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Scott Sumner: February 2016

An Author Archive by Month (16 entries)

Autor, Dorn, and Hanson on the China Shock

International Trade
Scott Sumner
Noah Smith has an article in Bloomberg discussing a new paper by David Autor, David Dorn and Gordon Hanson (ADH): In his recent book "Economics Rules," Harvard economist Dani Rodrik laments how economists often portray a public consensus while disagreeing... MORE

I'm not sure this will convince anyone, but I'll try anyway. As you may have gathered from my previous post, I don't believe in bubbles. In addition, I'm a libertarian. I see those two facts as being related. If asset... MORE

EMH update

Finance: stocks, options, etc.
Scott Sumner
When I started blogging in February 2009, I immediately got into lots of arguments about the Efficient Markets Hypothesis, which I think is "true" in the sense of being a good social science theory, a useful approximation of reality. I... MORE

Last weekend I gave a talk up at the Liberty Forum in Manchester, New Hampshire. While there, I learned more about the Free State Movement, an idea about which I was only dimly aware. The following is from memory, so... MORE

Drug overdose deaths: It's not just economics

Economics of Crime
Scott Sumner
Let me start this highly unscientific post with a caveat, I think it's quote likely that economic distress plays some role in the recent rise in drug overdose deaths. Here I'll try to caution people that the role might be... MORE

Real and monetary shocks, a numerical example

Monetary Policy
Scott Sumner
Here's Tyler Cowen: Closer to the central point I think is Scott's claim: "Any "real shock" that reduces NGDP expectations because the Fed responded passively is also a monetary shock." For me that is a real shock with insufficient monetary... MORE

Interest rate pessimism

Monetary Policy
Scott Sumner
Back in the 1970s, there was much pessimism about whether the Fed could get inflation under control by raising interest rates. Rates kept going higher and higher, and yet inflation also kept increasing. Markets did react to unexpected rate increases... MORE

Saturos directed me to a comment by Eliezer Yudkowsky: Just realized today that besides giving a real-world example of epistemic efficiency, markets also provide a real-world source of Newcomblike problems. Efficient markets can be so good at predicting you that... MORE

Correlation and causation

Macroeconomics
Scott Sumner
On January 23rd, I made the following claims: 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... MORE

It takes a regime change

Monetary Policy
Scott Sumner
In the 1970s, the Fed kept tinkering with interest rates, not understanding that high rates don't mean tight money. Inflation and NGDP growth kept soaring higher and higher. Eventually economists came to believe that (old) Keynesian economics was bankrupt. A... MORE

In my previous post I criticized Paul Krugman's claim that monetary policy could not have been tightening significantly during the summer of 2008, as real bond yields remained low. In other words, Krugman claimed that low bond yields were telling... MORE

Beckworth and Ponnuru on 2008

Monetary Policy
Scott Sumner
David Beckworth and Ramesh Ponnuru have produced some excellent pieces on the mistakes made by the Fed in 2008. Here's an excerpt from their latest: Krugman thinks the behavior of long-term real interest rates contradicts our thesis. They rose in... MORE

Storytelling

Monetary Policy
Scott Sumner
People like to think in terms of stories: It's a movie classic. The lovers are out for a walk when a villain dashes out of his house and starts fighting the man. The woman takes refuge in the house; having... MORE

James Bullard on Neo-Fisherian economics

Monetary Policy
Scott Sumner
James Bullard has a Powerpoint presentation on NeoFisherian economics. It concludes with 8 bullet points; here is the first: Policymaker conventional wisdom and NK theory both suggest low nominal rates should cause inflation to rise. Is this actually what they... MORE

Thank God economists cannot predict recessions

Monetary Policy
Scott Sumner
Civil engineers are rarely able to predict the collapse of US highway bridges, at least to within a period of 12 months. How should we feel about that fact? Maybe I'm biased, as my grandfather was a highway engineer in... MORE

Of all the things that puzzle me about macroeconomics, the relationship between changes in monetary policy and changes in long-term interest rates is perhaps the most confusing. I get why monetary injections tends to reduce short-term rates----prices are sticky and... MORE

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