It has now been seven years since the onset of the global financial crisis. A central question is how the crisis has changed our view on macroeconomic policy. The IMF originally tackled this issue at a 2011 conference and again at a 2013 conference. Both conferences proved very successful, spawning books titled In the Wake of the Crisis and What Have We Learned? published by the MIT Press.
The time seemed right for another assessment. Research has continued, policies have been tried, and the debate has been intense. How much progress has been made? Are we closer to a new framework? To address these questions the IMF organized a follow up conference on "Rethinking Macro Policy III: Progress or Confusion?", which took place at the Jack Morton Auditorium in George Washington University, Washington DC, on April 15–16, 2015.
The conference was co-organized by IMF Economic Counselor Olivier Blanchard, RBI Governor Raghu Rajan, and Harvard Professors Ken Rogoff and Larry Summers. It brought together leading academics and policymakers from around the globe, as well as representatives from civil society, the private sector, and the media. Attendance was by invitation only.
Wrap Up Video:
Session IV: Fiscal Policy in the Future Video:
Vitor Gaspar, Marco Buti, Martin Feldstein, Brad DeLong
J. Bradford DeLong
Olivier Blanchard, when he parachuted me into the panel, asked me to “be provocative.”
So let me provoke:
My assigned focus on “fiscal policy in the medium term” has implications. It requires me to assume that things are or will be true that are not now or may not be true in the future, at least not for the rest of this decade and into the next. It makes sense to distinguish the medium from the short term only if the North Atlantic economies will relatively soon enter a regime in which the economy is not at the zero lower bound on safe nominal interest rates. The medium term is at a horizon at which monetary policy can adequately handle all of the demand-stabilization role.
I have been playing with FOLD, and having fun. Here I take the transcript of the New York Comic Con "Trekonomics" panel created by the extremely-productive-on-long-airplane-flights Izabella Kaminska, add to it, and annotate it...
Hey! Why hasn't the Financial Times paid for her to step back from Alphaville and turn her Beyond Scarcity series of weblog posts into a book?
Over at Equitable Growth: The very sharp and energetic Peter Passell, who runs the Milken Institute Review these days, commissioned me to write a reader's guide to the secular stagnation debate. I set it up as a four-corner cage match--Bernanke, Rogoff, Krugman, and Summers--and I am proud of it. (But I have to offer apologies to those--Koo, Blanchard, Feldstein come most immediately to mind, but there are others--who have their own serious positions that are not completely and satisfactorily understood as linear combinations of the four I chose to be my basis vectors.) It is out:
J. Bradford DeLong (2015): The Scary Debate Over Secular Stagnation, Milken Institute Review 2015:IV (October) pp. 34-51:
Bernanke... says we have entered an age of a “global savings glut.”... Rogoff... points to the emergence of global “debt supercycles.”... Krugman warns of the return of “Depression economics.” And... Summers calls for broad structural shifts in government policy to deal with “secular stagnation.” READ MOAR
The highly-estimable Tim Duy is doing what he does best once again: worrying about the Federal Reserve's conduct of monetary policy:
Tim Duy: Some Thoughts On Productivity And The Fed: "Yellen is leaning in the direction of taking the productivity numbers at face value...
...and seeing low wage growth as consistent with the view that the productivity slowdown is real.... The unobserved component approach suggests that productivity growth decelerated to an annualized pace of just 0.82 percent by the second quarter of this year... [in line with] Fed staff estimates of potential GDP growth range from roughly 1.6 to 1.8 percent through 2020.... Yellen might think back to the 1990’s, when a surprise rise in productivity growth temporarily lowered the natural rate of unemployment... [and] reverse that logic now and think that the arguments for tighter policy are stronger....
Today's Economic History: Paul Krugman muses:
...All pre-industrial societies, I thought, were Malthusian... at the edge of subsistence... [and] a small elite, 5 or 10 percent... liv[ing] on resources extorted.... This model still seems to me to be pretty good for the Roman Empire. But at least as Goldsworthy describes it, the Roman Republic at the time of the Punic Wars was something very different... social solidarity... loyal allies... strong commitment from a large fraction of the population... military manpower... durability.... Are there any other examples in history like this? And how did they do it?
