tag:blogger.com,1999:blog-17232051.post3457396098651134881..comments2024-03-28T03:16:14.104-04:00Comments on Noahpinion: Bad event studiesNoah Smithhttp://www.blogger.com/profile/09093917601641588575noreply@blogger.comBlogger84125tag:blogger.com,1999:blog-17232051.post-16081551741242323982014-01-15T03:39:47.805-05:002014-01-15T03:39:47.805-05:00Morpheus security services offers security service...Morpheus security services offers <a href="http://www.morpheussecurity.com/security-services-in-chhattisgarh.php" rel="nofollow">security services in chhattisgarh</a>, security services in madhya pradesh, security services chhattisgarh. Security we provide a comprehensive spectrum of manned security services and security Guard Solutions.<br />Anonymoushttps://www.blogger.com/profile/06884006123204998027noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-52781361034186231312014-01-11T14:54:31.445-05:002014-01-11T14:54:31.445-05:00"Mike Konczal thinks 2013 shows that fiscal p..."Mike Konczal thinks 2013 shows that fiscal policy is needed alongside monetary policy."<br /><br />January 10, 2013<br /><br />Mike Konczal provides two arguments against monetary offset<br />By Scott Sumner<br /><br />"Mike Konczal has a new post with two arguments against monetary offset. In both cases he suggests that the predictions of “market monetarists” have not panned out. But in only the first case is the prediction even being made by a market monetarist..."<br /><br />http://www.themoneyillusion.com/?p=25827Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-32041603498097546002014-01-11T02:11:02.885-05:002014-01-11T02:11:02.885-05:00So Mark, to follow up on the response I made over ...So Mark, to follow up on the response I made over on Econospeak earlier, I largely accept your numbers except for your signs, although there are still second order effects that could be debated.<br /><br />Given that, it is clear that the really big shift was between 2009 and 2010 when we had a shift of more than 2%, much discussed and debated about since. You are probably right that I was wrong in my initial claim that the local and state effects offset the federal effect, although they partially offset it, but the more recent shift was probably more on the order of 1% (or a bit less, although I shall not press that point... ). Yes, in the end the fiscal policy was contractionary, but still not by as much as most in this debate/discussion have assumed.<br /><br />BTW, thank you for providing these careful calculations of the numbers, which I shall not further dispute in a serious way. <br /><br />Barkley Rosserrosserjb@jmu.eduhttps://www.blogger.com/profile/09300046915843554101noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-22564727321030885572014-01-10T21:40:37.710-05:002014-01-10T21:40:37.710-05:00"Regardless, this is why I don't take MM ..."Regardless, this is why I don't take MM serious. It is their desire to proclaim that fiscal policy is largely irrelevant, despite the major role government has in the economy. The government sector on goods and services is almost 20% economy. When you throw in transfer payments it grows to one-third to forty percent of the economy. <br /><br />The government is a major player in economic affairs. MM want to deny this."<br /><br />The Federal Reserve is also part of the government. This is why it makes absolutely no sense to say that MM is anti-government. MM is all about improving how policy is implemented by a government establishment. <br /><br />Furthermore, given the requirement by state and local governments to generally run balanced budgets, state and local governments are endogenous to the state of the economy. Thus to a great extent monetary policy determines the level of fiscal expansion or contraction at the state and local level. This is also evident in the Euro Area where there is almost no fiscal policy on a centralized level. In a very real sense the fiscal austerity seen in the peripheral countries of the Euro Area is directly attributable to the ECB's tight monetary policy.<br /><br />Now, in the US's case we do have a large centralized fiscal establishment but the problem is that the House of Representatives controls fiscal policy and it has been controlled by Republicans for the last four years. Thus even if the Federal Reserve did not offset a more expansionary fiscal policy, none is forthcoming.<br /><br />Thus the only game in town is monetary policy. And interestingly monetary policy is the only thing that Democrats actually have control of by virtue of the fact the President nominates candidates to the Board of Governors of the Federal Reserve and the Senate must confirm those nominees, and the Democrats control both the Presidency and the Senate.