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Sunday, April 28, 2019

Reply to PGL comment on Brad DeLong Post on Stealing Candy From Fish in a Barrel

This is a comment on a comment and is here only because I can't insert a figure in a comment section. Click the link. Good point. Also the GOP supply side story is about non residential fixed investment. They have been promising for 39 years that their tax cuts will cause a huge increase in business investment and that Democrats' tax increases will cause it to collapse.

Also there has been a very clear pattern, which happens to be the exact opposite. The ratio of non residential fixed investment to GDP is high when a Democrat is in the White House (especially if he is a peanut farmer from Georgia) and collapses when a supply-sider is in the White House.

The pattern is so clear that it is hard to avoid seeing it. The incentives to claim to have managed not to see it are clearly very strong.

Also Brad why real/real. Two famous economists have stressed that the causes of high investment cause high nominal/nominal while effects are due to real/real so one can test causation using relative prices. One of them is named DeLong. The tax bill doesn't affect the relative price of capital goods, I think it is best to look at dollars/dollars and leave price indices out of it.

3 comments:

Unknown said...

Glad you drew the graph:

"The pattern is so clear that it is hard to avoid seeing it. The incentives to claim to have managed not to see it are clearly very strong."

I love this line!

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