tag:blogger.com,1999:blog-2499715909956774229.post2021445908882321486..comments2024-03-22T22:37:02.639-07:00Comments on Stephen Williamson: New Monetarist Economics: Pining for the FjordsStephen Williamsonhttp://www.blogger.com/profile/01434465858419028592noreply@blogger.comBlogger16125tag:blogger.com,1999:blog-2499715909956774229.post-24303590038126220822015-03-09T21:08:07.836-07:002015-03-09T21:08:07.836-07:00Spotting correlations like these is similar to fin...Spotting correlations like these is similar to finding conspiracies -- they are there, of course, and anyone who can't see them is part of the conspiracy.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-73525819222544092662015-02-11T12:19:14.898-08:002015-02-11T12:19:14.898-08:00They can label what is going on in their model any...They can label what is going on in their model any way they want. They also call it "confidence." I haven't read the paper, so I don't have much to say about it, but I'm certain this is far from what Wren-Lewis is thinking about, or what your typical Old Keynesian who says "demand shock" is thinking about. Did "higher-order uncertainty" have something to do with the financial crisis? I don't know.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-7642903520747877502015-02-11T11:51:30.812-08:002015-02-11T11:51:30.812-08:00Doesn't Angeletos/Collard/Dellas have a model ...Doesn't Angeletos/Collard/Dellas have a model that delivers a "demand shock" (MIT 2014). That at least is a proper model, not an undergraduate toy.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-62156664610302400992015-02-11T06:24:46.571-08:002015-02-11T06:24:46.571-08:00Some people can see the virgin Mary in a grilled c...Some people can see the virgin Mary in a grilled cheese sandwich:<br /><br />http://www.nbcnews.com/id/6511148/ns/us_news-weird_news/t/virgin-mary-grilled-cheese-sells/#.VNtlh_nF98E<br /><br />Maybe people like that have high IQs, or have studied fluid dynamics (or cheese dynamics).Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-81199829769422248402015-02-11T06:20:14.098-08:002015-02-11T06:20:14.098-08:00The point is that the financial crisis is not a &q...The point is that the financial crisis is not a "demand shock." That's language attached to some device that was developed to teach something to undergraduates. It can't help us think about what was going on in the financial crisis.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-3593425869920791282015-02-10T21:07:57.682-08:002015-02-10T21:07:57.682-08:00"So, that's even worse - the Phillips cur..."So, that's even worse - the Phillips curve has the wrong slope." - no, you can clearly see that the percent change vs percent curve has one correlation then the opposite, depending on what 'regime' the data are in, such as 'boom times' or 'bust (post-boom) times'. The analogy with physics: the same fluid will behave differently depending on whether the regime is "laminar" or "turbulent", with the cutoff between the two regimes being quite dramatic (analogous to the charts here), with the cutoff determined by the fluid's "Reynold's number". It's surprising to me that you cannot see this. BTW these sorts of correlations are used in IQ tests all the time...the more you can spot, the higher your IQ.Ray Lopezhttps://www.blogger.com/profile/11134761834999705305noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-75399895137185021532015-02-10T18:57:23.147-08:002015-02-10T18:57:23.147-08:00Loved the Monty Python reference. I should add, th...Loved the Monty Python reference. I should add, that at least in case of Australia, different expectations about central bank policy discouraged such a flight to safety in the first place. <br /><br />"But 20 years of zero-lower-bound experience in Japan and recent experience around the world tell us that sticking at the zero lower bound does not eventually produce more inflation - it just produces low inflation."<br /><br />Persistent deflation under the C19th gold standard was a result of the stock of gold rising slower than the output of goods and services, just as persistent inflation was a result of the stock of gold rising faster than the output of goods and services, in both cases the demand to hold gold mostly marching with output. With central banks either being (1) not big enough players to affect that much or (2) operating to make it so or (3) some combination of the two.<br /><br />By 1919, central banks completely dominated gold holding. Persistent deflation in post-return to gold standard Britain was due to the returned-to money price of gold not matching the British price level. Sharp deflation in the Great Depression was the result of a dramatic increase in the demand to hold gold (thank you, Bank of France).