<br /><br />Thus the real mystery is why don't Democrats care more about the conduct of monetary policy than they do? Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-16696075551517813912014-01-10T21:37:16.282-05:002014-01-10T21:37:16.282-05:00"To this day many still claim that the 1964 C..."To this day many still claim that the 1964 CRA was a violent act against private property, while advocating a gold standard, dismantling safety nets, cutting back on social spending, and essentially getting the government out of the way so markets can work their "magic"."<br /><br />I would say those libertarians who oppose the CRA do so because they see it as an act against freedom. As for the gold standard that is a very popular position among adherents of Austrian Economic Theory, most of whom are also libertarians. As for the rest of those positions, yes, many libertarians believe that, but not all to the same degree. It so happens that Rand Paul embodies all of these beliefs, but again no single person can be said to represent the views of all libertarians. It is not at all as monolithic a political movement as you imagine. <br /><br />"I wish the Mises.org forums were not shut down, just to show you how batshit crazy these people are."<br /><br />Again, Austrianism is not libertarianism. Most Austrians are libertarians. But Austrians are not a majority of libertarians. You are conflating an economic school with a political movement. <br /><br />"Austrian economics is not a valid school of thought. There is no reason to abolish the state, go back to a gold standard, practice liquidationist measures, etc. Plus, they have been wrong on almost every single economic prediction - there has been no out of control inflation, the bond vigilantes never came, and austerity measurements during a time of severe AD deficiency do not promote growth."<br /><br />You will not find me disputing any of this. I spent a lot of time debating Austrians at Real Clear Economics and Forbes at one time. But these days I chose to ignore them by and large. But if you think all libertarians are Austrians then you are seriously confused. <br /><br />"Quite frankly, I do not understand what you mean by "fiscal policy is contingent on monetary policy response functions"."<br /><br />I mean that the effect of fiscal policy on aggregate demand is dependent on how monetary policy reacts to it. Basically both fiscal and monetary policy work by shifting the aggregate demand curve left or right. If monetary policy is targeting some outcome, say for example inflation, any attempt by fiscal policy to move the aggregate demand curve will be stymied as monetary policy will be changed in order to meet its target. Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-33927937778830336892014-01-10T21:29:27.548-05:002014-01-10T21:29:27.548-05:00"While state and local government spending ro..."While state and local government spending role in third quarter GDP growth was marginal, my point still holds; there was no severe fiscal contraction and we have "stopped banging our heads against the wall". The fiscal drag is becoming less of a drag an adding to economic activity."<br /><br />State and local gross investment and consumption spending had only a marginal affect on real growth last year also, so nothing really changed this year. The theory that state and local spending stopped falling is the whole reason why the tax increases and sequestor had no effect is seriously wanting. <br /><br />"Smith, Locke, Ricardo, and especially Malthus (I got a good chuckle out of that) do not even come close to modern day American libertarianism"<br /><br />Smith and Locke in particular are highly regarded by many American Libertarians:<br /><br />http://www.libertarianism.org/people/adam-smith<br /><br />http://www.libertarianism.org/people/john-locke<br /><br />Plus there is a problem equating classical liberalism with modern day American libertarianism. For instance, Thomas Paine could be classified as a classical liberal, but he was also the grandfather of social security, supported progressive taxation, and providing income to people upon emancipation. If he was alive today, he would be considered a card carrying commie in the eyes of American libertarians."<br /><br />Odd, because Thomas Paine is also lionized by American libertarians:<br /><br />http://www.libertarianism.org/people/thomas-paine<br /><br />And my impression is that much of his thoughts would be very compatible with left-libertarianism:<br /><br />http://bleedingheartlibertarians.com/2013/07/new-sep-entry-on-thomas-paine/<br /><br />"The modern day American libertarian movement gained traction in 1964 with Goldwater running against the Civil Rights Act. This manifested into decades of Conservatives running on state's right to take rights away from people (minorities, gays, women) and then attacking social welfare spending with Reagan's fictitious "Cadillac welfare queen"."