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Scott Sumner: March 2016

An Author Archive by Month (19 entries)

Lake Wobegon Keynesians

Fiscal Policy
Scott Sumner
The Keynesian view of fiscal policy is an ever-changing theory. In the 1960s, it was believed that fiscal stimulus was needed during recessions. In the 1990s, Keynesians argued that fiscal policy was not an appropriate stabilization tool, rather monetary policy... MORE

A little bit pregnant

International Macroeconomics: Exchange Rates, International Debt, etc.
Scott Sumner
Paul Krugman has a new post of mercantilism: Neil Irwin has a good think piece on Trumpism and the trade deficit; but as Dean Baker rightly suggests, it arguably suffers a bit from being a discussion of the effects of... MORE

Bernanke on monetary policy options

Monetary Policy
Scott Sumner
Rajat directed me to a series of posts by Ben Bernanke, discussing monetary policy options if the US once again hits the zero rate bound. Bernanke thinks this problem is likely to occur in the next recession, and I agree.... MORE

Don't try to normalize interest rates

Monetary Policy
Scott Sumner
Marcus Nunes has a new post that discusses a recent Wall Street Journal article. Here's the WSJ: The Fed needs to keep raising short-term interest rates to diminish risks to the economy and markets of "excessive accommodation," Mr. Kaplan told... MORE

Does anything matter? (And what would Pascal do?)

Growth: Consequences
Scott Sumner
This will be a highly speculative post, which is aimed at getting you thinking "outside the box", not answering any questions. Scott Alexander has a very nice post pointing out that surveys indicate no increase in Chinese happiness since 1999,... MORE

The world is a very complicated place, and people who look at things from just one dimension end up missing much that is important. For instance, in this post Bob Murphy talks about how Ireland has done well in recent... MORE

Is economics more "scientific" than science?

Economic Methods
Scott Sumner
Here's The Economist: In recent years medicine, psychology and genetics have all been put under the microscope and found wanting. One analysis of 100 psychology papers, published last year, for instance, was able to replicate only 36% of their findings.... MORE

Suppose you wanted to switch to socialism---what would be the ideal place to do so? You'd want a country with extremely high quality civil servants. That would be France. You'd want a country where socialism is not a dirty word,... MORE

Kocherlakota on the inflation outlook

Monetary Policy
Scott Sumner
Matthew Boesler has a very nice piece in Bloomberg discussing the market reaction to several recent pieces of news. You should read the whole article (it's short) because it's hard to excerpt. The most interesting takeaway is that the market's... MORE

The Economist reports on a new initiative in Switzerland: Campaigners in many rich countries want to strip private banks of the power to create money. In Switzerland members of the "Vollgeld Initiative" presented the government with enough signatures in December... MORE

The media's blind spot: Negative IOR

Finance: stocks, options, etc.
Scott Sumner
The media has an agenda, which covers its reporting of negative interest on reserves (IOR). Let's review the evidence: In late January, the Bank of Japan cuts interest rates into negative territory and does a bit more QE. The yen... MORE

Two dubious ideas

Price Controls
Scott Sumner
Here's The Economist: In places stuck in deflationary quicksand it may be necessary to be more radical still. Olivier Blanchard and Adam Posen of the Peterson Institute for International Economics have argued that Japan would benefit from an incomes policy.... MORE

Why don't we see big NGDP crashes any longer?

Monetary Policy
Scott Sumner
Before WWII, the government did not measure nominal GDP. But economists Robert Gordon and Nathan Balke put together estimates of nominal GNP, for the period after 1875. (For the US, changes in NGDP and NGNP are highly correlated.) We used... MORE

The year of thinking dangerously

International Trade
Scott Sumner
Donald Trump seems to have the ability to get otherwise sensible people to adopt some of the most bizarre positions imaginable. Here's Jonah Goldberg, describing two recent victims of Trumpism: Consider Larry Kudlow and Stephen Moore. In August, the two... MORE

During the 1980s and 1990s, there was a growing consensus that: 1. The minimum wage was not a particularly effective anti-poverty program, as it raised unemployment. Even the New York Times editorialized in favor of abolition of the minimum wage,... MORE

The Emperor repeatedly forgets his clothes

Monetary Policy
Scott Sumner
Today I'm going to criticize economists for not knowing what they mean by the term 'inflation'. But before doing so, I'd like to point to an analogy; economists have no idea what the terms 'easy money' and 'tight money' mean,... MORE

Paul Krugman says that there are three reasons to support more infrastructure spending. But he actually only provides two. The problematic reason is: The second case is a bit, but only a bit, harder: we are still in or near... MORE

Is China trade inflationary?

International Trade
Scott Sumner
I like contrarian arguments, but the hypothesis in the title is a bit too much for even me to accept. Instead I'll argue that the fans of the recent paper by Autor, Dorn and Hanson (ADH) are implicitly making this... MORE

Warren Buffett, out of sample

Finance: stocks, options, etc.
Scott Sumner
In a recent post I discussed a couple of arguments against the Efficient Market Hypothesis, which I used to hear a lot when I first started blogging in early 2009. One had to do with the outperformance of hedge funds,... MORE

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