynesian predictions about austerity have been shown to be incorrect. Now Simon Wren-Lewis has a post that tries to salvage the Keynesian model. Unfortunately he fails... MORE

Sympathy for the top quintile

Income Distribution
Scott Sumner
Paul Krugman often seems more interested in the plight of the America working class than the welfare of much poorer residents of developing countries. For instance, he's argued that lower immigration rates after the 1930s helped the American working class... MORE

Today it was announced that the Japanese eurozone economy had officially slipped into deflation, although as Paul Krugman pointed out the problem is not new at all. If you look at fundamentals such as inflation expectations embedded in the bond... MORE

Tax dodging and currency

Money
Scott Sumner
David Henderson has a recent post discussing the costs and benefits of tax avoidance. Here I'll discuss a similar issue, the pros and cons of hand-to-hand currency. In an earlier post I argued that eliminating currency would solve the "zero... MORE

Be skeptical, be very skeptical

Macroeconomics
Scott Sumner
I just returned from vacation and have some catching up to do. In the meantime let me point to a post over at Coyote Blog that relates to my recent post on the US recovery. The post begins by pointing... MORE

Slate.com linked to a group opposed to the penny: According to the U.S. Mint's 2011 annual report, the current cost of a penny is 2.4 cents per coin. With nearly 5 billion pennies minted in 2011, the U.S. spent almost... MORE

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