<br /><br />Goldwater was opposed to the CRA on the basis of political principles, not because he was a racist. He was responsible for initiating the resurgence of the American conservative political movement in the 1960s and he also had a substantial impact on the libertarian movement, but you're conflating the two. In particular, the founding of the Libertarian party was induced by concerns about the Vietnam War, conscription, and the end of the gold standard. It had absolutely nothing to do with racism, homophobia or sexism.<br /><br />"People like Ayn Rand and Milton Friedman were also heavily influential on the movement."<br /><br />Yes, but Objectivists are openly hostile towards non-Objectivist libertarians and Ayn Rand condemned libertarianism as a greater threat to freedom and capitalism than liberalism and conservatism. And Milton Friedman considered himself to be a classical liberal, and yet you just claimed it was problematic to identify modern American libertarianism with classical liberalism. And frankly, what's so horrendous about having Milton Friedman as an influence?<br /> <br />"It is essentially an anti-state ideology that seeks to put a wall of separation between economics and the government."<br /><br />There is a difference between putting limitations on government and being anti-state.<br /><br />"Today's American libertarian gained traction again with the Ron Paul movement, which comes straight out of Mises.org and Lew Rockwell."<br /><br />Ron Paul, and Lew Rockwell don't represent the views of all libertarians. Moreover most libertarians are not followers of Austrian Economic Theory.Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-2203541296232593012014-01-10T18:41:23.625-05:002014-01-10T18:41:23.625-05:00While state and local government spending role in ...While state and local government spending role in third quarter GDP growth was marginal, my point still holds; there was no severe fiscal contraction and we have "stopped banging our heads against the wall". The fiscal drag is becoming less of a drag an adding to economic activity. <br /><br />You seem quite unfamiliar with modern day American libertarianism. Smith, Locke, Ricardo, and especially Malthus (I got a good chuckle out of that) do not even come close to modern day American libertarianism (BTW, I see that you got your info straight out of wikipedia). <br /><br />Plus there is a problem equating classical liberalism with modern day American libertarianism. For instance, Thomas Paine could be classified as a classical liberal, but he was also the grandfather of social security, supported progressive taxation, and providing income to people upon emancipation. If he was alive today, he would be considered a card carrying commie in the eyes of American libertarians. <br /><br />The modern day American libertarian movement gained traction in 1964 with Goldwater running against the Civil Rights Act. This manifested into decades of Conservatives running on state's right to take rights away from people (minorities, gays, women) and then attacking social welfare spending with Reagan's fictitious "Cadillac welfare queen". <br /><br />People like Ayn Rand and Milton Friedman were also heavily influential on the movement. It is essentially an anti-state ideology that seeks to put a wall of separation between economics and the government.<br /><br />Today's American libertarian gained traction again with the Ron Paul movement, which comes straight out of Mises.org and Lew Rockwell. To this day many still claim that the 1964 CRA was a violent act against private property, while advocating a gold standard, dismantling safety nets, cutting back on social spending, and essentially getting the government out of the way so markets can work their "magic". <br /><br />I wish the Mises.org forums were not shut down, just to show you how batshit crazy these people are. <br /><br />Austrian economics is not a valid school of thought. There is no reason to abolish the state, go back to a gold standard, practice liquidationist measures, etc. Plus, they have been wrong on almost every single economic prediction - there has been no out of control inflation, the bond vigilantes never came, and austerity measurements during a time of severe AD deficiency do not promote growth. <br /><br />Quite frankly, I do not understand what you mean by "fiscal policy is contingent on monetary policy response functions". <br /><br />Regardless, this is why I don't take MM serious. It is their desire to proclaim that fiscal policy is largely irrelevant, despite the major role government has in the economy. The government sector on goods and services is almost 20% economy. When you throw in transfer payments it grows to one-third to forty percent of the economy. <br /><br />The government is a major player in economic affairs. MM want to deny this. