Tag Archives: Economics

Wienmodellen — så löser vi bostadsbristen [embedded content] Yours truly har alltid gillat Wien sen han läste tyska där år 1980. Jag längtar med jämna mellanrum tillbaka (var där för några år sedan och föreläste vid stadens två stora universitet). Och det blir ju inte sämre när det nu visar sig att staden — till skillnad från t ex Stockholm — på allvar försöker göra något åt bostadseländet. (h/t Kjell Nilsson)

This is my take on Rogoff’s “Modern Monetary Nonsense” Rogoff: “A number of leading US progressives, who may well be in power after the 2020 elections, advocate using the Fed’s balance sheet as a cash cow to fund expansive new social programs, especially in view of current low inflation and interest rates.” Rogoff’s use of the expression “as a cash cow to fund” ignores the fact that the Fed is already the “cash cow” that makes all economy’s payments possible. The Fed lends to...

Summers​ shameless assault on MMT First,​ it was Paul Krugman. Then came Kenneth Rogoff. And now Lawrence Summers has felt the urge to attack MMT and defend mainstream economics: There is widespread frustration with the performance of the economy … Altered economic conditions have led to the development of new economic ideas … And now, these new ideas are being oversimplified and exaggerated by fringe economists who hold them out as offering the proverbial...

Krugman a Keynesian? No way! In his critique of MMT the last couple of weeks, Krugman has claimed Stephanie Kelton and other MMTers have got things terribly wrong: Anyway, what actually happens at least much of the time – although, crucially, not when we’re at the zero lower bound – is more or less the opposite: political tradeoffs determine taxes and spending, and monetary policy adjusts the interest rate to achieve full employment without inflation. Under...

Economic ideas you should forget — the axioms of revealed preference The axioms of revealed preference have been part of the foundations of economics since they were formulated by Paul Samuelson in 1947. These principles allowed economists to continue to use the calculus of utilitarianism even though utilitarianism had ceased to be a fashionable philosophical doctrine. And they enabled economists to give a particular, and special, meaning to the term...

Generations of economics students have been misled into believing that banks are reserve constrained. Even today, though most specialist monetary economists would likely cringe at the idea, there are widely used textbooks that teach this mistaken view to a new generation of students. Usually the story is framed in terms of a ‘money multiplier’ model in which an addition of reserves into the monetary system by the central bank will supposedly cause a multiplied increase in bank lending and...

Kelton and Krugman — MMT vs IS-LM Is there some reason the straightforward framework Krugman laid out is wrong? Yes, as even its creator went on to acknowledge. MMT rejects the IS-LM framework that Krugman uses to demonstrate the conclusion that widening budget deficits put upward pressure on interest rates and crowd out private investment. The model remains the workhorse for many mainstream Keynesians. MMT considers it fundamentally flawed … Keep this in...

Need education outcomes explained in a more intuitive way? Better call Dave Guest post by Jeff Mosenkis of Innovations for Poverty Action A lovely tribute to Dave Evans, who’s been a boon to the field, and a prolific producer of public goods, from David McKenzie and his Development Impact Blog colleaguesI ran a quick search, and I’ve cited him about 50 times in my links It’s fitting that Dave’s final Dev Impact post is in one of his specialities, making research more understandable to...

Modern monetary theory (MMT) makes clear that, for currency-issuing governments, the macroeconomic constraint on fiscal policy is resource availability, not revenue. This is sometimes summarized as “the constraint on fiscal policy is inflation” in recognition of the link between resource availability and the macro impacts of spending. So long as there are available workers, materials, plant and equipment, it is possible to produce more. Under these circumstances, extra spending on goods...

Krugman vs Kelton on the fiscal-monetary tradeoff Paul Krugman is back again telling us that he doesn’t really want to spend time on arguing about MMT — and then goes on complaining that well-known MMTer Stephanie Kelton says things “obviously indefensible.” What has especially irritated the self-proclaimed ‘conventional’ Keynesian is that Kelton “seems to claim that expansionary fiscal policy … will lead to lower, not higher interest rates.” Now, the logic...