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Scott Sumner: September 2015

An Author Archive by Month (24 entries)
For seven years I've been trying to discuss monetary policy, and commenters (mostly at MoneyIllusion) keep wanting to bring up a completely unrelated topic---banking. Monetary policy works though the hot potato effect, and banking is no more essential to the... MORE

Concrete steps for Mr. Cochrane

Monetary Policy
Scott Sumner
John Cochrane has a post on Japan's long period of near-zero CPI inflation, and then adds this footnote: Update David Beckworth on the same topic. I'm less of a NGDP target fan. It's like saying all the Chicago Cubs need... MORE

About those wacky libertarians

Economics of Education
Scott Sumner
Will Wilkinson has a post discussing libertarianism. He points out that many libertarians are disdainful of politics. They tend to be ideological purists who are so anti-government that they are reluctant to get involved in the rough and tumble of... MORE

Our bizarre system of taxing capital

Taxation
Scott Sumner
It's difficult to think of a more bizarre and foolish policy than the practice of taxing capital. Consider: 1. If it were appropriate to pay taxes on capital gains, why wouldn't it be appropriate to pay negative taxes on capital... MORE

Japan adopts an NGDP target

Monetary Policy
Scott Sumner
Marcus Nunes points to a report that Japan has adopted an NGDP target: Japanese Prime Minister Shinzo Abe vowed on Thursday to raise gross domestic product by nearly a quarter to 600 trillion Japanese yen ($5 trillion), pledging to refocus... MORE

The Wicksellian Natural Rate of Interest

Monetary Policy
Scott Sumner
The Richmond Fed has a new study of the natural rate of interest, by Thomas A. Lubik and Christian Matthes: The natural rate of interest is one of the key concepts for understanding and interpreting macroeconomic relationships and the effects... MORE

Money is fungible

Monetary Policy
Scott Sumner
Yesterday I discussed one bizarre idea that has popped up in the wake of the Great Recession. Today I'll look at another. The newly elected leader of Britain's Labour Party has proposed a "People's QE". The plan is discussed in... MORE

The past decade has produced some unusual macroeconomic outcomes, and even more unusual new macro theories. One of the very strangest is NeoFisherism. Irving Fisher noted a positive relationship between inflation and nominal interest rates. He suggested that higher rates... MORE

The future is soon

Monetary Policy
Scott Sumner
Brad DeLong recently made an interesting observation about interest rates: It was Milton Friedman who insisted, over and over again, that in any but the shortest of runs high nominal interest rates were not a sign that money was tight--that... MORE

Central banks target inflation

Monetary Policy
Scott Sumner
Andrew Sentance has a new post in the Financial Times, which is critical of the Fed's refusal to raise interest rates. The word 'inflation' does not appear in the article. Here's how it begins: These are tough times for monetary... MORE

Switzerland

Cross-country Comparisons
Scott Sumner
Over at TheMoneyIllusion I recently did a post discussing the public policy issues that I thought were most important. These were the top 4: Most important issues (no particular order): 1. US Military intervention (I'm mostly against it) 2. Immigration... MORE

Keynesianism and market monetarism

Macroeconomics
Scott Sumner
Paul Krugman has a new post that summarizes Keynesian economics: I would summarize the Keynesian view in terms of four points: 1. Economies sometimes produce much less than they could, and employ many fewer workers than they should, because there... MORE

What makes you think Li knows the truth?

Macroeconomics
Scott Sumner
There is a great deal of skepticism about Chinese economic data. I believe that some of the skepticism is justified, but much of it is greatly overdone. This FT article discusses the critique that I find most plausible: However, doubts... MORE

Asking the wrong question

Growth: Causal Factors
Scott Sumner
I saw this in the Financial Times: Many economists think the government can help a weak economy by convincing people the rate of price increases is poised to accelerate. In theory, households will spend more whilst businesses will boost their... MORE

Who benefits from a wage subsidy?

Labor Market
Scott Sumner
One of the basic principles of public finance is that it makes no difference whether a tax is legally borne by the buyer or seller. The burden of the tax will depend on the relative elasticity of supply and demand,... MORE

Did the copper SOE help Chile develop?

Growth: Causal Factors
Scott Sumner
Tyler Cowen says yes: One reason the Chilean reforms went well was that the state had nationalized the copper mines. That provided a steady flow of money, thus minimizing the need for revenue-raising distorting policies elsewhere. More generally the revenues... MORE

The standard story of the Great Recession has housing play a key role. There were lots of subprime mortgages, and when the housing bubble burst there was a big increase in defaults. This led to a banking crisis and a... MORE

Here's a question I'm confused about. I think I understand that Keynesians believe that fiscal stimulus is expansionary and fiscal austerity is contractionary. But what do they believe is the effect of fiscal stimulus if it's called supply-side economics? Does... MORE

Sticky wage model test: The results are in

Labor Market
Scott Sumner
In October 2009, the US unemployment rate peaked at 10%. By January 2012, it was down to 8.3%. But in January 2013 it was still 8.0%. (And "austerity" was about to be implemented.) It was during this period that a... MORE

Peter Ireland and Michael Belongia have a couple of very good posts on monetary policy, at the "E21" website. Here they discuss the recent Jackson Hole meetings: By quick count, the foregoing discussion suggests that, as a group, Fed officials... MORE

Do we really want to control health care costs?

Economics of Health Care
Scott Sumner
In America, the government heavily subsidizes the provision of "health care." (The scare quotes will be explained later.) For example, roughly 40% of the cost of health insurance for middle class families is paid for by the government, via tax... MORE

Answers: Maybe, and no. Tyler Cowen linked to a recent paper by Jonathan L. Willis and Guangye Cao, out of the Federal Reserve of Kansas City. Here's the opening paragraph: Over the past three decades, the U.S. economy seems to... MORE

Markets are self-aware

Scott Sumner
Markets are just amazingly wise. But that shouldn't be surprising, because they must be smarter than us in order to make it tough to get rich. And that's because if it were easy to get rich we'd quickly run out... MORE

Pseudo-recessions and actual recessions

Macroeconomics
Scott Sumner
Last year I did a number of blog posts criticizing the consensus view that Japan had fallen into a recession. Many people assumed that two consecutive declines in real GDP meant that Japan was in recession. I argued that the... MORE

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