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-80856398593933215602014-01-10T16:52:16.159-05:002014-01-10T16:52:16.159-05:00"Spending changes have bigger bangs for the b..."Spending changes have bigger bangs for the buck in the short run on aggregate demand than identical tax changes."<br /><br />Yes, but how much bigger? Let's model this.<br /><br />First of all we need some multipliers. I want to keep this simple so I just want a spending and a tax change multiplier. Romer and Bernstein's "Job Impact of the American Recovery and Reinvestment Act" used a multiplier of about 1.6 for spending and 1.0 for tax changes (see Appendix):<br /><br />http://otrans.3cdn.net/45593e8ecbd339d074_l3m6bt1te.pdf<br /><br />Let's assume all changes to the CAPB were spending changes except for 2013 which we'll assume was two thirds tax changes and one third spending changes. Thus the multiplier for the 2013 CAPB change will be 1.2. <br /><br />And let's assume that all changes to state and local fiscal policy were balanced budget changes. Then any reduction in state and local spending would have a multiplier of 1.6-1.0=0.6.<br /><br />Taking the CAPB changes from 2010 through 2013 which were (-0.2), 1.0, 1.1 and 2.3 respectively and multiplying by their respective multipliers yields an economic effect of (-0.32), 1.60, 1.76 and 2.76 respectively (where negative is expansionary and positive is contractionary). <br /><br />Now we need an estimate for the size of the reduction in state and local spending relative to potential GDP. Here is a graph of state and local spending and revenue as a percent of potential GDP:<br /><br />http://research.stlouisfed.org/fred2/graph/?graph_id=154516&category_id=0<br /><br />State and local spending fell from 15.7% of potential GDP in 2009 to 15.4% in 2010 to 14.7% in 2011 to 14.4% in 2012 and to an average of 14.1% in 2013. Thus the reductions in state and local spending as a percent of potential GDP are 0.3, 0.7, 0.3 and 0.3 in 2010 through 2013 respectively. <br /><br />Multiplying by the balanced fiscal multiplier of 0.6 yields an economic effect of 0.18, 0.42, 0.18 and 0.18 for 2010 through 2013 respectively. Adding these to the economic effects of the CAPB changes yields an economic effect of (-0.14), 2.02, 1.94 and 2.94 for 2010, 2011, 2012 and 2013 respectively.<br /><br />In short, even using a balanced budget multiplier, and using what I think are very generous assumptions, the fiscal changes in 2013 were significantly more contractionary than in the previous two years. Furthermore, even in its most contractionary year, state and local spending reductions only contributed about one fifth of the negative economic impact. Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-71859093935551133222014-01-10T16:08:24.052-05:002014-01-10T16:08:24.052-05:00"In my experience of reading about MM and its..."In my experience of reading about MM and its followers is that there is an underlying aversion to fiscal policy and any form of social spending or government involvement to help stabilize business cycles...However, I don't believe that this diminishes the idea that infrastructure spending, reversing the unprecedented public loss, extending unemployment benefits, and providing middle class tax relief would have no effect on AD during a severely depressed economy."<br /><br />The effect of any of these policies on AD is strictly conditional on the monetary policy reaction function. And if there is no such thing as the liquidity trap, then there is no reason to believe that these policies will have any effect at all on AD given that reaction function. Whether these policies are desirable or not should then be decided strictly based on other criteria. <br /><br />"While I realize that there is some economic disagreement between Austrians and MM, I was pointing out their similar political ideologies leanings."<br /><br />"Some" is an understatement. I would say finding what MM and AET agree on economically would require a microscope. And while I am probably not the right person to generalize the views of Austrians, I would argue that most, if not all, are libertarians. That kind of political uniformity is not really true with regard to MM. I myself am a Democrat and am probably well to the left of our President on most issues.