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Nick Rowe
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My theory: "Political economy" means "as opposed to domestic economy; the management of the resources of the polis not the domos". So "political" is now redundant. Am I right?
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"And as production falls businesses stop paying the workers they have laid off: incomes fall." I think it is best to delete that bit. Because income from production of goods would fall when production falls, whether or not businesses stop paying the workers they have laid off, and whether or not they lay workers off or keep them idle on the payroll. The only difference that makes is to the distribution of income. Capitalists' profits are people's incomes too. "They decide that they want to spend less and so build up their holdings of financial assets." And we could have another round of our old argument about "financial assets" vs "medium of exchange". Maybe they want to build up their holdings of land? What matters is that they spend less medium of exchange to build up (at least temporarily) their holdings of medium of exchange.
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I Googled "dispositive", but it didn't help. Fair enough, but a much more useful way to create accountability would be to replace inflation targeting with price level path (or NGDP level path) targeting. The Fed knows in advance it will be required to fix its past "mistakes". Bygones will not be allowed to be bygones. Permahawks (plus permadoves too, by symmetry) will become an endangered species.
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I agree with John and Scott. How can you (easily) explain (e.g.) why supply curves slope up without using a (curved) PPF?
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Thanks Brad. kaleberg: the math in my little model can be solved by a bright high school student. That is not the issue. It is understanding what it means that is the issue. It was math/physics/engineer people who took the equations and dumped them into a computer without thinking about it that got us economists into this mess in the first place. What we need are philosophers with common sense. Economics is about people, with expectations, interacting with other people.
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anne: I wrote a post on it, which I think explains it a bit more simply (though at much greater length): http://worthwhile.typepad.com/worthwhile_canadian_initi/2015/07/understanding-schmidt-and-woodford-on-neo-fisherianism.html
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Tom: interesting. But let's take a simple example. Suppose each agent i has a reaction function Y(i) = 2Y + e(i) where Y is mean Y(i) across all agents and e(i) is a mean zero iid shock. Large number of agents, simultaneous moves. There's a unique RE equilibrium Y=0, but it's not learnable by least squares. So you are saying that agents will learn that least squares is not a good learning method, and figure out that they must be living in a model with an "unstable" equilibrium, and all jump to it. But here's another possibility. There are always bounds out there, somewhere. Like hyperinflation of hyperdeflation eventually make people give up on using money and resort to barter, or a different money (like Zimbabwe). Suppose agents' actions are bounded in my simple model. Like -100 <= Y(i) <= +100. That now gives us three RE equilibria, and the outer two equilibria are learnable by least squares. So if we start near the Y=0 equilibria, with least squares learning, and agents eventually figure out that least squares isn't working, it seems far more likely they will jump to the nearest outer equilibrium, since they see that's where they are going anyway. In other words, the passengers are far more likely to see that the boat is unstable, is going to capsize, and all jump off the boat, than all line up carefully along the exact centre of the boat. That's the reason that armies and navies spend so much time on drills and discipline, precisely to stop everyone rushing for the sides of the boat.
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Yep. Good. Good to see Peter Howitt's early work getting recognition too. Slid over one point though. The Garcia-Schmidt/Woodford approach isn't really real-time learning like the Evans approach is. It's more like a Walrasian Tatonnement for expectations. Play doesn't begin until the auctioneer says "OK, that's enough iterations on expectations, I'm bored, let's start trading."
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Maybe. But how to explain why many of us feel that e.g. wearing Google Glass is just wrong, unless you are working as a surgeon or mechanic.
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Don: well, if John Taylor would read my or Miles Kimball's stuff on upward-sloping IS curves, he would figure out he *has* been right all along. It's just the Fed gets confused by what he's telling them to do, and will do the opposite. So he just needs to explain it better to the Fed. ;-) BTW, was rhetoric offered by the Philosophy department? Trying to remember what I took that same Winter 76 at UCB!
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Brad: "That as far as the real interest rate is concerned, the "'natural rate'... that would be ground out by the Walrasian system of general equilibrium equations", as Milton Freidman would have put it, is lower than the one current monetary policy gives us." That's the bit I (and I think Miles Kimball) would disagree with. If the IS curve slopes up, then tight monetary policy both reduces output and lowers the actual rate of interest below the (potential output equilibrium) natural rate of interest. (But telling the Fed to "raise the rate of interest" is of course not the right advice to give, because the Fed will misunderstand it, do exactly the wrong thing, and start reducing money supply or (increasing money demand).) Which is not to say that real forces have not been lowering the natural rate too.
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anne: Deirdre McCloskey refers to herself as "auntie". I think she likes the name.
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pgl: "This is sort of like a guy out on a first date with a nice and pretty young woman but all he can talk about is his ex-wife. Guaranteed that this dude will not get a 2nd date." Exactly. (Or he's talking about himself).
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Sorry, but I have just woken up. And yes I am pissed.
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That is total Bullshit from Paul Krugman. Keynes left Canada. Keynes said run deficits in a recession, and surpluses when the economy recovers. Which is what the Conservatives did. And which is not what the Liberals are doing. Lazy ignorant lefty insular American narrative. Canada is NOT the US. I know we are not a big important country, but we are right next door. And we got our monetary and fiscal and banking policy more right (less wrong) than you did. Get your facts straight.
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And maybe fading folk memories of the gold standard provided a palimpest of an Omega point in the 1970's and 1980's. But it's gone now. Nobody now thinks "prices are abnormally low/high, therefore they must rise/fall". And inflation targeting merely gives us a random walk, with drift.
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Yep. But you only get an Omega point with a NGDP level path target, or a price level path target, or some sort of nominal level path target.
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am: "How does fiscal offset relate to ''monetary offset'' during qe? If this question is nonsensical then please ignore it." Good question. I was thinking about this last night. There should be some sort of symmetry. I can sorta see an answer. But my brain is not clear yet Dunno to your other 2 questions.
Toggle Commented Oct 14, 2015 on Links for 10-14-15 at Economist's View
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Not: "The Grauniad, shurely"? Or has Private Eye changed too?
Toggle Commented Oct 14, 2015 on Links for 10-14-15 at Economist's View
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am: Shouldn't that be: "The Grauniad, shurely", for proper Private Eye spelling? (Or am I out of date on that too?)
Toggle Commented Oct 14, 2015 on Links for 10-14-15 at Economist's View
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It's an old British joke. A deliberate anachronism. Like Canadians calling "The *Toronto* Globe and Mail".
Toggle Commented Oct 14, 2015 on Links for 10-14-15 at Economist's View
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anne and djb: sorry. My post can't have been as clear as i thought it was. Assume fiscal policy works (for sake of argument). Assume that the Fed is doing QE. Does it make any difference if the Fed builds a new bridge with the money it prints, instead of buying government bonds? No, because the government will just build one less bridge. It's just like the Fed doing the government's shopping. (Remember the government owns the Fed, so the government is getting one bridge worth's less interest-free loans from the Fed.)
Toggle Commented Oct 14, 2015 on Links for 10-14-15 at Economist's View
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djb: you misread my post. I'm not saying any of those things.
Toggle Commented Oct 14, 2015 on Links for 10-14-15 at Economist's View
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And "buy" means "sell money"; and "sell" means "buy money". Our very language assumes a monetary exchange economy. We can't even talk about what recessions look like, without implicitly talking about money.
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