tag:blogger.com,1999:blog-3621026.post831191543689357836..comments2024-03-29T06:05:04.162+01:00Comments on Robert's Stochastic thoughts: Roberthttp://www.blogger.com/profile/14455788499385673507noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-3621026.post-20097754797407223932009-03-31T04:49:00.000+02:002009-03-31T04:49:00.000+02:00Thanks Scott Sumner. I just can't figure out why ...Thanks Scott Sumner. <BR/><BR/>I just can't figure out why Keynes didn't advocate steady modest inflation (say an n% rule ?). I think it must have been that actually advocating inflation was too radical for Keynes.<BR/><BR/>He also tends to seem to assume that expected inflation must be zero except during a hyperinflation. I think those were the two cases which had occurred when he wrote. We have since managed persistent predicted moderate inflation partly via improved published price indices and cost of living adjustments which they make possible.<BR/><BR/>I don't know about Keynes, but I sure am confused by Keynes on Fisher and the Fisher effect. I'm working on it.Roberthttps://www.blogger.com/profile/14455788499385673507noreply@blogger.comtag:blogger.com,1999:blog-3621026.post-62468277034546759832009-03-31T04:40:00.000+02:002009-03-31T04:40:00.000+02:00"Robert..."Mostly Keynes argues that if one wants ..."Robert..."Mostly Keynes argues that if one wants lower real wages it is better to drive up prices with monetary policy..."<BR/><BR/>Carried out over generations, ..."<BR/><BR/>I should have written "In Chapter 19, Mostly Keynes ..." Note "better" means "better than trying to cut nominal wages" not good. Keynes supported public investment (I think mostly in public housing but he isn't very clear) as a way to have full employment.<BR/><BR/>He definitely assumed that real wages would grow as capital accumulated and technology progressed. Everyone did. They were right except about the USA in the past 35 years. <BR/><BR/>I think it is clear how Keynes would react to the huge increase in inequality over the past 30 years in the USA -- he advocated making the tax system more progressive, in order to speed the reduction of inequality. I'd guess that were he alive he would advocate making it much more progressive to reverse the increase.Roberthttps://www.blogger.com/profile/14455788499385673507noreply@blogger.comtag:blogger.com,1999:blog-3621026.post-59927562741432625152009-03-30T21:35:00.000+02:002009-03-30T21:35:00.000+02:00Nice post. In defense of Barro, Keynes' views reg...Nice post. In defense of Barro, Keynes' views regarding an "immoderate increase in money" are vague. Most of the time he seems to imply that immoderate increases would definitely be inflationary, particulary under a fiat money regime. (Keynes abhorred fiat money throughout his career.) If so, then the liquidity trap concept is pretty meaningless (except where policy is constrained, as under a gold standard.) BTW, his "confidence" comment probably refered to higher rates associated with the Fisher effect, which Keynes did not understand very well. Your point that fiscal policy could also shake confidence is very pertinent. Keynes recognized that possibility in a comment he made around 1930. <BR/>You are right that the logic of the GT is that moderate inflation would prevent liquidity traps. Of course Keynes never saw that logic. With a forward-looking moderate inflation target, almost nothing in the GT would make sense. The fiscal multiplier would be zero, there would be no paradox of thrift, etc. Any non-monetary shock would cause the central bank to change policy enough to keep expected inflation on target. And with a high enough trend rate of inflation they could do that, as liquidity traps would be ruled out.Scott Sumnerhttps://www.blogger.com/profile/15864819372390187247noreply@blogger.comtag:blogger.com,1999:blog-3621026.post-25489117142041005732009-03-29T20:37:00.000+02:002009-03-29T20:37:00.000+02:00Robert..."Mostly Keynes argues that if one wants l...Robert..."Mostly Keynes argues that if one wants lower real wages it is better to drive up prices with monetary policy..."<BR/><BR/>Carried out over generations, this policy ineluctably results in a gradually lower median standard of living (per hour worked). This is exactly what has happened (lower real wages). It now takes 2 jobs plus overtime to support a family, when one job used to be enough. Many retirees were pushed to near subsistence level.<BR/><BR/>Even if Keynes was correct that this will reduce unemployment a bit (unproven), is it worth it? Do we really want the median consumer to suffer a gradually declining standard of living with each successive generation?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3621026.post-60810947823441157042009-03-28T17:00:00.000+01:002009-03-28T17:00:00.000+01:00http://delong.typepad.com/sdj/2009/03/tim-geithner...http://delong.typepad.com/sdj/2009/03/tim-geithner-is-not-a-tool-of-wall-street.html<BR/><BR/>March 27, 2008<BR/><BR/>Tim Geithner Is Not a Tool of Wall Street<BR/><BR/>Edward Luce writes -<BR/><BR/>"America’s liberals lay into Obama: * The liberal backlash against President Barack Obama has begun with many prominent left-leaning economists in the US attacking the administration’s plans to bail out the banks.<BR/><BR/>"Paul Krugman describes the toxic asset purchase plan as 'cash for trash.' Jeffrey Sachs calls it 'a thinly veiled attempt to transfer hundreds of billions of US taxpayer funds to the commercial banks.' Robert Reich depicts Tim Geithner, Treasury secretary, as a prisoner of Wall Street while Joe Stiglitz says the plan 'amounts to robbery of the American people' " ....<BR/><BR/>* http://www.ft.com/cms/s/0/963b81bc-1b1d-11de-8aa3-0000779fd2ac.html<BR/><BR/>-- Brad DeLong<BR/><BR/>[The supposed liberal academic thought police are busy policing thought. Please do not report me.]Anonymousnoreply@blogger.com