<br /><br />"In fact, I don't view Austrian economics as actual economics, but as a political ideology masked as an "economic school of thought"."<br /><br />In all fairness to Austrians I think this is a gross mischaracterization. In its most sophisticated form Austrian Economic Theory has a highly evolved, if exceedingly idiosyncratic, methodology.<br /><br />"I see a similar level with MM, using economics to push a libertarian agenda."<br /><br />I would say that some MM bloggers choose to discuss libertarian ideas on their blogs. But that is certainly not true of David Beckworth, Nick Rowe, Marcus Nunes, David Glasner or Britmouse for example.<br /><br />"That is why they make bold claims that fiscal policy has no impact on the economy, which is completely absurd."<br /><br />It's incorrect to say that MM believes that fiscal policy has no effect on AD. MM believes that there is no such thing as a liquidity trap. Thus the effect of fiscal policy on AD is strictly conditional on the monetary policy reaction function. It's because of the monetary policy reaction function that fiscal policy has no effect on AD.Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-24388499618518378942014-01-10T16:05:56.769-05:002014-01-10T16:05:56.769-05:00"Even the BEA is calling shenanigans on you. ..."Even the BEA is calling shenanigans on you. Most of the growth attributed to the third quarter of 2013 came from:...spending and in PCE (i.e. stopped hitting our heads against the wall).<br /><br />While there was considerable growth in the third quarter, 41% came from inventory build up, which is nothing to brag about at the moment. In addition, growth was also contributed to ameliorations in the fiscal drag."<br /><br />Let's keep focused. <br /><br />How much real growth was really due to state and local government spending on gross investment and consumption in the last quarter, and how much did that change in the first three quarters compared to last year?<br /><br />Here's the contribution to RGDP growth according to the BEA:<br /><br />http://www.bea.gov/iTable/iTableHtml.cfm?reqid=9&step=3&isuri=1&903=2<br /><br />State and local government gross investment and consumption spending added 0.19 points to RGDP growth in 2013Q3 or 4.6%. In the first three quarters of 2013 state and local gross investment and consumption spending added an average of 0.033 points to RGDP growth. This is up from (-0.038) points last year. That's a difference of only 0.071 points and is trivial at best. <br /><br />"Libertarianism is an anti-government ideology that has roots stemming back to anarchy. Its modern day revival, which is a bastardization of left-wing anarchism, is attributed to right wing libertarianism, Ayn Randianism, and Austrians. In fact, much of the modern day revival of libertarianism can be traced back to Mises.org and Lew Rockwell."<br /><br />Frankly this BS on stilts.<br /><br />Since the term "liberalism" in the US gradually came to refer to "social liberalism", the term "libertarianism" began to be used in its place to refer to "classical liberalism". H. L. Mencken became one of the first prominent Americans to call himself a libertarian, and he did so primarily because he wanted to distinguish himself from social liberals. Most European "libertarians" still call themselves "liberals" because in Europe that term is still more identified with classical liberalism than it is with social liberalism.<br /><br />Classical liberalism emphasizes the need to secure the freedom of individuals by limiting the power of government. It advocates civil liberties with a limited government under the rule of law, private property, and a belief in economic environment in which transactions between private parties are free from government restrictions, tariffs, and subsidies. It builds on select ideas of Adam Smith, John Locke, Thomas Malthus, and David Ricardo.Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-24469199975720098632014-01-10T13:18:33.046-05:002014-01-10T13:18:33.046-05:00You are skeptical about both? What does it even me...You are skeptical about both? What does it even mean? Is it religion? Models are neither true or false. Just more or less useful in describing relationships between aggregates and responses to shocks/policy changes.Krzyshttps://www.blogger.com/profile/15794655390770135247noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-84495530712109330832014-01-10T10:03:29.235-05:002014-01-10T10:03:29.235-05:00Even the BEA is calling shenanigans on you. Most ...Even the BEA is calling shenanigans on you. Most of the growth attributed to the third quarter of 2013 came from:<br /><br />1. Inventory build up<br />2. Deceleration in imports<br />3. Accelerations in state and local government<br />spending and in PCE (i.e. stopped hitting our heads against the wall).