Short version, bulletpointed for the powerpoint generation:
- Economics is about STUFF created...(and stuff includes services).
- Some folks get confused that money is the issue, rather than the stuff. They're wrong.
- Right now, a metric ass-ton of STUFF isn't getting created.
- This is despite the fact that we lots of workers aren't working AND lots of workplaces are short-staffed.
- This is hideous, horrendous, bad. Fix it now at ANY cost.
We have people who would be working but are instead watching Judge Judy. We have machines that could be spinning but are literally rusting for lack of use. This is a coordination disaster.This is why we have the field of Macro. FWIW, I think Karl is in the Scott Sumner camp...NGDP targeting. I think this post pushed me over the edge to the first ever case of Aretae suggesting government action -- Target NGDP like Sumner says. All Fed, No elected officials.The question is how do we end this thing as quickly as possible. How do we stop wasting our basic resources (men and machines), day-after-day, month-after-month, year-after-year.
So when I hear this debate drift oft into how Republicans don’t appreciate the value of infrastructure – I suffer infinite eye roll. This is the time for this? You would watch the core economy grind down while you argue over the need to fix a pothole!
When I hear the GOP running some nonsense about how Obamacare is scaring small business I find myself beating back the desire for autodefenestration. Can we let this go already! There are real issues that need to be dealt with.
Now maybe some people want to explain to me how what appears to be a massive market failure is actually something else: a skill mismatch, a great recalculation, etc. I am willing to have that debate.
Of those that agree that this is the result of insufficient aggregate demand we can debate the fastest means of spurring such demand: aggressive monetary policy, payroll tax cuts, something else we haven’t thought of – I am all ears.
However, these are the limits of rational disagreement.
Side arguments that are basically proxy battles for your general theory of government are sadistic tribalistic grandstanding. You chatter and dawdle while Rome burns.
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6 comments:
This post was the tipping point for me in my Google feed reader, for demoting Aretae out of the frequently read "best" label. I may still occasionally come by though.
Are you willing to advocate government intervention based on pragmatic considerations, or do you consider NGDP targeting by the Fed to be preferable to free market money creation?
I read Smith's post. He sounded a lot like a socialist friend of mine.
We have factories! We have workers! Put the workers in the factory and we have wealth!
I'm not so sure. What if those factories are all set up to make buggy whips, or tanks, or mortgage processing equipment?
The fundamental role of the market is to match willing buyers and sellers: true. However, the fundamental role of the entrepreneur in the capitalist economy is to discover willing buyers and sellers. You can't have a functioning market without entrepreneurs, and you can't have functioning entrepreneurs if you don't want to talk about incentives.
For what it's worth, I'm in Kling's recalculation camp.
Todd,
1. Pragmatic considerations.
2. It's worse than your socialist friend's position.
A. We have factories.
B. We have workers.
Your friend's position.
C. We have people who want product.
And demand?
D. But no one is making and selling product.
The problem.
We were making lots of stuff last year. We're not making as much stuff this year. That's BAD, unless you're an anti-people environmentalist. If the same people could make the same stuff as last year and people could buy it, things would be good. But the MACRO picture is that they're not.
Economic growth > antigovernmentalism because economic growth drives everything.
Perhaps the recalculation story is right. I'm sympathetic to Kling too...but it's for sure horrid to have LOWER output than last year, and fewer people creating that output. Even if nothing got better, we have a lot of room to grow back to where we were...but that folks aren't making as much stuff.
I still think that both the original Smith article and your summary/support thereof gloss over the fact that demand is a heterogeneous and dynamic phenomenon. I agree that there are currently many idle resources in our economy. I disagree that the lower output this year than last is "necessarily" bad, instead, it might also be bad, but necessary.
Basic proposition / question.
Proposition: We can NEVER grow back to where we were. Where we were represented an unsustainable pattern of production and trade. Measuring monetary aggregates tells you next to nothing about those patterns.
Question: Let's say Sumner's NGDP targeting proposals were implemented, yet uncertainty about future government spending and regulatory burdens remained at their present levels. Do you think material well-being would be noticeably improved?
As befits my epistemology...I don't think we actually have an empirical answer to that.
Until we try it, that is. I'd wager that yes, NGDP targetting all by itself would make for a recovery. I don't believe I understand the field, so I listen to others with experience.
MOST experience on this seems to be Sumner, with Kling, Krugman, others all making up stories that MIGHT be true.
NGDP targeting seems best. I'll make a short post on this right now.
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