Multiple Comments of the Day: What I, at least, regard as an interesting discussion in the comments to my A Very Brief Sokratic Dialogue on Website Redesign: From that post:
Platon: Five requirements?
Sokrates: Yes.... The stream... so... who want to either read what is new or to treat the site as a weblog--that is, have a sustained engagement and conversation with the website considered as a Turing-class hivemind--can do so.... The front-end... to give each piece of content a visually-engaging and subhead-teaser informative welcome mat.... The syndication... to propagate the front-end cards out to Twitter and Facebook.... The stock... a pathway... by which people can pull things written in the past... relevant... to their concerns today.... The grammar: The visually-interesting and subhead-teaser front-end... needs to lead the people who would want to and enjoy engaging with the content to actually do so.... [But,] as William Goldman says, nobody knows anything.
Platon: Is there anybody whose degree of not-knowingness is even slightly less than the degree of not-knowingness of the rest of us?...
Sokrates: My guess... http://www.vox.com--Ezra Klein and Melissa Bell and company--are most likely to be slightly less not-knowing than the rest of us....
Over at Equitable Growth: Introduction
Olivier Blanchard, when he parachuted me into this panel, asked me to “be provocative”.
So let me provoke:
My assigned focus on “fiscal policy in the medium term” has implications. It requires me to assume that things are or will be true that are not now or may not be true in the future, at least not for the rest of this and into the next decade. It makes sense to distinguish the medium from the short term only if the North Atlantic economies will relatively soon enter a régime in which the economy is not at the zero lower bound on safe nominal interest rates. The medium term is at a horizon at which monetary policy can adequately handle all of the demand-stabilization role. READ MOAR
This morning, Republican-appointed Supreme Court Chief Justice John Roberts wrote and five of his colleagues -- Democrat-appointed Breyer, Ginsburg, Sotomayor, and Kagan, and Republican-appointed Kennedy -- agreed that:
Section 18031 [of the Affordable Care Act--i.e., the ObamaCare Law--] provides that “[e]ach State shall . . . establish an American Health Benefit Exchange..." [But] if [a] State chooses not to do so, Section 18041 provides that the Secretary [of Health and Human Services] “shall . . . establish and operate such Exchange..." (emphasis added [by Roberts]).... The phrase “such Exchange”... instructs the Secretary to establish and operate the same Exchange that the State was directed to establish.... Black’s Law Dictionary 1661... (defining “such” as “That or those; having just been mentioned”).... State Exchanges and Federal Exchanges are equivalent—they must meet the same requirements, perform the same functions, and serve the same purposes...A simple matter of black-letter law, no? The plain meaning of the phrase "such Exchange" means that anything legal that is true of a health-insurance exchange established by, say, the state of New York is also true of a health-insurance exchange established by the federal government for, say, the state of Florida if the state of Florida fails to establish its exchange, no?
J. Bradford DeLong :: University of California at Berkeley
Let me begin by thanking Matt Rognlie for doing some very serious and thoughtful digging into this set of factor-payments data. That digging leaves me in an ideal position for a discussant: There are interesting and important numbers. These numbers have not been put together in this way before. The author is wise enough not to believe he has nailed what the numbers mean to the floor. Thus I am in an excellent position to, if not add intellectual value, at least to claim a lavish intellectual-rent share of Matt Rognlie's product.
bottlerocketscience: Startup Geometry Podcast EP 004: Brad DeLong:
At that time--or, rather, in that logical state to which the economy will converge if values of future shocks are set to zero--expected inflation will be constant at about the 2% per year that the Federal Reserve has announced as its target. At that time the short-term safe nominal rate of interest will be equal to that 2% per year of expected inflation, plus the real profits on marginal investments, minus a rate-of-return discount because short-term government bonds are safe and liquid. At that time the money multiplier will be a reasonable and a reasonably stable value. At that time the velocity of money will be a reasonable and a reasonably stable value. Why? Because of the powerful incentive to economize on cash holdings provided by the the sacrifice of several percent per year incurred by keeping cash in your wallet rather than in bonds. And at that time the price level will be proportional to the monetary base. READ MOAR
Over at Equitable Growth: Back in 1959 Arthur Burns, lifelong senior Republican policymaker, Chair of the Council of Economic Advisers under President Eisenhower, good friend of and White House Counselor to President Nixon, and Chair of the Federal Reserve from 1970 to 1978 gave the presidential address to the American Economic Association. In it, he concluded that the United States and a lot of choices to make as far as its future economic institutions and economic policies were concerned. And, he said:
These... choices will have to be made by the people of the United States; and economists--far more than any other group--will in the end help to make them...
