EconLog Archive
Macroeconomics
Does MMT need a mathematical model? Or greater self-awareness?
Noah Smith has a very good post discussing MMT models on the economy. Here’s how he concludes: I’m not confident in my ability to answer these and other important questions by reading L. Randall Wray blog posts, or long online explainers, or wordy MMT papers. I want to be able to read a concrete, formal, .. MORE
Behavioral Economics
Why I’m an Economic Optimist but Happiness Pessimist
Seven years ago, my mentor Tyler Cowen did an interview with The Atlantic entitled, “Why I’m a Happiness Optimist but Economic Pessimist.” His point: Though GDP growth has been disappointingly low for decades, the internet does give us tons of free, fun stuff. The more I reflect on the Paasche price index, though, the more I’m .. MORE
International Macroeconomics
A Powerful Argument from Don Boudreaux
An old, standard argument against trade deficits is that they are financed by foreign capital inflows that represent debt to be reimbursed in the future. In this perspective, an American trade deficit gives the foreign owners of the incoming capital a claim to future American production. Don Boudreaux and other economists have argued that foreign .. MORE
Labor Market
My Short Case Against Occupational Licensing
“Just because somebody packs up that moving van in Chicago, Illinois, they don’t lose their skills on the way to the state of Arizona. Why should somebody have to suffer the burden of thousands of dollars or weeks or months of recertification in a skill that they already have?” So said Doug Ducey, the Republican .. MORE
Public Choice Theory
The Life and Life and Life of the NATO Bureaucracy
The Partnership also prompted Foreign Affairs to publish an article strongly in favor of rapid NATO expansion. Its authors, Ronald D. Asmus, Richard L. Kugler, and F. Stephen Larabee, argued that German-Russian nationalist competition was bound to recur unless the former Soviet satellites were incorporated into NATO and the EU. The “new NATO,” the authors .. MORE
Economic Methods
Fine on Sturgeon
Sociologist Gary Alan Fine is probably best known for his ethnography of role-playing games. But he’s also written the amusing “Ten Lies of Ethnography.” Wittiest passage: Science fiction writer Theodore Sturgeon allegedly noted in response to claims that most science fiction is of poor quality that “90 percent of science fiction is crap, but then .. MORE
Finance
Market mimicking monetary policy
My preferred monetary policy would involve stabilizing the price of NGDP futures contracts. Under this regime, important variables such as the money supply and interest rates would be determined by the market, set at a level that the market expected would lead to on-target growth in NGDP. This sort of regime is not likely to .. MORE
Eurozone crisis
Bannon in/on Italy
Steve Bannon, as you may know, spends more and more of his time in Europe. He visits Italy quite a bit, as he is rumored to be planning to turn a monastery into a sort of permanent summer school for “populists”. Recently Bannon was in Italy and had a debate with Carlo Calenda, former Minister .. MORE
Behavioral Economics
Reflections on The Sopranos
I just finished re-watching the entirety of The Sopranos, HBO’s classic Mafia drama. I saw it season-by-season when it originally aired (1999-2007), and I still hew to the allegedly philistine view that the ending was not only bad, but insulting. Overall, though the show’s reputation is well-deserved. Here are the top social science insights I .. MORE
Fiscal Policy
Hummel on Modern Monetary Theory
If we focus solely on MMT’s [Modern Monetary Theory’s] essential claims about money, distinct from any associated policy proposals, it is neither new nor modern. It simply justifies funding government expenditures by issuing fiat money, which, of course, all economists have long been aware is possible. MMT then attempts to downplay the potential inflationary impact .. MORE
Public Goods
The Public Good of Protection from Asteroids
The Tanis site, in short, did not span the first day of the impact: it probably recorded the first hour or so. This fact, if true, renders the site even more fabulous than previously thought. It is almost beyond credibility that a precise geological transcript of the most important sixty minutes of Earth’s history could .. MORE
Macroeconomics
The NGDP targeting boom
Irving Fisher proposed a price level target in the early 1900s, and numerous other reformers had already been advocating the policy over the previous 100 years. Sweden dabbled with the idea in the 1930s, but it wasn’t until the 1980s that inflation targeting caught on with central bankers. Nominal GDP targeting is another idea that’s .. MORE
Upcoming Events
Me on Bob Zadek Show This Morning
I know this is last minute but I will be interviewed by Charlie Deist on the Bob Zadek Show at 8:00 a.m. PDT. In other words, 45 minutes from now. You can listen to the live stream here. Among other things, we will discuss whether Steve Moore is a good fit for the Fed.
Regulation
Well Maybe Not Anything That’s Peaceful
Leonard Read, the founder of the Foundation for Economic Education (FEE), had a succinct way of stating the philosophy of freedom and individual rights: Anything that’s peaceful. (His book by that title is here. I give a short appreciation of Leonard Read here.) So I was disappointed, to put it mildly, to see on FEE’s .. MORE
Economic and Political Philosophy
Do “We” Want to Rule Over Others?
On Friday, president Donald Trump tweeted: “The problem is, no matter what the Radical Left Democrats get, no matter what we give them, it will never be enough. Just watch, they will Harass & Complain & Resist (the theme of their movement). So maybe we should just take our victory and say NO, we’ve got .. MORE
Labor Market
The Federal Minimum Wage Increase Hurt Many Low-Skilled Workers
We find that increases in the minimum wage significantly reduced the employment of low-skilled workers. By the second year following the $7.25 minimum wage’s implementation, we estimate that targeted individuals’ employment rates had fallen by 6.6 percentage points (9%) more in bound states than in unbound states. The implied elasticity of our target group’s .. MORE
Economic Growth
Paasche Says Progress
When economists debate economic stagnation, I routinely recall my undergraduate macroeconomics textbook, Dornbusch and Fischer’s Macroeconomics (5th edition). In Appendix 2-1, these famed economists introduce readers to two main contrasting price indices: the Laspeyres, or base-weighted, and the Paasche, or current-weighted: While this may seem technical, much is at stake. Suppose a stagnationist belittles the .. MORE
Fiscal Policy
Spending must be paid for—but when?
There’s been a lot of recent discussion about the budget deficit, which is growing rapidly. Some argue that this is not a problem, while others see a crisis coming. I believe that both sides are wrong. I don’t believe the deficit will lead to high inflation, nor do I expect default. There may be some .. MORE
Economics of Education
The $60K Rafting Guide
Like the students in Jared Lucas’s class, I have been thinking a lot about Bryan Caplan’s insights on schooling in The Case Against Education. I got to about page 120 and then my plane landed, but I read it the way I read every book I write a review on: every page and every footnote. .. MORE
Central Planning
Urban Agriculture or Urban Legend?
A significant constraint to affordable housing is a notion of farmland preservation for ‘food sustainability’ based on dominant urban planning assumptions of required farmlands. Debates in states such as Oregon have been intense in the United States, as well as in Canada and beyond. Urban planning mechanisms to preserve actual and potential agricultural land drive .. MORE
Economic Education
Letter from a Teachers’ Teacher
I recently received this email from Jared Lucas, who teaches a class for aspiring teachers. Reprinted with his permission. Hello Mr. Caplan, My name is Jared Lucas, and I teach American Government as well as a seminar class for students wanting to become future teachers. I teach at a vocational school in Newark, OH. While .. MORE