The Unbroken Window

If you take the classical Keynesian interpretation of the role of government in the economy and compare it to what a “true” Keynesian ought to advocate for based upon a careful reading of Keynes’ work, you might find yourself a little confused.
The classic Keynesian argument is that the government can play an important role in [...]

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It is well known that Paul Krugman has morphed from Nobel Prize winning columnist into something else. Nonetheless, it is still fun to analyze what he is saying when he pretends to be wearing his economist hat. Take for example the issue of whether or not we should be worrying about having a debt to [...]

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A lot! The following plots (real) household real estate value between 2000 and 2009.

Since the peak, the U.S. has “lost” about $8 trillion in real estate wealth – or about 33% of the value it held at its peak in 2006. However, if you break out the value of real estate into the value embedded [...]

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It seems to be a lot!
Since the the real value of household wealth hit is peak in the U.S. in the 4th quarter of 2006 through the trough in the first quarter of 2009, total U.S. household wealth (including real estate and equities) fell by 23.6% or about $20 trillion. The value of household assets [...]

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Even during a speech at West Point regarding sending more of our men and women off to war in Afghanistan, the President could not help but invoke the “fact” that he inherited the worst economic crisis since the Great Depression. Well, that may be so. I can pull out data to support this (it was [...]

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So the Administration is happy that TARP is going to be less costly than planned, and expects to not have to spend $200 billion of it (but it will, on beer goggle research – see prior post). But I just learned that “Treasury expects the bailout to cost $200 billion less than expected, and that [...]

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From the Redwood forests of California:
In a required state report to the federal government, the university system said the $268.5 million it received in stimulus funding through October allowed it to retain 26,156 employees.
That total represents more than half of CSU’s statewide work force. However, university officials confirmed Thursday that half their workers were not [...]

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This abstract says it all:
Why are the 2000s so different from the 1970s? A structural interpretation of changes in the macroeconomic effects of oil prices …
In the 1970s, large increases in the price of oil were associated with sharp decreases in output and large increases in inflation.  In the 2000s, and at least until the [...]

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It would be desirable anyway, but if we are talking about how to deal with the unemployment problem, my colleague Mark Bils and coauthors show that:
that cutting the payroll tax by six percentage points (of the 12.4% Social Security component) would, under standard assumptions, increase employment by three million to four million workers—an amount equal [...]

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Count another in favor of prudence.
We examine the evidence on episodes of large stances in fiscal policy, both in cases of fiscal stimuli and in that of fiscal adjustments in OECD countries from 1970 to 2007.  Fiscal stimuli based upon tax cuts are more likely to increase growth than those based upon spending increases.    As [...]

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