In my view, when you have Nobel Memorial Prize-caliber economists like Arizona State's Edward Prescott, Chicago's Robert Lucas and Eugene Fama, and Harvard's Robert Barro claiming that there are valid theoretical arguments proving that fiscal stimulus simply cannot work, not even in a deep depression--even though they cannot enunciate such theoretical arguments coherently--it is entirely fair for outsiders to conclude that academic economics as a profession is useless.
Monday, 20 July 2009
The state of economics
China bounces back
China's economy grew at an annual rate of 7.9% between April and June, up from 6.1% in the first quarter, thanks to the government's big stimulus package. The country's quickening economic expansion comes as most nations in the West continue to experience recession. Beijing now expects China to achieve 8% growth for 2009 as a whole, which compares with a predicted contraction of between 1% and 1.5% in the US. (BBC News; click figure to enlarge.)
Everyone seems surprised that the Chinese economy has recovered so quickly. This is being ascribed to the stimulus package announced in last November, but it is surprising that it could come through so quickly.
Unemployment rising rapidly
The paradox of thrift — for real
Tuesday, 14 July 2009
UK Inflation falls (a little)
UK annual inflation fell in June as the Consumer Prices Index (CPI) dropped to 1.8% from 2.2% in May, the Office for National Statistics (ONS) said. This is below the Bank of England's target of 2%, but it is surprising perhaps that it is only now below target given general defaltion fears. This is the year on year rate, so measure price changes over the last 12 months, rather than how prices have changed just over the last month or so.
The Retail Prices Index (RPI), a key inflation figure which includes mortgage interest payments and housing costs, became even more negative, falling to -1.6% from -1.1%, the lowest figure since the statistic has been collected in 1948! However given that monetary policy has pushed interest rates down so much, this is perhaps not such a good measure of inflation.
See this page from the BBC for an explanation of inflation and how the statistics are calculated.
Monday, 13 July 2009
Markets and Morals
Market triumphalism has given way to a new market scepticism. Almost everybody agrees that we need to improve regulation, but this moment is about more than devising new regulations. It’s also a time, or so it seems to me, to rethink the role of markets in achieving the public good. There’s now a widespread sense that markets have become detached from fundamental values, that we need to reconnect markets and values. But how? Well it depends on what you think has gone wrong. Some say the problem is greed, which led to irresponsible risk taking. If this is right, the challenge is to rein in greed, to shore up values of responsibility and trust, integrity and fair dealing; to appeal, in short, to personal virtues as a remedy to market values run amuck...
Inspiring Green Innovation
Sunday, 21 June 2009
Don't tighten policy yet!
Friday, 5 June 2009
Lord Stern on Climate Change
Miscellany from Krugman
Sunday, 10 May 2009
1931 and all that
Saturday, 18 April 2009
Irrationality, salad and chips - failure of the independence axiom
"Investigators asked college students to choose foods from menus that differed in only one feature; one menu offered a salad and the other did not. The point? To find out whether the presence of a salad on the menu influenced what else the students ate. It did. The students choose French fries more often from the menu with the salad."
Why do people like trams so much?
Wednesday, 8 April 2009
According to Eichengreen and O'Rourke: "globally we are tracking or doing even worse than the Great Depression, whether the metric is industrial production, exports or equity valuations." Krugman calls this "half a Great Depression" becuase the fall in manufacturing output in the US is not as bad as it was in 1929. But they point out that looking at global data, things don't look so good. On the bright side, the policy response (monetary and fiscal) looks a lot better now, so there is still hope...