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Scott Sumner: October 2017

An Author Archive by Month (20 entries)

Bad policies lead to bad theory

Monetary Policy
Scott Sumner
In the past, I've argued that bad economic policies led to the development of Keynesian economics. The two major culprits were tight money during 1929-32 and the NIRA (which both dramatically raised real wages.) If Irving Fisher's "compensated dollar plan"... MORE

Another Fed mistake from 2008

Monetary Policy
Scott Sumner
George Selgin sent me a 2000 JMCB paper by David Reifschneider and John C. Williams, who were both at the Fed: To reduce the effects of this phenomenon, in our simulations we incorporate a notional upward adjustment to the inflation... MORE

401k plans do not "subsidize saving"

Taxation
Scott Sumner
USA Today reports: Most workers who have access to 401(k) plans will be able to invest up to $18,500 next year, plus an additional $6,000 in catch-up contributions if they are 50 and over. But lawmakers in Washington have been... MORE

Do low taxes explain inequality?

Taxation
Scott Sumner
Matt Yglesias suggests that the answer is yes: Three or four decades later, scholars are able to look at the fruits of those policies and draw some conclusions. The same main technologies that exist in the United States and United... MORE

What can school choice accomplish?

Central Planning vs. Local Knowledge
Scott Sumner
I've always been a big fan of school choice, indeed I'd like to entirely abolish the public school system and move to 100% private education. Having public schools makes no more sense than having a public church. At the same... MORE

The 1987 stock market crash

Finance: stocks, options, etc.
Scott Sumner
I have a new piece at The Hill discussing the 1987 stock market crash, as well as its implications for today's economy: The real lesson of 1987 is that all lessons are provisional, subject to revision as more time goes... MORE

A breath of fresh air from John Cochrane

Monetary Policy
Scott Sumner
Over at TheMoneyIllusion I've been running a series of posts that are critical of popular views of inflation. I claim inflation is determined by shifts in the supply and demand for money, and that factors like the Phillips curve and... MORE

Voters don't hate inflation

Monetary Policy
Scott Sumner
Here's Tyler Cowen: Many monetary rules call for higher rates of price inflation if the economy starts to enter a downturn. That's often the right economic prescription, but voters hate high inflation. Tyler is engaged in "reasoning from a price... MORE

Over at TheMoneyIllusion I have a new post that (among other things) discusses this claim: Blanchard was prompted to recite his faith in the power of the Phillips Curve by former Fed governor Jeremy Stein, who wondered how central banks... MORE

Don't assume that irrationality is hard-wired into humans

Behavioral Economics and Rationality
Scott Sumner
I don't doubt that there are some types of human behavior that are both hard-wired and irrational. But it's very dangerous to simply assume that any form of irrationality that you encounter is innate (i.e. genetic). Here's the NYT: "A... MORE

Rethinking Macroeconomics

Macroeconomics
Scott Sumner
I recently attended a conference at the Peterson Institute on "Rethinking Macroeconomics", which mostly meant returning macro to its Keynesian roots. Readers may know that I have a contrarian take on the crisis---I believe it occurred because macroeconomists did not... MORE

1967 and 2008: Two botched policies

Macroeconomics
Scott Sumner
I've occasionally done blog posts explaining how it's possible to prevent recessions from occurring, even after they have begun. That's because a recession is dated from the point where output starts falling, but it's not considered a recession unless the... MORE

I am currently in DC attending a star-studded macroeconomic policy conference at the Peterson Institute. Today's participants included Bernanke, Summers, Blanchard, Draghi, Fischer, and many other eminent economists. Bernanke's paper was by far the most interesting, especially his proposal for... MORE

Evidence for money non-neutrality

Macroeconomics
Scott Sumner
Tyler Cowen recently linked to an interesting paper by Emi Nakamura and Jon Steinsson, which discusses the problem of identification in macroeconomics. One section looks at what we know about the monetary policy transmission mechanism: What is the most convincing... MORE

Congratulations to Richard Thaler

Behavioral Economics and Rationality
Scott Sumner
As a University of Chicago alum, it's always nice to see the UC pick up another Nobel Prize in economics. Economists are often accused of engaging in empty theorizing, but Thaler has developed useful ideas, such as methods by which... MORE

Balance of trade data is not what you think

International Trade
Scott Sumner
Tyler Cowen directed me to a post by Brad Setser, with this very interesting observation: I feel I am at risk of becoming a bit shrill on the topic of tax and trade, but it is very hard--in my view--to... MORE

Define "efficient"

Taxation
Scott Sumner
Tyler Cowen directed me to an article on government efficiency in The Atlantic. The author tried to push back against the claim that state and local governments were more efficient than the Federal government: Similarly, the Internal Revenue Service is... MORE

First as tragedy, then as farce

Alternative Economics
Scott Sumner
Countries such as China and Russia are reluctant to come to terms with their history. Many of their residents are unaware of the horrors perpetrated by Mao and Stalin. I suppose that's no big surprise; people prefer to see their... MORE

Roger Farmer on NGDP futures targeting

Monetary Policy
Scott Sumner
I had the good fortune of meeting Roger Farmer last year, when he was still teaching at UCLA. We had a great discussion of Keynes's ideas. (I seem to recall we both thought he was misunderstood, and that the General... MORE

Milton Friedman wouldn't have been confused

Monetary Policy
Scott Sumner
Stephen Kirchner pointed me to a very infuriating Financial Times article on inflation. Here is the title: Nobody seems to know why there's no US inflation Nobody? Seriously? How about market monetarists who point to the very slow growth of... MORE

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