Week 27, 2013, further reading


Rationality and the Euro
by Paul Krugman, NYT
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Austerity Won’t Work if the Roof Is Leaking
by ROBERT H. FRANK, NYT
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Nobody Pays Any Attention To What I Say
by Paul Krugman, NYT
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E Pluribus Unum
by Paul Krugman, NYT
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Paul Krugman: Nobody Pays Any Attention To What I Say


 

Or that’s what people keep telling me. Actually, one of the odd but revealing things about modern conservatives is the way they alternate between paranoia about the vast left-wing conspiracy and insistence that people who disagree with them are part of a tiny fringe with no real following. Joe Scarborough thinks (or thought — has he updated?) that I was all alone in questioning deficit panic; the fairly large anti-me industry has been insisting for around a decade that I’ve lost all credibility except among credulous New York liberals.

So, on the general principle that if I am not for myself, who will be for me: that left-wing rag the Wall Street Journal has a new assessment, based on some supposedly objective criteria (but not including Twitter followers) of the most influential business thinkers. They see a big change since the last time they did this, five years ago. Back then, business strategy gurus — authors of books on reengineering the search for excellence in the total quality six-sigma chaos, and all that — dominated the list. This time, the top thinkers are:

1.Paul Krugman
2. Joseph Stiglitz
3. Bill Gates
4. Michael Porter
5. Thomas Friedman
6. Eric Schmidt
7. Richard Branson
8. Malcolm Gladwell
9. Robert Reich
10. Jack Welch
11. Muhammad Yunus
12. Niall Ferguson
13. Michael Dell
14. Howard Gardner
15. Jimmy Wales

Let me say, the fact that Joe Stiglitz is up there makes me more optimistic about the world; as I’ve written in the past, he’s an insanely great economist, in ways that you really can’t comprehend unless you do economic modeling, but until now I would never have envisioned him having the kind of reach he now does.

Something else, which the WSJ doesn’t emphasize, is that the list isn’t just heavy on economists; it’s heavy on liberal economists. I don’t think that’s an accident, and I don’t think it’s purely political. The fact is that in an era of markets gone massively bad, conservative economists don’t have much to offer except excuses.

Obviously it’s not completely one-sided; going down the list a bit further I see proof that PT Barnum was right. But still, iinteresting.

Economics and Politics by Paul Krugman – The Conscience of a Liberal – NYTimes.com

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Paul Krugman: The Always-Wrong Club


 

Aha. Floyd Norris reminds us of the 23-economist letter from 2010, warning of dire consequences — “currency debasement and inflation” — from quantitative easing. The signatories are kind of a who’s who of wrongness, ranging from Niall Ferguson to Amity Shlaes to John Taylor. And they were wrong again.

But that won’t diminish their reputations on the right, even a bit. How do I know that? Well, also on the list — presumably because they asked him to be there — is Kevin Hassett, co-author of Dow 36,000 and also a prominent denier of the existence of a housing bubble. Fool me once, fool me twice, fool me yet again — hey, never mind.

Quite amazing.

The Always-Wrong Club – NYTimes.com

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Paul Krugman: Wells, Hitler, and the World State


 

John Holbo has a fun post about the old H.G. Wells-based movie Things to Come, which embodied a vision of the future that used to be quite popular among intellectuals — that of a temporary dictatorship, not of the proletariat, but of the scientifically literate meritocracy, which would give way to liberal democracy — plus some truly terrible fashion choices — once the masses had been sufficiently educated.

Actually, you could say that something like this vision is still popular in elite circles; instead of envisioning Raymond Massey enforcing peace through air supremacy, they would have Michael Bloomberg enforcing budget discipline through bipartisan commission, but the spirit of the thing is the same. As it turns out, the second vision is proving as far off base as the first.

But surely you can’t discuss all this without referencing George Orwell’s Wells, Hitler, and the World State. It’s a short essay, and the perfect corrective to any notion that technology automatically leads to social or political progress.

Wells, Hitler, and the World State – NYTimes.com

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Week 26, 2013, further reading


The Always-Wrong Club
by Paul Krugman, NYT
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Careless talk may cost the economy
by Martin Wolf, ft.com
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Florida Versus Spain, An Update
by Paul Krugman, NYT
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Nova SBE is once again the sole Portuguese school in the FT Finance ranking

We Were Middle-Class Once, And Young
by Paul Krugman, NYT
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Europe is ignoring the scale of bank losses
by Wolfgang Münchau, ft.com
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Paul Krugman: Florida Versus Spain, An Update


 

I’ve suggested on a number of occasions that one good way to understand the problems of the euro is to compare the experiences of Florida and Spain. Both had huge housing bubbles, fed in part by buyers of coastal holiday homes, which burst. Both suffered nasty recessions as a result. But then their destinies diverged, because one was part of a fiscal as well as monetary union, while the other wasn’t. As its economy shrank, Florida paid much less in federal taxes, even as federal spending in Florida rose; I’ve estimated the de facto federal aid to Florida in 2010 at around 5 percent of GDP. That’s aid, not loans; anything on that scale would have been inconceivable in Europe.

Now, as everyone knows, Spain continues to suffer, with unemployment rising ever higher; and despite ECB actions that have contained its borrowing costs, no end to the debt crisis is in sight. Meanwhile, what’s going on in Florida?

Remarkably, the Florida unemployment rate is not only down, it’s slightly below the national average:

How did that happen? It’s not because of a huge employment boom: Florida’s employment decline was much bigger than that of the nation as a whole, and it has not made up the gap:

What has happened, presumably, is out-migration: workers leaving Florida for better job markets. Oh, by the way: further evidence against the notion that “structural” mismatches explain weak employment.