<br />http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm<br /><br />While there was considerable growth in the third quarter, 41% came from inventory build up, which is nothing to brag about at the moment. In addition, growth was also contributed to ameliorations in the fiscal drag.<br /><br />Libertarianism is an anti-government ideology that has roots stemming back to anarchy. Its modern day revival, which is a bastardization of left-wing anarchism, is attributed to right wing libertarianism, Ayn Randianism, and Austrians. In fact, much of the modern day revival of libertarianism can be traced back to Mises.org and Lew Rockwell.<br /><br />It is a naive belief system that as you abolish the government and rely on unfettered free markets, that this will lead to increases in individual and social welfare. This type of belief only appeals to cranks and crackpots. Sane people do not want to dismantle our safety nets or abolish social spending and (almost) every aspect of government. <br /><br />I do believe that MM are correct in claiming that monetary is not ineffective at the ZLB levels, but so don't many people, including Keynesian oriented persons. Using unconventional techniques, such as QE, taxing excess reserves, or abolishing paper money could be proven effective. Or even using conventional techniques such as expectations. <br /><br />In my experience of reading about MM and its followers is that there is an underlying aversion to fiscal policy and any form of social spending or government involvement to help stabilize business cycles. <br /><br />Perhaps they are right that all we need to do is target NGDPLT. However, I don't believe that this diminishes the idea that infrastructure spending, reversing the unprecedented public loss, extending unemployment benefits, and providing middle class tax relief would have no effect on AD during a severely depressed economy. <br /><br />While I realize that there is some economic disagreement between Austrians and MM, I was pointing out their similar political ideologies leanings. In fact, I don't view Austrian economics as actual economics, but as a political ideology masked as an "economic school of thought". I see a similar level with MM, using economics to push a libertarian agenda. That is why they make bold claims that fiscal policy has no impact on the economy, which is completely absurd. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-43642889281368780302014-01-09T22:40:00.312-05:002014-01-09T22:40:00.312-05:00Not debatable at all, Mark, if one accepts the old...Not debatable at all, Mark, if one accepts the old balanced budget multiplier idea. Spending changes have bigger bangs for the buck in the short run on aggregate demand than identical tax changes.rosserjb@jmu.eduhttps://www.blogger.com/profile/09300046915843554101noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-61078719451702939812014-01-09T22:12:23.994-05:002014-01-09T22:12:23.994-05:00The point is that Sumner, and others, are criticiz...The point is that Sumner, and others, are criticizing the fact that Krugman is happy to do these bad event studies when it goes in the right direction but then dismisses them when they do not. He called the test, as did Konczal, and then does not acknowledge that the test went the other direction. Of course the test could have gone the way for many reasons, these are bad event studies, but Krugman and others are constantly using them themselves. This is unjustified, just as this article notes, the sample sizes are too small and bloggers need to stop treating a series of predictions over a short times series as strong evidence for or against particular positions. It is weak evidence at best. I find this most recent post at odds with the Krugtron the invincible post in which you claim that Krugman is right because of some similar event studies.weareastrangemonkeyhttps://www.blogger.com/profile/07725580843974605480noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-64548672101117622552014-01-09T21:30:52.112-05:002014-01-09T21:30:52.112-05:00"As for real government spending on consumpti..."As for real government spending on consumption and investment, it decreased by 1.91% between 2011 and 2012, and decreased by 1.03% between 2012 and the three quarters of 2013. That is a deceleration, not an acceleration."