That's you. "Economists", that is. And I am glad to be here, because I am glad that you are joining us. For we--all of us in America--need you. Arthur Burns was right: you are better-positioned than any other group to help us make the right choices, at the level of the world and of the country as a whole, but also at the level of the state, the city, the business, the school district, the NGO seeking to figure out how to spend its limited resources--whatever. READ MOAR
Sokrates: Internet Media and the Fall of GigaOm
Adeimantos: What? Are you now intellectually flirting with both Hinduism and techno-transhumanism?
Felix Salmon: I told you so. If I may quote myself:
Glaukon: So: Blogging...
Hypatia: I would like to start by offering the floor to the Great and Good Felix Salmon:
Felix Salmon: To All the Young Journalists Asking for Advice...: I’m also very flattered by the lovely things you said... about how you’d love to have a career in journalism... do[ing] the kind of thing... I do. You won’t.... By the time you’re my age... you’ll... be doing something... nobody today... foresee[s]....The obstacles facing you are much greater than anything I managed to overcome.... The exact same forces which are good for journalism and good for owners are the forces which are bad for journalists....
It is time for me to reedit and revise this before I give it again. How should it change? What does it say that no longer needs to be said? What does it not say that now needs to be said?
Zimbabwe!: Here is a piece of currency, a dollar bill. It is from Zimbabwe. It is for $100,000,000,000,000 Zimbabwean dollars.
I want to label something that I see "cognitive capture", and think about it.
The vir illustris Ron Rosenbaum, however, disagrees. Rosenbaum is writing about David Corn's story that Bill O'Reilly was not in fact in a "war zone" in 1982, and about how O'Reilly is responding by saying: "you can tell that I am a truth-teller because the liberals attack me so much". And he thinks that "cognitive capture" is not a useful concept. We should pretend it does not exist. We should instead just tell the truth day by day as if we were having a reasoned discussion. And we should hope that eventually, with enough truth-telling, the chips will fall where they should:
@jayrosen: 1/ To clarify what I meant in saying I share this http://nymag.com/daily/intelligencer/2015/02/fox-news-should-thank-mojo-for-oreilly-story.html view. The @MotherJones story on O'Reilly was still worth doing. It's important to nail down what actually happened, compare that to O'Reilly's statements, and criticize him for misrepresentation. But. Since we're trying to be factual, it is a fact that Fox News is not only built to absorb these blows but to strengthen itself by them. Things are way beyond whether Fox News 'has' or does not 'have' credibility, journalistically. That discourse is surreal at this point. We have to face up to a kind of rupture in the news system. 'Making shit up' is a devastating blow over here, and no big deal over there.. So what I object to is any assumption of 'continuity in credibility.' We need metaphors of discontinuity if we're to understand Fox News.
@RonRosenbaum1: @jayrosen_nyu A bit condescending to say 'those people''s eyes can't be opened a bit by somethng as egregious as this.
One of the things that was supposed to get done in January but didn't was a revision of this piece--it is now three years out-of-date, after all, and while it is still useful it is less useful than it was, or would be were I to properly review and update it. But it did not get done in January. It is not going to get done in February. So I am putting it up both as a useful (albeit somewhat out of date) resource, but primarily as a reproach to myself to get cracking on the revision in my copious spare time...