<br /><br />So, in none of the above cases do we have to tell an interest rate story. Why do we now tell an interest rate story? Interest rates being the price of credit, and all: an across-time price.Lorenzohttps://www.blogger.com/profile/00305933404442191098noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-49119497482180771912015-02-10T18:39:45.719-08:002015-02-10T18:39:45.719-08:00"So after the "major demand shock" ..."So after the "major demand shock" - otherwise known as the financial crisis". Would there have been a demand shock if central banks had responded appropriately to the suddenly increased demand to hold money? The experience of Israel and Australia suggests not.Lorenzohttps://www.blogger.com/profile/00305933404442191098noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-72875279372963485452015-02-10T09:41:40.318-08:002015-02-10T09:41:40.318-08:00At the aggregate level, the way this concept is us...At the aggregate level, the way this concept is used is typically not helpful. What we really care about are the welfare effects of alternative policy rules. To do that calculation, we need a model. Inefficiency (relative to what is feasible under alternative policy rules) is not something we can measure directly.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-43788957061980586332015-02-10T08:16:16.873-08:002015-02-10T08:16:16.873-08:00from Paul Ormerod's blog:
A powerful blow agai...from Paul Ormerod's blog:<br />A powerful blow against the concept of potential output has been published in the latest edition of the American Economic Association’s journal Applied Economics. Igal Hendel and Yossi Speigel document the evolution of productivity over a 12 year period in a steel mini-mill producing an unchanged product, working 24/7. The steel melt shop is almost the Platonic ideal from a national accounts perspective of output measurement. The product – steel billets – is a simple, homogenous, internationally traded product. There was virtually no turnover in the labour force, very little new investment, and the mill worked every hour of the year. Yet despite production conditions which were almost unchanged, output doubled over the 12 year period. As the authors note, rather drily, “the findings suggest that capacity is not well defined, even in batch-oriented manufacturing”. Time to put the concept of potential output into the rubbish binAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-31354747396502444822015-02-10T06:40:41.895-08:002015-02-10T06:40:41.895-08:00Hoisted on his own parrot.Hoisted on his own parrot.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-40835898439703535712015-02-10T06:34:17.439-08:002015-02-10T06:34:17.439-08:00There are at least two theories of the Phillips cu...There are at least two theories of the Phillips curve correlation. The first is a very old one, which was in Lucas's "Expectations and the Neutrality of Money" paper from 1972. Lucas's theory was that the Phillips curve correlation was due to unanticipated monetary shocks. The central bank surprises economic agents with a monetary shock, and people are fooled into working harder. The theory can potentially explain why the Phillips curve shifts, or its slope changes. But that theory isn't taken so seriously any more. The Phillips curve also comes out of New Keynesian models, due to price stickiness, and the forward-looking behavior of firms who are setting the prices. I think that also implies that the Phillips curve is unstable, but no one really explores that. In its crudest form, the Phillips curve becomes a theory of inflation - output gaps, however measured (could be the difference between the unemployment rate and some "natural rate") determine the inflation rate. Some central bankers think in the latter terms.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-47247363304363000532015-02-10T02:41:33.842-08:002015-02-10T02:41:33.842-08:00The post "Government debt, financial markets ...The post "Government debt, financial markets and dead parrots" from Simon reminds me more of the dead parrot sketch.<br /><br /> Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-65969514124241334832015-02-09T18:50:15.947-08:002015-02-09T18:50:15.947-08:00Does the phillips curve assume that the only thing...Does the phillips curve assume that the only thing affecting inflation is the labor market?Unknownhttps://www.blogger.com/profile/17932071545546824245noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-5699648882340420932015-02-09T10:17:18.774-08:002015-02-09T10:17:18.774-08:00You forgot the best one -- the Phillips Curve has ...You forgot the best one -- the Phillips Curve has joined the bleeding choir invisible. It is an ex Pcurve!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-70752453162671639252015-02-09T09:13:02.191-08:002015-02-09T09:13:02.191-08:00Great post! We need more people questioning and pr...Great post! We need more people questioning and providing an alternative to the "Intermediate Macro Keynesian" narrative out there. Hopefully you'll blog more about your own "positive" theory of inflation, aggregate level of activity, etc.soon?Anonymousnoreply@blogger.com