<br /><br />Em, no. <br /><br />Real Government Consumption Expenditures & Gross Investment (2009 dollars) averaged $2,992.3 billion in 2011, $2,963.1 billion 2012 and $2,906.4 in the first three quarters of 2013. <br /><br />http://www.bea.gov/iTable/iTableHtml.cfm?reqid=9&step=3&isuri=1&910=x&911=0&903=6&904=2011&905=2013&906=q<br /><br />$2,963.1 billion is 0.97% less than $2,992.3 billion, and $2,906.4 is 1.95% less than $2,963.1 billion. The percent decrease is greater in magnitude in 2013 than in 2012 (so far). <br /><br />"Yes, MM is a free market anti-government political ideology, wrapped up into an "economic school of though"."<br /><br />Since when is libertarianism and classical liberal synonymous with "anti-government"? And in any case, that particular description is qualified with the word "blogging", and was written by what I believe is the most extreme libertarian (Lars Christensen) among Market Monetarist bloggers. I also think the phrase "economic allocation is best left to market forces" is subject to a great deal of interpretation. It's very difficult to generalize the political affiliations of MMers, as it is rather diverse. <br /><br />"This explains their aversion for fiscal policy and why many adherents not only believe that fiscal policy is ineffective, but downright harmful."<br /><br />One unifying belief among Market Monetarists is that the liquidity trap is a myth. Hence fiscal policy can never make up for bad monetary policy. It isn't opposition to fiscal policy so much as the conviction that fiscal policy is irrelevant for the purposes of aggregate demand management.<br /><br />"It also explains the fact that is attracts the Austrian nutters."<br /><br />In the form of antipathetic trolls, certainly (e.g. Geoff aka "Major Freedom" at the Money Illusion). MM is very much a demand-side economic school and Austrian Economic Theory (AET) is very much a supply-side economic school. AET is generally incompatible with MM and few Austrians find any points of agreement with MM. Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-32166734989877039062014-01-09T20:40:35.559-05:002014-01-09T20:40:35.559-05:00I was wrong. I conflated the entire fiscal contrac...I was wrong. I conflated the entire fiscal contraction with the sequester. The tax hikes began on Jan 1st, while the sequester began on March 1st. <br /><br />As for real government spending on consumption and investment, it decreased by 1.91% between 2011 and 2012, and decreased by 1.03% between 2012 and the three quarters of 2013. That is a deceleration, not an acceleration. <br /><br />Then also looking at public employment, it shows that the fiscal drag is coming to an end.<br /><br />Yes, MM is a free market anti-government political ideology, wrapped up into an "economic school of though". <br /><br />"Most of the blogging Market Monetarists have their roots in a strong free market tradition and nearly all of us would probably describe ourselves as libertarians or classical liberal economists who believe that economic allocation is best left to market forces. "<br />http://marketmonetarist.com/2012/07/19/the-ngdp-level-targeting-the-true-free-market-alternative-we-try-again/<br /><br />This explains their aversion for fiscal policy and why many adherents not only believe that fiscal policy is ineffective, but downright harmful. It also explains the fact that is attracts the Austrian nutters. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-14881181885923927872014-01-09T20:16:58.864-05:002014-01-09T20:16:58.864-05:00"So, you may be right about the general gover..."So, you may be right about the general government balances, alhtough I never saw any account of how they deal with state and local governments."<br /><br />Yes, but that's true of all of the 90 or so nations covered by the IMF Fiscal Monitor. In my opinion going into detail on the fiscal assumptions concerning all of the state and local governments would be rather burdensome for the publication.<br /><br />"OTOH, there clearly was stimulus from them nevertheless in that their spending and hiring rose. As this did not affect any balance, it remains unaccounted for."<br /><br />This is based on the highly debatable assumption that the stimulative effect of increased state and local spending significantly exceeds the contractionary effect of increased state and local revenue.Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-20499558980401188792014-01-09T20:05:38.455-05:002014-01-09T20:05:38.455-05:00"So this does not account for the stimulus co..."So this does not account for the stimulus coming from the rising spending and hiring at state and local levels."<br /><br />This is based on the highly debatable assumption that the stimulative effect of increased state and local spending significantly exceeds the contractionary effect of increased state and local revenue.Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-41011357821526056272014-01-09T19:58:47.068-05:002014-01-09T19:58:47.068-05:00"Intuitively-yes I know it doesn't belong..."Intuitively-yes I know it doesn't belong in economics!