A Lack of Prudence

What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom.—Adam Smith, The Wealth of Nations

Here’s some nonsense on stilts:

Richard Feynman was once asked what he would pass on if the whole edifice of modern scientific knowledge had been lost, and all he . . . → Read More: A Lack of Prudence

A Welcome Definition

Foseti provides one for “austerity”:

I’ve complained a few times that opponents of austerity refuse to define what they’re opposed to. Naively, I’d assumed that austerity meant that governments were cutting spending. Actually, it turns out governments continue to spend more money during period of austerity and even periods of “crippling austerity.” I’ve done . . . → Read More: A Welcome Definition

Maybe I Can Help

Paul Krugman is having difficulty reaching a conclusion:

So Japan, which is spending heavily for post-tsunami reconstruction, is growing quite fast, while Italy, which is imposing austerity measures, is shrinking almost equally fast.

There seems to be some kind of lesson here about macroeconomics, but I can’t quite put my finger on it …

. . . → Read More: Maybe I Can Help

The Rich Aren’t Necessary

So says Nick Hanauer:

It is astounding how significantly one idea can shape a society and its policies. Consider this one.

If taxes on the rich go up, job creation will go down.

This idea is an article of faith for republicans and seldom challenged by democrats and has shaped much of today’s . . . → Read More: The Rich Aren’t Necessary

The Choice Is(n’t) Yours

It doesn’t get much clearer than this:

The first case—Obama triumphant—obviously makes it easiest to imagine America doing what it takes to restore full employment. In effect, the Obama administration would get an opportunity at a do-over, taking the strong steps it failed to take in 2009. Since Obama is unlikely to have a . . . → Read More: The Choice Is(n’t) Yours

Consumer Demand is Not the Whole Picture

See if you can spot what’s missing:

Businesses aren’t investing in the United States because of a lack of consumer demand, International Paper CEO John Faraci said Friday.

“I think this was all about consumer spending and demand. You know, the problem we have is there’s inadequate demand to create jobs. We know how . . . → Read More: Consumer Demand is Not the Whole Picture

In Praise of Deflation

First, some neo-Keynesian nonsense:

It’s counterintuitive that falling prices can be bad. After all, nobody ever complained about stuff being cheaper. The problems, though, are twofold. First, if prices fall across the board, so too will wages — but debts won’t. Borrowers will have a harder time making their payments. More of them will . . . → Read More: In Praise of Deflation

Nothing new in macroeconomic methodology? (wonkish)

Simon Wren Lewis who is a professor of economics at Oxford University has an interesting piece (hat tip: Mark Thoma) on the distinction and choice between micro founded macroeconomic models and top-down models such as the IS/LM (Keynesian) or other variants such as Modern Monetary Theory (MMT).

I think this is an interesting discussion . . . → Read More: Nothing new in macroeconomic methodology? (wonkish)

Keynesian Tautologies

From Paul Krugman:

Watching Europe sink into recession – and Greece plunge into the abyss – I found myself wondering what it would take to convince the chattering classes that austerity in the face of an already depressed economy is a terrible idea.

After all, all it took was the predictable and predicted failure . . . → Read More: Keynesian Tautologies

Spot the Fallacies

I count three:

Capitalism is currently undergoing its most serious crisis since the Great Depression. The solutions offered by the Right are the same as they were then: Do nothing and let the natural cycle of business (the invisible hand of the free market) straighten itself out. Well, that’s not going to work. Hoover . . . → Read More: Spot the Fallacies