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Scott Sumner: April 2015

An Author Archive by Month (18 entries)

Robots, committees, or markets?

Monetary Policy
Scott Sumner
Ben Bernanke has a good post on the Taylor Rule. Let's start at the end, where he argues in favor of decision-making by the FOMC, rather than a rigid mechanical policy rule: Monetary policy should be systematic, not automatic. The... MORE

The problem with "shocks"

Macroeconomics
Scott Sumner
I recently presented a paper discussing how economists think about the "stance" of monetary policy. That is, what do economists mean by terms like "easy money" and "tight money"? It turns out that the entire subject is just a big... MORE

EconTalk Extra

Finance
Scott Sumner
I'd like to make readers aware of a site called EconTalk Extra. There is a very good recent post by Amy Willis discussing my EconTalk conversation with Russ Roberts. Unfortunately I didn't respond to comments until this morning, as I... MORE

Optimal mutual funds in a world of bubbles

Efficient Markets Hypothesis
Scott Sumner
One argument in favor of the Efficient Markets Hypothesis is that if bubbles existed, it should be possible to make large excess returns by betting on an eventual collapse of the bubble. And the famous counterargument often made is that:... MORE

It's not a beauty pageant

Efficient Markets Hypothesis
Scott Sumner
Over at TheMoneyIllusion I received the following comment: Macro trading is not about getting it right, it is about getting what others think is right. And that can be almost anything ... That reminded me of Keynes's famous claim that... MORE

I recently received this request in a comment section: Slightly off-topic, but Scott you would *love* an idea which is becoming more widespread here in the UK, that the housing shortage here is being caused by "artificially low interest rates".... MORE

Substitute goods and reasoning from a price change

Economic Education
Scott Sumner
David Henderson has a good post on the way that textbooks teach the substitution effect. I have one other bone to pick with principles textbooks---they don't clearly explain to students how to avoid "reasoning from a price change." Start with... MORE

Did the Fed cause the sub-prime boom?

Monetary Policy
Scott Sumner
George Selgin has a new post discussing a paper he wrote with David Beckworth and Berrak Bahadir. In the paper they argue that the Fed set its policy rate too low during the early 2000s, and that this decision contributed... MORE

Over at TheMoneyIllusion I have a long post discussing Ben Bernanke's recent comments on monetary reform. There is one issue that seems especially important, and I wanted to devote an entire post to the subject. Here's Bernanke: I want to... MORE

Is the Fed allowed to create GDP prediction markets?

Central Planning vs. Local Knowledge
Scott Sumner
In the comment section of a recent blog post, David Andolfatto asked the following question: Scott, Does it fall within the Fed's present Congressional mandate to create markets in the instruments you want? (I honestly don't know. If we do,... MORE

The wrong way to fix Social Security

Taxation
Scott Sumner
Governor Chris Christie wants to reduce Social Security benefits for the rich: As part of the plan, he'll propose phasing out Social Security payments for those making more than $80,000 in other income and eliminating them for those making $200,000... MORE

There is no sticky wage puzzle

Labor Market
Scott Sumner
Most people find the NGDP shock/sticky wage theory of the business cycle to be at least slightly plausible. However I'm often asked why wages have not adjusted yet. Surely it doesn't take 7 years for full adjustment to a negative... MORE

Don't blame the workers

Labor Market
Scott Sumner
A popular Keynesian theory of recessions is that nominal wages are sticky, and hence reductions in aggregate demand lead to high unemployment. They often go on to advocate more government spending to put people back to work. Free market economists... MORE

A few weeks ago I criticized a Robert Shiller claim that economic theory tells us that low interest rates should lead to more investment. That's an EC101 level error, reasoning from a price change. Unfortunately, I see this all the... MORE

Ben Bernanke has a very good post on the topic of using monetary policy to stabilize asset markets, with the ultimate goal being greater financial stability. I have a post over at MoneyIllusion that comments on his post, but here... MORE

Germany is "balanced", it's the rest of Europe (and the ECB) that are unbalanced

International Macroeconomics: Exchange Rates, International Debt, etc.
Scott Sumner
In economic theory, there is no particular reason why countries should have "balanced" current accounts. No one cares that California's current account with the rest of the US is usually unbalanced, and often by a sizable amount. Nor should they... MORE

The Great Recession has exposed the fact that many economists believe things that just aren't so. They believe that low interest rates suggest that money is easy. They believe that monetary stimulus is ineffective at the zero bound. And recently... MORE

Michael Darda pointed me to the following statement from Larry Summers (in reply to Ben Bernanke): Successful policy approaches to a global tendency towards excess saving and stagnation will involve not only stimulating public and private investment but will also... MORE

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