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Scott Sumner: June 2015

An Author Archive by Month (25 entries)

Macroeconomics in small economies

Fiscal Policy
Scott Sumner
Like many American economists, I've learned macroeconomics from an American perspective. But America is a very unusual country. For instance, US RGDP growth has averaged about 3% for the past 120 years, if not more. Most business cycles are fairly... MORE

When Americans think about inequality, it is often linked to ethnic differences. Sometimes that's also true in Europe (as with the Roma), but more often the inequality is regional. Perhaps the starkest example lies in Italy, where even in 2007... MORE

Why can't we have nice things?

Labor Mobility, Immigration, Outsourcing
Scott Sumner
If you travel to other countries you might occasionally notice something that you wish the US had. The one I notice most often is good subways. This article caught my eye: Stan Paul, who begins his morning ride to UCLA... MORE

1937 and 2013

Scott Sumner
Bob Murphy has a new post discussing the similarities between the fiscal policy of 2013 (often called 'austerity') and the fiscal policy of 1937, which some Keynesians believe helped cause the 1937-38 depression (which was relatively deep). In fact, there... MORE

Jose Romeu Robazzi recently left the following comment: "IMHO the disagreement between keynesians and monetarists remain the same: both schools identify AD shortfall as a problem, and both schools recommend some sort of intervention (e.g. wealth transfers to sustain AD):... MORE

The "other things"

Fiscal Policy
Scott Sumner
Russ Roberts did a recent post complaining about the way Paul Krugman uses data to support his arguments. Roberts pointed out that when things turn out as he expected, Krugman cites the events as proof of his (Keynesian) worldview. When... MORE

A bit freer today than yesterday

Property Rights
Scott Sumner
This caught my eye: The Supreme Court ruled Monday that a 66-year-old program that lets the government take raisins away from farmers to help reduce supply and boost market prices is unconstitutional. In an 8-1 ruling, the justices said forcing... MORE

The title of this post might seem a bit strange, for several reasons: 1. The tax cut was widely blamed for causing a recession 2. I'm a libertarian that favors low taxes In a first-best world I'd like to see... MORE

Could a well designed euro have worked?

International Macroeconomics: Exchange Rates, International Debt, etc.
Scott Sumner
As the Greek crisis approaches some sort of resolution, it's worth asking whether the euro ever had a chance of working. While we may never know the answer to this question, we do know that a well-designed euro would have... MORE

The Democrats move left

Tax Reform
Scott Sumner
In recent decades, the Republican Party has moved to the right on some issues, notably immigration. More recently, the Democrats have moved left on issues like trade, fiscal stimulus and the minimum wage. And taxes, as the following story illustrates:... MORE

Russ Roberts vs. Simon Wren-Lewis

Monetary Policy
Scott Sumner
I have repeatedly pointed out that the US government did a massive amount of austerity in 2013, and yet GDP growth was higher than during 2012. One would think that Keynesians would have a response to my claim, a response... MORE

Kevin Drum's Third Law is wrong

Macroeconomics
Scott Sumner
Tyler Cowen recently listed three laws, and Kevin Drum responded with variations on Tyler's Laws. Here was Tyler's third law: 3. Cowen's Third Law: All propositions about real interest rates are wrong. And Kevin's version: 3. Drum's Third Law: Really?... MORE

Matt Yglesias on environmental impact regulations

Energy, Environment, Resources
Scott Sumner
Why was the proposed wind farm not built off the coast of Cape Cod? It was stopped by "environmentalists". Why don't we have high speed rail up and down the northeast corridor? "Environmentalists" won't allow it. Of course the real... MORE

Or at least that's the inference I draw from an email sent to me by Zurich resident Marco Salvi: Dear Professor Sumner I would like to bring to your attention that the Swiss voters have rejected today the introduction of... MORE

Interpersonal utility comparisons are unavoidable

Wealth distribution
Scott Sumner
When I advocate policies aimed at redistribution on utilitarian grounds, some commenters object that interpersonal utility comparisons are impossible. Actually they are unavoidable. Consider a policy that almost all well-informed people would support; ending sugar subsidies. Ending sugar subsidies would... MORE

Some progressives complain that American CEOs are overpaid. They point to the fact that the spread between the highest and lowest employee in a Japanese corporation is far lower than in the US. The implication is that if only the... MORE

Market monetarism in Iceland?

Monetary Policy
Scott Sumner
Matt Yglesias has a good post discussing how Iceland defied the conventional wisdom and still did better than countries like Ireland (which is arguably the country that had the most similar economic crisis.) Matt says Iceland did 4 things: 1.... MORE

Economists use the term "second best policy" for a public policy that may not be optimal, but nonetheless might improve things if public policy is off target in other respects. Thus if we don't have a tax on pollution emitted... MORE

Peter Pan in Japan

Monetary Policy
Scott Sumner
Ever since 2009, I've been using the Peter Pan analogy for the expectations channel of monetary stimulus: If I think I can fly, then I can fly. Now the Japanese are adopting this approach: Though lower oil prices have stalled... MORE

The world's three smallest macro models

Macroeconomics
Scott Sumner
In a comment over at TheMoneyIllusion, Britonomist pleaded for a transmission mechanism: I'm sympathetic to market-monetarists, I'd love to be able to believe that problems like low aggregate demand can easily be solved using monetary policy alone even at the... MORE

The (white) kids are alright

Income Distribution
Scott Sumner
This post is about Charles Murray's book entitled Coming Apart, which I have not read. It's a bit presumptuous for me to comment on a book merely based on book reviews. So consider this an initial inquiry, I'm looking to... MORE

Reply to Austan Goolsbee

Monetary Policy
Scott Sumner
In a tweet, former Obama economic advisor Austan Goolsbee asked: q for NGDP target fans: if fed target=5% when actual=0, implicitly means target 5% infl for 1 yr. Wouldn't mkt doubt 5% infl just temporary? The answer (from a fellow... MORE

Over at TheMoneyIllusion a commenter named Julius Probst told me that he asked Larry Summers about NGDP targeting, and Summers seemed supportive. After I mentioned this in my blog, Politico decided to ask him directly. Here's what they found: Did... MORE

The Fed is not doing its job

Monetary Policy
Scott Sumner
Here's a recent WSJ report on the economy: Many Federal Reserve officials entered 2015 thinking they likely would start raising short-term interest rates by midyear. That idea got put on ice after a winter economic slowdown, partly attributed to the... MORE

It's pretty clear to me why mortgage interest is tax deductible--homeowners (and builders, realtors, bankers, etc.) are a very powerful special interest group. This post asks a different question. Why is business interest deductible against taxes on business earnings? Perhaps... MORE

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