Now, out-migration is a big problem when it happens in Europe, because it undermines the fiscal base; but in Florida, which benefits from federal retirement and health-care programs, housing the elderly is actually an export industry.

So the saga continues — and the evidence continues to mount that Europe just wasn’t ready for a single currency.

Florida Versus Spain, An Update – NYTimes.com

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Week 25, 2013, further reading


Profits Without Production
by Paul Krugman, NYT
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Rents and Returns: A Sketch of a Model (Very Wonkish)
by Paul Krugman, NYT
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Reform of British banking needs to go further
by Martin Wolf, ft.com
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A Potentially Tragic Taper
by Paul Krugman, NYT
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Newsletter 01 – Nova SBE
New Campus Nova School of Business and Economics

How Are These Times Different?
by Paul Krugman, NYT
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The toxic legacy of the Greek crisis
by Martin Wolf, ft.com
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Globalization and Macroeconomics
by Paul Krugman, NYT
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Structural Excuses
by Paul Krugman, NYT
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Fight the Future
by Paul Krugman, NYT
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Bond market nerves threaten to end Europe’s calm
by Wolfgang Münchau, ft.com
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Posted in Europe, Further reading, HomeWork, Links, Martin Wolf, Paul Krugman, Wolfgang Münchau | 1 Comment

Paul Krugman: Structural Excuses


 

I promised in an earlier post to say something about why these days I tend to get annoyed when I hear the phrase “structural reform”, especially in Europe.

Part of the reason is that the phrase sounds good, but could mean lots of things. In many cases “structural reform” is code for eliminating worker protections and/or sharply cutting social benefits. Sometimes this may be necessary — let’s face it, France has made it much too attractive to retire at 55 — but such things should be called by their proper names, not wrapped in vague language that conceals the nature of the pain.

That brings me to a second problem: whenever some catchphrase becomes part of what Very Serious People say because it sounds Serious, it’s time to stop using the phrase, to force the VSPs to talk about what they really mean. In the US context, “entitlement reform” is VSP boilerplate — I mean, who can be against reform? But there’s a world of difference between trying to move away from fee for service medicine — a reform I support — and, say, raising the Medicare age, which would be a terrible policy. These things should not be lumped together.

But the main thing about “structural reform” in Europe is the role it plays in discussion of macroeconomic policies. Instead of reflecting on the fact that Europe is sinking deeper into depression five years into the slump, and clearly needs less austerity and more aggressive monetary expansion, the usual suspects start talking about the need for structural reform. And my sense is that this talk of reform has, in practice, become less a real demand for specific actions than an excuse for not facing up to the reality of macroeconomic disaster, and a way to avoid discussing the responsibility of Germany and the ECB, in particular, to help end this disaster.

Structural Excuses – NYTimes.com

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Paul krugman: The Hellenization of Economic Policy


 

Simon Wren-Lewis has been on a roll lately; his latest talks about how the mishandling of Greece inflicted vast damage on the European economy as a whole, and to some extent the US economy too. Basically, troika officials refused to admit the obvious and allow an early Greek default; instead they made absurd claims for the effectiveness of austerity, and in so doing spread austerian economics far and wide.

So in a way we’ve had the worst of all possible worlds: the alleged prospect of becoming another Greece has been used by austerians to frighten politicians and the public into policies that deepen the slump, and the mishandling of Greece — by many of the same people spreading this fear — has made the prospect of becoming another Greece even more frightening.

The IMF, at least, seems to have learned something from the experience.But as Wren-Lewis says, there is no hint of rethinking or remorse at the ECB, which is at this point the player that really matters.

The Hellenization of Economic Policy – NYTimes.com

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Paul Krugman: Fiscalists, Monetarists, Credibility, and Turf


Cardiff Garcia has a nice survey of the two main groups of stimulati — those who want policy makers to be doing much more in the way of fiscal expansion, and those who want much more in the way of monetary expansion. As he says, most (but not all) of the players here are, as a practical matter, OK with trying both, so in policy terms there isn’t much argument between them.

I’d just add two points.

First, my own evolution: in 1998, looking at Japan, I concluded that monetary policy could be effective, but only if — in what I guess is now a widely used phrase — the central bank could credibly commit to being irresponsible, that is, to allowing inflation to rise, not tightening money as soon as the economy recovered. When crisis struck more widely, it became clear to me just how hard this would be to achieve — in part because it would obviously take years to persuade central bankers that they needed a higher inflation target, and further time to convince investors that the central bankers really had changed their spots.

So I became a pragmatic fiscalist, for reasons best laid out by Mike Woodford: the great thing about fiscal stimulus is that it doesn’t depend on expectations, and it works even if nobody believes it will work.

Unfortunately, this pragmatic case for fiscal policy runs into a different real-world problem: the obduracy of policymakers, who quickly turned to austerity policies, reaching for any argument they could find. This has led me and others to spend a fair bit of time calling for monetary expansion, simply because the central bank retains some freedom of action.

Second, I’m surprised that Garcia doesn’t mention Richard Koo, who would seem to be the prime candidate on the fiscalist side for someone who is adamant that we not try monetary policy on the side. I’ve written about my puzzlement over Koo’s position.

The main thing, I think, is to recognize that while we have our differences, the important thing is to try everything that might help. The greatest intellectual sin here is to care more about protecting your turf — my answer is the only answer! — than about the real economy that desperately needs every form of help we can deliver.

Fiscalists, Monetarists, Credibility, and Turf – NYTimes.com

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