-I'd expect this kind of consolidation to be less contractionary-tax cuts on the rich wouldn't hurt growth too much."<br /><br />Approximately two thirds of the revenue raised by the 2013 tax changes comes from the payroll tax increase which falls most heavily on those with low incomes and according to the CBO has a higher fiscal multiplier than any other kind of tax change. Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-91599490724871808102014-01-09T19:44:57.312-05:002014-01-09T19:44:57.312-05:00"More importantly, when has there ever been &... "More importantly, when has there ever been "neutral policy"? <br /><br /> Certainly not in 2013 where policy was a net drag. I still don't get why it's so difficult to admit that if there had been no sequester we would have had higher growth. I think monetary policy may have somewhat offset it but it clearly didn't entirely do so. Mike Saxhttps://www.blogger.com/profile/01360689916550576484noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-24500956214745904082014-01-09T19:41:37.861-05:002014-01-09T19:41:37.861-05:00"About 70% of the fiscal policy changes at th... "About 70% of the fiscal policy changes at the federal level in 2013 were in taxes, not spending (i.e. the sequestor). Thus it seems to me in order to compare the degree of fiscal consolidation with previous years it's essential that we use some measure that takes into account the revenue side of government fiscal policy."<br /><br /> Intuitively-yes I know it doesn't belong in economics!-I'd expect this kind of consolidation to be less contractionary-tax cuts on the rich wouldn't hurt growth too much. Mike Saxhttps://www.blogger.com/profile/01360689916550576484noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-3006745751581578232014-01-09T19:37:32.179-05:002014-01-09T19:37:32.179-05:00Sam who's obseessed with increasing budget def... Sam who's obseessed with increasing budget deficits? We've had nothing but fiscal contraction for 4 years-starting in 2010. Mike Saxhttps://www.blogger.com/profile/01360689916550576484noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-10634378029989969512014-01-09T19:35:18.110-05:002014-01-09T19:35:18.110-05:00Kevin, I think NGDPLT has made quite an impression... Kevin, I think NGDPLT has made quite an impression on the blogosphere. I don't have any objection to it being tried. My problem is Sumner's tying it to fiscal austerity. If he stops that-which he wont-then I have no problem-though we certainly can be no more than agnostic of what it's success would be at this point. Mike Saxhttps://www.blogger.com/profile/01360689916550576484noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-28514891411449698742014-01-09T18:55:00.030-05:002014-01-09T18:55:00.030-05:00It obviously has to do with "regime change&qu...It obviously has to do with "regime change" not happening or something like that. So if there is a rise in unemployment in 2009 it is because of insufficient stimulus (or austerity for that matter) while if there is no rise in unemployment in 2013 despite austerity and Zero Lower Bound still binding it is either because of "regime change" or "other stuff" (with regime change possibly one example of other stuff)<br /><br />Still feeling that it does't make any sense and you are still feeling confused? Don't worry, I think it was supposed to be that way. All is well. Anonymoushttps://www.blogger.com/profile/14853090724221729923noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-52461546268689546162014-01-09T18:07:08.009-05:002014-01-09T18:07:08.009-05:00For the record.
In response to Krugman’s April 2...For the record.<br /> <br />In response to Krugman’s April 2013 post “Monetarism Falls Short” here is what I wrote:<br /> <br />http://economistsview.typepad.com/economistsview/2013/04/monetarism-falls-short.html#comment-6a00d83451b33869e2019101a068f8970c<br /> <br />“The last I checked the Fed had not implemented a policy of nominal GDP level targeting (NGPLT), so when it does, perhaps then we can talk about what NGDPLT has or has not done. However what I do think we’re witnessing is a test, albeit a somewhat complicated one, of the existence or nonexistence of the liquidity trap.<br /> <br />The four largest currency areas at or near the zero lower bound in central bank policy interest rates are the United States, the Euro area, Japan and the United Kingdom…”<br /> <br />And I went on to discuss the empirical evidence against the existence of the liquidity trap. Nearly one year later the evidence has only grown that much stronger.Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.com