Tag Archives: Economics

Moments like this you never forget! Last year Mark Blyth gave the U. S. Senate Budget Committee a well-earned lecture on public debt. Unforgettable and absolutely fabulous!

Oxford professor Simon Wren-Lewis had a post up some time ago commenting on traction gaining ‘attacks on mainstream economics’: One frequent accusation … often repeated by heterodox economists, is that mainstream economics and neoliberal ideas are inextricably linked. Of course economics is used to support neoliberalism. Yet I find mainstream economics full of ideas and analysis that permits a wide ranging and deep critique of these same positions. The idea that the two live and die...

The tiny little problem with Chicago economics Every dollar of increased government spending must correspond to one less dollar of private spending. Jobs created by stimulus spending are offset by jobs lost from the decline in private spending. We can build roads instead of factories, but fiscal stimulus can’t help us to build more of both. This form of “crowding out” is just accounting, and doesn’t rest on any perceptions or behavioral assumptions. John Cochrane And the tiny little...

Diane Coyle has an excellent article in the FT about an apparent puzzle. Why do executives get incentive bonuses (extra pay on meeting some target), but most workers do not? Her article is based around a classic paper by Bengt Holmstrom and Paul Milgrom. Their basic argument is that incentive pay linked to specific targets works (it increases effort) when tasks are simple and effort can be easily measured. However if tasks are complex, and only some aspects of performance can be...

The real cost of euro austerity The euro has taken away the possibility for national governments to manage their economies in a meaningful way — and in Greece the people has had to pay the true costs of its concomitant misguided austerity policies. The unfolding of the Greek tragedy during the last couple of years has shown beyond any doubts that the euro is not only an economic project, but just as much a political one. What the neoliberal revolution during the 1980s and 1990s didn’t...

Economics — too much maths and too little history  [embedded content]

Solow and Damon Runyon’s law The eminently quotable Robert Solow — as always — says it all: To get right down to it, I suspect that the attempt to construct economics as an axiom-atically based hard science is doomed to fail. There are many partially overlapping reasons for believing this … A modern economy is a very complicated system. Since we cannot conduct controlled on its smaller parts, or even observe them in isolation, the classical hard- science devices for discriminating between...

NAIRU — a harmful fairy tale The NAIRU story has always had a very clear policy implication — attempts to promote full employment is doomed to fail, since governments and central banks can’t push unemployment below the critical NAIRU threshold without causing harmful runaway inflation. Althouigh a lot of mainstream economists and politicians have a touching faith in the NAIRU fairy tale, it doesn’t hold water when scrutinized. One of the main problems with NAIRU is that it is essentially a...

Panglossian trade theory facing reality I feel a little like Rip Van-Winkle. The consensus amongst economists in the 1980s was that trade is always and everywhere good for everyone. After attending a UCLA workshop on trade a couple of weeks ago, I learned that all that has changed. There is a new consensus, summarized in two papers, “The China Syndrome”, published in the American Economic Review, and “the China Shock”, a new working paper, by David Autor, David Dorn and Gordon Hanson...

Remember the old times? Here is a quote from ECB President Jean-Claude Trichet … on September 3rd, 2010: “We encourage all countries to be absolutely determined to go back to a sustainable mode for their fiscal policies,” Trichet said, speaking after the ECB rate decision on Thursday. “Our message is the same for all, and we trust that it is absolutely decisive not only for each country individually, but for prosperity of all.” “Not because it is an elementary recommendation to care for...