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Uncertainty (as for instance PK pointed out) can work in different ways in the short and long terms. In the short term it can result in hedging behavior which might actually promote some investment. In the longer term it will push up risk margins which will probably push growth rates down.
Toggle Commented yesterday on Links for 01-16-17 at Economist's View
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P.S. Rational expectations IS an attempt to build in behavioral adaptation. It is just that it turns out not very useful (it is empirically a complete flop).
Toggle Commented yesterday on Links for 01-16-17 at Economist's View
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First you have to get his attention (and hold it for long enough to get him to half understand what you are saying). Not easy when his response to any democrat is "you lost!"
Toggle Commented yesterday on Links for 01-16-17 at Economist's View
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This is the exact equivalent of people who argue that the climate can't be getting warmer if the weather is cold today.
Toggle Commented yesterday on Links for 01-16-17 at Economist's View
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Trump doesn't do details. Details are for little people.
Toggle Commented yesterday on Links for 01-16-17 at Economist's View
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I like to think of it also of the reverse of "trickle down". Money doesn't trickle down - it flows upwards. If you don't have a money source at the roots, the whole system dries out. It is important to complete the "water cycle" of the system. Helicopter money is like rain and taxes like evaporation.
Toggle Commented yesterday on Links for 01-16-17 at Economist's View
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Because they are already reportedly telling some of their contacts not to trust the government with information in case it ends up with hostile governments. Maybe using the word "war" is misleading. Maybe "cold war" is more accurate, but in general I mean a state of mutual distrust.
Toggle Commented yesterday on Links for 01-16-17 at Economist's View
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I don't believe in "creative destruction", I believe in "destructive creation" which is something quite different. But that is not the point. This is not about the government as such, it is about the security apparatus in itself. It could get very nasty if that ends up either totally alienated or politicized.
Toggle Commented yesterday on Links for 01-16-17 at Economist's View
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Nope. I think we are trying to model a system converging to an equilibrium that is changing faster than the system can possibly adapt. We should forget all about equilibrium in macro-economics. It only misdirects. I once tried to explain this with an analogy to flying a plane - the plane is always sinking and rising and net path the outcome of the sum of different (constantly varying) forces. This is quite distinct for instance, from the way that a boat floats on the ocean (which is much closer to how we are trying to model things today). The stochastic shocks in economic models are like waves on the sea - where the net effect in the end is that the average position remains the same. I don't think the economy is like that.
Toggle Commented yesterday on Links for 01-16-17 at Economist's View
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No that isn't enough. Sure people might change their behavior as their understanding changes. But other things are changing as well as the behavior. In particular, technology and available resources change. As I said the system is evolutionary (which means an adaptive system - which includes behavior changes), and evolution is never easy to anticipate, which implies uncertainty. And the existence of uncertainty leads to persistent disequilibrium (as people adopt defensive contingent strategies to cope with uncertainty). The big errors in macro are all associated with the general equilibrium paradigm and the assumptions that come with it.
Toggle Commented yesterday on Links for 01-16-17 at Economist's View
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I love that. But you could change it slightly and it would be even sharper: "I am not ignorant enough to know everything."
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Perhaps MI5 and Wilson?
Toggle Commented yesterday on Links for 01-16-17 at Economist's View
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Just as an aside - not really economics, but I am really worrying about what the war between the future white house team and the CIA that seems to be brewing. I don't see good solutions to this. It is sort of unprecedented in a major western country. Can you think of a similar case (where the intelligence services - and perhaps the military as well regarded there own government head as an enemy agent)?
Toggle Commented yesterday on Links for 01-16-17 at Economist's View
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The fundamental problem is in trying to model an evolutionary system as though it was a quasi stationary system (with exactly proportional growth).
Toggle Commented yesterday on Links for 01-16-17 at Economist's View
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I know I will completely offside with my view on this, but I think the behavioural/rational expectations debate is rather besides the point. The much bigger issues are uncertainty and disequilibrium. http://noahpinionblog.blogspot.de/2017/01/cracks-in-anti-behavioral-dam.html
Toggle Commented yesterday on Links for 01-16-17 at Economist's View
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I think he is missing some very important things: 1. Inflation phobia (note it is the NOMINAL interest rate that has fallen below zero) 2. The policy mix which tries to rely for monetary expansion almost exclusively on private lending. 3. International capital flows which weaken the leverage of national economic policy. 4. Rent extraction (for natural resources and for intellectual property) which are a significant part of 3 above (and of the increasing inequality). 5. Competitive tax policy (i.e. lack of international co-ordination)
Toggle Commented 4 days ago on Links for 01-13-17 at Economist's View
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Mr Trump firing somebody because he unethically helped him? But this is what he wants from people, all the time?
Toggle Commented 4 days ago on Links for 01-13-17 at Economist's View
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Yes and there is an even bigger problem in how it distorts politics. To work ideally, politics should be about policies not about personalities. Unfortunately, human biases make this difficult to achieve, but setting up a system so that it elects a single individual is asking for trouble.
Toggle Commented 4 days ago on Links for 01-13-17 at Economist's View
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I see Barry Eichengreen gets it: "Maybe, then, the ultimate lesson of the Powell-Trump comparison is that a presidential system of government, like that in the US, is not superior in terms of the checks it imposes on political extremists. On the contrary, the opposite may be true." Elected Kings are not a good idea and explain why autocrats everywhere like Presidential systems not parliamentary systems.
Toggle Commented 4 days ago on Links for 01-13-17 at Economist's View
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From the linked article: "What I can say is that conservatives seem to have learned little from the experience largely because they ignore what solid evidence says and instead embrace political arguments. This isn’t the only issue where that’s true, and I can’t see how that will change with Mr. Trump as president." I can see how that will change as Mr. Trump as president. It will get worse, much worse. This is a guy who was able to claim a 1 billion $ loss (mostly paid by other people) as a tax deduction. Shifting blame and avoiding facing reality is a defining feature of Donald Trump.
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If that is his policy, it seems a good way to ensure that his whole cabinet is at war with the whole federal public service.
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Anne, while this may be hyperbole, there are some issues that need clarification. 1. Putin and Trump both use propaganda rather than argument. 2. Putin and Trump both try to intimidate journalists. 3. Putin almost certainly condoned the deliberate bombing of refugee relief efforts in Syria. 4. Putin has been encouraging anti-democratic sentiment in Western Europe (not that I think much of the Ukrainian leadership - I actually think that the Ukraine would be better off without its Eastern provinces - but I think Putin could probably have negotiated a settlement if he wanted instead of provoking war). 5. I think it is likely that Trump or some senior Republicans are being blackmailed by the Russians which is a serious threat to US security. 6. That the Russians refuse to come clean on systematic doping of their athletes in spite of considerable evidence is simply outrageous and indicative of a false and fragile nationalism.
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Yes that should be. But a question, why haven't the Democrats found a younger leadership team? Has the DLC become (like the Kremlin after Khrushchev or FC Liverpool after Paisley) a gerontocracy.
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The thing about the Laffer curve example is that the Laffer curve is actually not a narrative. It is a very trivial (and basically irrelevant) theoretical point. You can make out of it the narrative that "there is a level of marginal tax such that increasing the tax level will decrease tax revenue" - but that is not what the Laffer curve is in itself.
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May be of interest: https://www.theguardian.com/commentisfree/2017/jan/10/running-president-elections-broken-we-can-fix-them
Toggle Commented 7 days ago on Links for 01-10-17 at Economist's View
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