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Scott Sumner: January 2016

An Author Archive by Month (21 entries)

Influence, target, control

Monetary Policy
Scott Sumner
I often get commenters complaining that the Fed should not be controlling interest rates. They think the market should set rates. In one sense I agree, but in another sense I wonder if the commenters are confused. I wonder if... MORE

Tyler Cowen has an excellent post on progressivism and individual rights. At one point he discusses the views of Kevin Drum: Kevin Drum had an interesting point in response (and do read his full post, there is more to it... MORE

Paul Krugman on French economic policies

Macroeconomics
Scott Sumner
A finance student from Coventry sent me Paul Krugman post from 1997, which has some interesting things to say about today. Fifteen years ago, just after Fran├žois Mitterrand became president of France, I attended my first conference in Paris. .... MORE

Keynesian economics and cognitive illusions

Monetary Policy
Scott Sumner
Consider the following two paradoxes: 1. Falling wages are associated with falling RGDP. Falling wages cause higher RGDP. 2. Falling interest rates are associated with falling NGDP growth. Falling interest rates cause higher NGDP growth. You often hear people say... MORE

My recent book on the Great Depression is not easy to review. The arguments are complex, and not always easy to follow. I did my best, but it's a very complicated story. Given my low expectations, I was pleasantly surprised... MORE

Larry Summers and asset prices

Finance
Scott Sumner
I frequently argue that anti-EMH theories are not useful. That is, theories of irrational market behavior, such as "bubbles", are simply not useful to policymakers, academics and ordinary investors. If they are useful to anyone (it's hard to know either... MORE

Hey Fed, stop hanging around the Combat Zone

Monetary Policy
Scott Sumner
The Combat Zone was the name for Boston's red light district, when I first moved here in 1982. I believe it's now gentrified, much like Times Square in NYC. But I'd like to see if we can work this into... MORE

Behavioral economists aren't as smart as they think

Behavioral Economics and Rationality
Scott Sumner
I recently did a post criticizing economists who second guess the behavior of others. This new post gives me another opportunity: Thaler asserts that good economics needs good psychology, instead of its tradition of inventing bad psychology. He makes short... MORE

China is rapidly shifting to a service economy

Growth: Consequences
Scott Sumner
The Financial Times has a new piece on the Chinese economy, which contains a graph showing the striking shift toward a service economy: However Gavyn Davies suggests that this graph is misleading, and also provides a graph showing the shares... MORE

Am I an ideologue?

Economic Methods
Scott Sumner
Adam Ozimek has a good post showing that economists are not ideologues, and that they change their mind when new information comes in. So I tried to think of some examples that would apply to me. I'll start with early... MORE

We never seem to learn

Monetary Policy
Scott Sumner
At the beginning of 2015, we were told that growth would pick up, because plunging oil prices were "like a tax cut." Well, they are like a tax cut, but of course demand-side tax cuts also fail to boost growth,... MORE

The European right and the GOP

Politics and Economics
Scott Sumner
Politics is a moving target. Political parties are continually evolving over time, and over decades the changes can be quite stark. Many "blue states" used to be red when I was young, and vice versa. In the South this partly... MORE

China's always been poorly governed

Macroeconomics
Scott Sumner
I often get annoyed reading articles claiming that China has an economic model that others should emulate. China is a poor country, not just compared to the US, but even compared to Mexico. Even if you believe poverty reflects factors... MORE

Sympathy for the devil?

Regulation
Scott Sumner
In my view, rent seeking is the great evil of the modern world, largely explaining the poverty of countries like Iraq and India. The main problem in the world today is people who put the self-interest of their narrow special... MORE

What would an IS shock look like?

Monetary Policy
Scott Sumner
One thing that makes it hard to discuss macroeconomics with people is the widely held assumption that changes in interest rates reflect changes in monetary policy. That misconception comes from the fact that people misinterpret the implications of two true... MORE

Passing the buck

Monetary Policy
Scott Sumner
The Fed has a legal mandate for price stability and high employment. Their mandate does not instruct them to stop trying if things get a bit difficult. It does not instruct them to pass the job on to the fiscal... MORE

For the second time in six months, the world's equity markets have been roiled by a tiny downward move in the Chinese currency. It seems unlikely that this is mere coincidence. And yet I've yet to see a convincing explanation... MORE

Who's afraid of level targeting?

Monetary Policy
Scott Sumner
Ken Duda directed me to a speech by Stanley Fischer, which lays out four options for the next time rates hit zero: 1. Negative interest on reserves 2. A higher inflation target 3. Fiscal stimulus 4. Abolition of currency It's... MORE

Tyler Cowen has a good post on the catastrophic collapse of the Brazilian economy: And how is Brazilian output doing you may wonder?: By the end of 2016 Brazil's economy may be 8% smaller than it was in the first... MORE

NGDP or NGO?

Monetary Policy
Scott Sumner
Vincent Geloso has a new post, where he suggests using nominal gross output (NGO) as an alternative to NGDP targeting: The intuition behind NGDP target is that monetary policy should be aimed at reacting to changes in demand for money.... MORE

After I began blogging in early 2009, I started giving talks entitled "The Real Problem Was Nominal." I argued that tight money, not financial distress, was the cause of the Great Recession. As far as I know, Robert Hetzel was... MORE

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