tag:blogger.com,1999:blog-2499715909956774229.post5997806225576532042..comments2024-03-22T22:37:02.639-07:00Comments on Stephen Williamson: New Monetarist Economics: Historical FictionStephen Williamsonhttp://www.blogger.com/profile/01434465858419028592noreply@blogger.comBlogger21125tag:blogger.com,1999:blog-2499715909956774229.post-72913900184596419192015-09-03T10:38:46.392-07:002015-09-03T10:38:46.392-07:00If you want to see how all those outdated ideas ab...If you want to see how all those outdated ideas about inflation fail just look at Argentina, we have it all, price controls, wage controls, subsidies (for all...costs and utilities)...please send us a couple of Sargent's books for our ministrer of economics....I expect he might find them useful.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-55757253097904582762015-05-21T19:25:26.473-07:002015-05-21T19:25:26.473-07:00Okun said a drop of "10% of a year's GNP&...Okun said a drop of "10% of a year's GNP", not 10% per year, as Williamson claims. That is, Okun's 10% of GDP (the "sacrifice ratio") could be spread out over many years.<br /><br />In hindsight, we know that Okun was pretty accurate. For example, Ball (NBER #4306, 1993) found that the Volcker disinflation had a sacrifice ratio of about 7%, fairly close to Okun's estimate. So the episode cost the US over 50% of a year's GDP.<br />Ragouthttp://ragout.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-22778874799999838362015-01-25T14:18:44.957-08:002015-01-25T14:18:44.957-08:00"It is also an excellent analysis of the cont..."It is also an excellent analysis of the contemporary policies of Margaret Thatcher."<br /><br />Lol. Instead of reading your "holy books" you Austrian nutcases really gotta look at some DATA from time to time to reconnect with reality.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-20545036388652521702015-01-21T20:03:41.194-08:002015-01-21T20:03:41.194-08:00Those two papers you quote by Tom Sargent were sim...Those two papers you quote by Tom Sargent were simply brilliant and yet live in obscurity in the working papers series of the Federal Nank of Minneapolis. <br /><br />They have much to teach today's microeconomics despite been written in 1981. <br /><br />It is also an excellent analysis of the contemporary policies of Margaret Thatcher.Jim Rosehttps://www.blogger.com/profile/02233668500637892711noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-62440545624627095622015-01-18T12:12:10.548-08:002015-01-18T12:12:10.548-08:00Guys who do e.g. predict hyperinflation and don...Guys who do e.g. predict hyperinflation and don't acknowledge their mistake after their model failed empirically.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-19630610265846992172015-01-14T17:46:02.854-08:002015-01-14T17:46:02.854-08:00"...the New Classical are unscientific as the..."...the New Classical are unscientific as they ignore empirical evidence."<br /><br />Who are those New Classical anyway?Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-86135111788405706412015-01-14T13:49:29.823-08:002015-01-14T13:49:29.823-08:00Lot of nonsense in this Sargent paper. "Persi...Lot of nonsense in this Sargent paper. "Persistently running large deficits" does not automatically lead to higher inflation, it depends on how the monetary agency behaves. And Krugman is spot-on about the calibration part, the New Classical are unscientific as they ignore empirical evidence.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-38153018199627779842015-01-14T13:08:09.547-08:002015-01-14T13:08:09.547-08:00Be quiet John, your nonsense is not needed here. ...Be quiet John, your nonsense is not needed here. Krugman will supply enough nonsense for all of us.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-4523817999390892992015-01-12T06:43:29.114-08:002015-01-12T06:43:29.114-08:00They might say: "That's pretty interestin...They might say: "That's pretty interesting. Once we thought the trap central banks tended to fall into was in creating too much inflation by persistently exploiting some temporary (and perhaps only perceived) tradeoff between inflation and unemployment. Now the trap seems to be that central banks create too little inflation under the false impression that persistently low nominal interest rates will create inflation."Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-23229383975402814952015-01-07T00:52:02.060-08:002015-01-07T00:52:02.060-08:00Suppose someone held the following view in 1980 or...Suppose someone held the following view in 1980 or so: "Inflation only *seems* to have a momentum of its own; it is actually the long-term government policy of running persistently high deficits and creating money at high rates which imparts momentum to inflation." What would such an economist think of the U.S. economic record in the last decade or so, with its "persistently high deficits," "high rates" of money creation, but not much inflation?Anonymoushttps://www.blogger.com/profile/11677815746117897839noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-17836128825183632742015-01-06T15:00:08.460-08:002015-01-06T15:00:08.460-08:00Agree all round.
