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Brian Gladish
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Glad to see someone else pick up the ball on Evonomics! Here's my effort: We met briefly at one of the AERCs. Glad to see you have picked up Popper.
Daniel, I guess we read Krugman differently. He says they should "stop talking about 'exit strategies'" -- they are just talking and he says they shouldn't act. Then he says to "forget all those scare stories" that would make them change the current policy -- so, continue on with the increasing debt and spending. But I would guess that we both agree that he favors ZIRP (if he can't get negative) and spending (of course, there is never enough of that!). But none of this addresses Pete's original question of how to counter Summers' claims, which is a topic that interests me, and on which I hope Pete will comment.
Daniel Kuehn - I take these sentences as a call to continue ZIRP indefinitely and to spend like crazy: Why does all of this matter? One answer is that central bankers need to stop talking about “exit strategies.” Easy money should, and probably will, be with us for a very long time. This, in turn, means we can forget all those scare stories about government debt, which run along the lines of “It may not be a problem now, but just wait until interest rates rise.” Don't they describe the current policy?
On Krugman, I can only say "wow" (subdued and lower case). More than 4 years since the financial crisis with little or no improvement, so continue the same policies. For God's sake don't ever, ever question our assumptions and reasoning. BTW, what is a sign of demand running ahead of supply? Rising prices? The housing market was not a sign of demand running ahead of supply?
I doubt there is any way to counter this in a way that Keynesians would accept. If interest rates were depressed to -2%, and the expected result of full employment didn't appear, it would be conjectured that the rate must be even lower. 5%? 10%? However, thinking people might be swayed by suggesting that -2% would consume capital through dissaving (maybe the implosion of the money supply, as people converted their rapidly-depreciating bank balances into hard or financial assets, would make Keynesians take notice). But I don't think Summers thinks that capital consumption is necessarily bad, as in his mind consumption drives growth, not capital accumulation. Again, as I mentioned in my fb comment, I am interested in approaches to this problem. Countering people with different assumptions about how the world works seems like a big issue.
Supporting Rafe's project, I suggest that some of Popper's work adds credibility to the action axiom and integrates economics more closely with the natural sciences:
It seems that libertarians expect this incredible fidelity when their (mine, too) heroes enter the policy domain. The fact that Mises was also grateful to fascist Italy for initially staving off the Anschluss was simply a value judgment that he liked not being enslaved or murdered by Nazis, not an endorsement of fascism. When attempting to apply principles to the political domain we are bound to fail, as will the physician advising the witch doctor. With politics it is always a question of who will be coerced, how much and in what fashion, not what principles foster social cooperation.
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Aug 30, 2011