FEBRUARY 2012 VERSION: Budgeting and Macroeconomic Policy: A Primer
by J. Bradford DeLong
Budgeting and Macroeconomic Policy: A Primer
Budgeting and Macro Policy
J. Bradford DeLong
U.C. Berkeley: Spring 2012: February 23, 2012: 11,103 words
Noncommercial distribution for educational purposes allowed
© 2012 J. Bradford DeLong
The policy debate on the sources, causes and potential solutions to rising income and wealth inequality has intensified in the past few years. Recently, French economist Thomas Piketty’s popular book 'Capital in the Twenty-First Century' garnered much attention and ignited further debate about these issues. Piketty argues that wealth will inevitably become more concentrated under capitalism because the returns to wealth are larger than economic growth rates. The solution he proposes is a coordinated global tax on wealth. The Baker Institute's Tax and Expenditure Policy Program will host two renowned economists to discuss the underlying causes and consequences of inequality, evaluate the empirical evidence of rising inequality, and examine potential solutions for dealing with these problems in the United States.
As prepared for delivery:
J. Bradford DeLong :: U.C. Berkeley, NBER, WCEG, INET :: February 3, 2015 :: http://tinyurl.com/dl20150202a
I am very happy to be here, especially as Texas is a state I get to relatively rarely. I have unusually few relatives in it, you see. When the DeLongs got to Wichita they decided to turn north rather than south and wound up in DeKalb County, Illinois. And those who did end up here decamped to North Carolina, leaving me with none until last year when my cousin Annie and her husband moved to Dallas. The last time my wife and I spent any extended time in Texas was on our honeymoon, when we were washed out of our campsite in a swamp near the Louisiana border by a midnight mid-June thunderstorm, so we bypassed Galveston and Houston and then spent a week and a half going Austin-San Antonio-Permian Basin-El Paso.
Sokrates Son of Sophroniskos: You are out of your century, and out of your country...
Titus Pomponius Atticus: I claim this to be my country, and here by the docks of the Piraeus to be my place. I am not called "Atticus" for nothing, you know...
Axiothea: Why are you called "Atticus"? It doesn't sound like a very Roman name...
Atticus: I made it up. My father had only two names--good old Titus Pomponius, no claims to triple-barreled noble senatorial-class names he, just an equestrian.
J. Bradford DeLong :: U.C. Berkeley
OëNB Conference on European Economic Integration :: Vienna :: November 24-25, 2014
There is an important purpose of an opening keynote talk like this one. Its task is to start from first principles and then give a large-scale bird's-eye overview to what is to come. We have panels to come on monetary policy, balance-sheet adjustment and growth, inequality and its role in generating internal macroeconomic imbalances, external macroeconomic rebalancing, and banking sector regulation. They all presuppose that Europe, and within it the regions of Central, Eastern, and Southeastern Europe that we focus on here, need not just higher aggregate demand in the short-term but more. They need large-scale sectoral rebalancing. And that sectoral rebalancing needs to be rapid. Why? Because these economies will not grow smoothly without deep structural reforms--in these reforms need to be not just at the bottom but at the top, reforms of institutions, governance structures, an regulatory practices and mandates need to be carried out as well.
My problem this morning is that I have four starting points. Or maybe my problem is that I have five starting points:
I. A Little Dutch History
My first starting point is the history of the Netherlands.
I would have to be more rash indeed than the fifteenth century's Charles de Valois-Burgogne,2 the last sovereign Duke of Burgundy, to dare to opine about classical Dutch history with Jan de Vries in the room. But my read of it tells me that "political union" is a very vague and sketchy concept indeed. Consider the "political union" of what was surely the strongest power in seventeenth-century Western Europe: the seven United Provinces of the Netherlands that dominated the economy and were the political-military lynchpin of the coalition to contain the aggressive King Louis XIV Bourbon of France. READ MOAR
Septima: My good friend Omar, whom I love so dearly! You just ran into that tree!
Axiothea: And why are you walking about muttering to yourself with your eyes glued not to the beautiful mountain afternoon but to your smartphone?
Omar Khayyam: THAR SHE BLOWS! THREE POINTS OFF THE LARBOARD BOW!! IT'S THE BERNE WHALE!!!
William Gale wrote: http://www.cato.org/publications/cato-online-forum/get-fiscal-house-order
And now he responds:
Recently, I wrote an article on the role of fiscal policy on economic growth. I argued that, if we want to raise living standards of future generations, a major priority should be reducing the long-term ratio of public debt to GDP. (I also suggested that, since the benefits of higher economic growth disproportionately accrue to high-income households, those households should bear the brunt of the costs of fiscal consolidation.)