Actually I suspect that Fed acti...Agree all round.<br /><br />Actually I suspect that Fed actions have real effects because they are signals that a regime change is real. That was the implication of a decomposition I saw by a Bank of Canada guy in 2013 showing that the rounds of asset purchases in QE-infinity each caused immediate jumps in rates that decreased as the policy went on.<br /><br />But why are the signals costly? For that, we have to know the propagation mechanism - whether it's sticky wages/prices, or something else.Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-78873277347590711282015-01-05T08:46:35.426-08:002015-01-05T08:46:35.426-08:00I'm guessing that you think that's inconsi...I'm guessing that you think that's inconsistent with what Sargent was saying in 1981. That's not correct.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-55854977173677338032015-01-05T02:35:25.490-08:002015-01-05T02:35:25.490-08:00“It would be a grave mistake for the Fed to commit...“It would be a grave mistake for the Fed to commit to conduct monetary policy according to a mathematical rule,”<br /><br />Good stuff. <br /><br />http://blogs.wsj.com/economics/2015/01/04/minneapolis-feds-kocherlakota-opposes-policy-rule-to-decide-u-s-monetary-policy/?mod=marketbeat<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-46077900910700408392015-01-02T06:19:16.939-08:002015-01-02T06:19:16.939-08:00By the way, Dave's an excellent example of the...By the way, Dave's an excellent example of the macroeconomists who lived through the transition to modern macro, and succeeded by absorbing new ideas and building on them, which wasn't always easy. Unless you were at Minnesota, Chicago, or Carnegie-Mellon, you had to do this indirectly, and work a lot of stuff out for yourself.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-48554269848305699832015-01-02T05:59:13.260-08:002015-01-02T05:59:13.260-08:00"...actions have some importance..."
Bu..."...actions have some importance..."<br /><br />But it looks like a regime change, don't you think?<br /><br />"...disinflations are not costless in terms of output..."<br /><br />I tend to agree, but it's actually not obvious what you attribute that recession to. And if it's monetary policy, the propagation may not work through sticky wages and prices.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-7461290510835373812015-01-02T05:35:31.569-08:002015-01-02T05:35:31.569-08:00"But those revolutionaries gave us much of th..."But those revolutionaries gave us much of the framework we now use for addressing monetary policy problems: (i) we want to think in terms of policy regimes rather than policy actions; (ii) commitment is important; (iii) well-understood policy rules are important; (iv) people are forward-looking. All of those ideas are now common currency in central banking circles. People who succeeded as macroeconomists in the post-1980 world absorbed the ideas of Sargent and his contemporaries and worked with them - you can certainly see that in Woodford's work, for example."<br /><br />In many ways this is a continuation of the previous discussion, and the reply to your previous post “Where is the multiplier?” by Anonymous (Jan 1, 2015 at 10.11 AM). Most of these things you have identified have been debated for the last 200 years, they were key arguments put forward for maintaining the Gold Standard, and are unfortunately likely to be debated for the next 200. Even though they have been unreservedly debunked by historians time and time again, people keep bringing these old arguments back up again. Sargent did not give us anything of substance new; his final sentence on the extract you provide remains highly controversial and is just a repeat of those old arguments. But what he did was dress it up in maths and some implausible assumptions that are consistent with this ideology. (The forward looking arguments are weak and largely irrelevant. When I look at applied mathematicians like Sargent it seems to me the support what-ever ideology gives a more “sophisticated” mathematical model, which is even worse than choosing a model on the basis that it supports an ideology!!! This is probably explains Krugman’s observation (if he is correct) that some of these die hard monetarists were later miraculously transformed into RBC card carriers.) And this is reflected in their approach to history. Samuelson, who ironically inadvertently paved the way for this indulgent nonsense by gutting the General Theory and forcing it into a mathematical Walrasian model, however, is spot on in the quote you give regarding the historical evidence. When the dust settles, surely the overwhelming majority of people who will not put the stabilisation of inflation from the 1980s down to the Volcker shock. The lasting stabilisation is more likely to be put down to being a result of factors that were occurring in the world economy at the time (relating to oil and commodity prices, and then later the entry of China and the ex Soviet bloc into the international system which altered the relationship between capital and labour and the prices of manufactures and commodities throughout the world and which lasted for decades). Endorsing the policy measures taken during this episode would be like trying to endorse pre-General Theory policies taken during the Gold Standard which were all about policy credibility and commitment. Like Samuelson, most people now, both policy economists who have real economies to run, and certainly historians, do not.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-23440366284114376742015-01-01T20:21:05.336-08:002015-01-01T20:21:05.336-08:00But doing so certainly wouldn't make us Keynes...But doing so certainly wouldn't make us Keynesians. The issue is if all actions or only unanticipated ones have importance. CAnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-46054613996434627502015-01-01T17:59:12.017-08:002015-01-01T17:59:12.017-08:00Good post! But even if Okun's numbers were way...Good post! But even if Okun's numbers were way off, shouldn't the early 80s recessions teach us that actions have some importance, and that disinflations are not costless in terms of output?Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-18885273163787212922015-01-01T15:47:23.507-08:002015-01-01T15:47:23.507-08:00Sargent has a number of more recent papers that ex...Sargent has a number of more recent papers that explore this period. Here are a couple examples, possibly not the best ones: <br /><br />https://files.nyu.edu/ts43/public/research/inflat21.pdf<br />https://files.nyu.edu/ts43/public/research/ccs13.pdfDave Backushttps://www.blogger.com/profile/11472846910681816429noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-7683966271418873372015-01-01T14:12:17.192-08:002015-01-01T14:12:17.192-08:00Death certainly saves embarrassment.Death certainly saves embarrassment.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-71989229470838425692015-01-01T13:57:31.650-08:002015-01-01T13:57:31.650-08:00Re " If Okun was feeling pretty smug about al...Re " If Okun was feeling pretty smug about all this by the mid-1980s," Okun died in March 1980 (http://en.wikipedia.org/wiki/Arthur_Melvin_Okun) so he didn't have a chance to check his forecast against the record or make a mea culpa.Louis Johnstonhttps://www.blogger.com/profile/16967753169567713277noreply@blogger.com