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Scott Sumner: May 2017

An Author Archive by Month (19 entries)

Reasoning from a price change caused the Great Depression

History of Economic Thought
Scott Sumner
The Great Depression had two primary causes: an excessively tight monetary policy caused NGDP to drop in half between 1929 and early 1933, and then a set of New Deal policies such as the National Industrial Recovery Act (NIRA) slowed... MORE

More Ginis please

Income Distribution
Scott Sumner
The Gini coefficient is a popular tool used by economists to measure economic inequality. Unfortunately, economists tend to rely on income data, which is not a very good measure of economic well being. Conceptually we'd like to use consumption data,... MORE

Saving, cost control, and infrastructure

Cross-country Comparisons
Scott Sumner
There's been a lot of recent talk about increasing federal spending on infrastructure. In my view this misses the point. There are two effective ways to get more infrastructure; cost control and increased saving. Here's Matt Yglesias: Mass transit construction... MORE

In the comment section of a recent post, Thomas Hutcheson and I discussed what would happen if there were a financial crisis without tight money (defined as sharply falling NGDP growth.) It's not easy to find examples, because financial crises... MORE

"Public opinion" is not what you think

Economics of Health Care
Scott Sumner
Many people anthropomorphize the public, and talk about "the public" having an opinion, just as you or I might have an opinion. I view this as a big mistake. Elsewhere I have argued that polls on policy questions are very... MORE

Bob Murphy left a comment after my MoneyIllusion post on the NGDP prediction market (and David Henderson had a similar question): In a traditional financial market, people have skin in the game and that helps to yield the "wisdom of... MORE

I am pleased to announce that a new Hypermind NGDP market is up and running. Back in 2015, we ran an annual NGDP prediction market and 4 quarterly markets. Because only the annual forecast has much macroeconomic significance, this time... MORE

Wages are the key to the business cycle

Labor Market
Scott Sumner
Back in the 1980s and 1990s, I did some research with Steve Silver on sticky wages and the business cycle. Using postwar data, it's very difficult to draw any conclusion, as the economy was hit by both supply and demand... MORE

I often debate the question of whether severe slumps are caused by financial crisis or tight money. In my view it's usually tight money, with financial stress being a symptom of falling NGDP. So how would we test my hypothesis?... MORE

Do robots reduce employment?

International Trade
Scott Sumner
A new NBER paper by Daron Acemoglu and Pascual Restrepo finds that "deployment of robots reduces employment and wages, but they caution that it is difficult to measure net labor market effects." Here is a graph that summarizes their results:... MORE

I am going to criticize a recent Tyler Cowen post on Greece. But before doing so, let me explain where I think we agree. 1. Fiscal policy doesn't explain very much of the business cycle. 2. Greece's problems go far... MORE

Good news on trade?

International Trade
Scott Sumner
This FT article sounds like bad news, but in my view it's just the opposite: A deal announced on Friday by officials in Beijing and Washington was billed as "gigantic" and "Herculean" by his administration in its efforts to reset... MORE

Avik Roy on GOP health care reform.

Economics of Health Care
Scott Sumner
Avik Roy has a highly informative article in Forbes, discussing the pros and cons of the recent House health care bill (which is now before the Senate). He suggests that the proposal offers a number of improvements over the current... MORE

When it comes to public debt and deficits, I sometimes feel like people go to one extreme or the other. Japan has a public debt equal to about 250% of GDP, but many people wave it away as a minor... MORE

Is history cyclical?

Economic History
Scott Sumner
I just finished reading Tyler Cowen's new book, "The Complacent Class." Tyler is really good at bringing together lots of seemingly disparate trends and finding a common underlying theme. Many (but not all) of the anecdotes in the book will... MORE

Policy needs to be symmetrical

Monetary Policy
Scott Sumner
Thomas Hutcheson left an interesting comment after my previous post: There is an alternative: use unemployment (some vector or indicators not just U3) to target the "unemployment" portion of the Fed's mandate and the Price level to target the "price... MORE

Don't target unemployment

Labor Market
Scott Sumner
The government reported today that the unemployment rate has fallen to 4.4%. To give you an idea of how low that is, consider that since 1971 the only period of lower unemployment was the tech boom of the late 1990s:... MORE

America: A dromedary, not a Bactrian camel

Income Distribution
Scott Sumner
It's now becoming fashionable to describe America in binary terms, such as red and blue, coastal and middle, affluent and struggling. In my view these generalizations are often misleading. Let's take the case of income distribution. If you listened to... MORE

Antiestablishmentarianism

Labor Market
Scott Sumner
Donald Trump once said. "I know words, I have the best words". Interestingly, all of those words are one syllable. But I happen to know an eleven-syllable word, which is defined by Wikipedia: Antiestablishmentarianism (or anti-establishmentarianism) is a political philosophy... MORE

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