In response, Berkeley Economics Professor Brad Delong asked, “Why would anyone seek today to relatively downweight virtually any other economic policy priority in order to focus on the deficit?” At the risk of oversimplifying, Delong offers two classes of reasons for asking his question:
Over at Equitable Growth: These days, when people come to me and ask if I will run a reading course for them on Karl Marx, this is what I tend to say:
The world is divided into those who take Karl Marx's work seriously and those who do not.
On the one hand, those who do not take Karl Marx's lifetime work-project seriously are further divided into three groups:
Those who ignore Marx completely.
Those who use selected snippets from his work as Holy Texts, and
Those modern "western Marxists" who find inspiration in the works that Karl Marx wrote exclusively before he was thirty. READ MOAR
So I finally made a chunk of time to read and think about Michael Kinsley's response to Paul Krugman's rebuttal of Kinsley's claim that Krugman was engaged in a "misguided moral crusade against" rather than a technocratic critique of "austerity".
First and most essential, I need to set some rules here: If I'm going to be called a canine of any form, standards must be maintained.
I insist that it be not "attack dog" but either:
Those are the approved options. Pick one. Use it. Stick to it. It's really not hard at all to do.
Sokrates: If you wanted a focus group for the core target audience of the Old New Republic, you would look for intellectually-curious left-of-center engaged intellectuals not themselves subject-matter experts in policy and politics. And on the internet the single most concentrated slice of such people are found in the commentariat at the website http://unfogged.com. Their Ringmaster assembles such a focus group. It isn't pretty, but I do think it is an accurate picture of what has been wrought by all those liberal writers and editors who were...
Artaphernes: ...were for three decades and more willing to go the extra mile to suck up to the various and manifold bigotries of Martin Peretz and company. Isn't that what you were going to say, Sok?
Sokrates: Anyway, here are selections from the thread:
Ogged and Company: Teach Me: I've read so much blather about The New Republic's shake-up that I'm just going to skip the links and ask a simple question: in the last thirty years, what are its five best pieces of political writing?
The other contributions to Brink Lindsey's Cato Institute Online Economic Growth Forum have all been things I can engage--things that make me think, that are individual economists' honest and good-faith attempts to say where the fruit is to be picked in terms of boosting America's economic growth.
Then comes Douglas Holtz-Eakin.
And, I must say, it seems to me that it really is time for some sort of disciplinary police action/intervention here...
Holtz-Eakin's piece seems to me to be, in the context of the other--remarkably good--pieces that Brink Lindsey has commissioned, a very strange intrusion from some alternative non-technocratic discursive universe--a veritable Colour out of Space:
That same nameless intrusion which Ammi had come to recognise and dread... the shaft of phosphorescence from the well was getting brighter and brighter, bringing to the minds of the huddled men a sense of doom and abnormality which far outraced any image their conscious minds could form...
Some questions for the authors of the contributions that struck me as the most interesting...
Two Questions for Scott Sumner: First Question: Why has nominal GDP targeting not already swept the economics community? It really ought to have. Second Question: I believe in nominal GDP targeting--especially if coupled with some version of "social credit" at or near the zero lower bound. But a look back at the history of ideas about a proper "neutral" monetary policy--Newton’s fixed price of gold, Hayek’s fixed nominal GDP level, Fisher’s fixed price-level commodity basket, Friedman’s stable M2 growth rate, the NAIRU targeting of the 1970s, Bernanke’s inflation-targeting—leads immediately to the conclusion that anybody who claims to have uncovered the Philosopher’s Stone here is a madman. How can you reassure me that I (and you) are not mad?
...of the long-run growth rate in the economy.... But it does offer one of the cheapest ways of boosting growth. Unlike fiscal programs such as infrastructure, there is virtually no cost to improving monetary policy.... Elsewhere (2014) I’ve argued that a policy of nominal GDP targeting would smooth out the business cycle and undercut many of the arguments for counterproductive policies.... We need to convince other economists that nominal GDP targeting is the way to go. Once we do so, the Fed will follow the consensus. READ MOAR