The Unbroken Window

I apologize for the simple wonky post on the weekend and that you will not get to enjoy a pithy observation on this otherwise fine weekend. The “government budget identity” is simply a way to think about how a government can finance its expenditures. Suppose a government is required to help us build bridges and [...]

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Religious worship of the multiplier can very quickly devolve into a way to justify dishonesty in the market. I wished Keynesians would recognize this. Think of how such reasoning might go (from the standpoint of a businessman, no friend you should note, of capitalism): Businessman: “Gee, I have a product that some people like. If [...]

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Via Tyler Cowen, the very worthy Steve Randy Waldman discusses the Post-Keynesian argument for fiscal policy, even when we are not at the zero bound: Post-Keynesians did predict a crisis, on broadly the terms that we actually experienced. They argue that there are adverse side effects to using monetary policy to manage aggregate demand. Although [...]

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The foundation of modern macroeconomic theory (yes theory, the empirical work is scant) is based on the idea that prices (nominal) are sticky. Simplifying greatly, if you adhere to a classical view of the world where all agents have perfect information (no good economist assumes this of course, but it makes a nice straw man [...]

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I am sure my readers would wrinkle their eyebrows upon utterance of the name Brad DeLong. After all, this is a guy who regularly calls all Republicans hacks and does not shy away from throwing his opponents under the ad hominem bus. But that does not mean you ought not read some of the things [...]

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Be careful when you read people talking about aggregate demand shortfalls. When you hear it, they are about to recommend expansionary fiscal or monetary policy to “reinstate” aggregate demand. But demand is not demand is not demand. Remember your micro. How do we define demand? It is both your willingness AND ABILITY to pay for [...]

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Germane to our post earlier today, this new paper by Valerie Ramey (she’s found similar results in the past, something I will write about later on) finds that government spending multipliers are less than one (i.e. for every dollar of government spending, less than $1 of new economic activity is created) and that while government [...]

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Something of a blogosphere explosion occurred last week. What caused it? A largely correct post by Paul Krugman that had the gist of arguing that the amount of US federal government debt is a misleading indicator of how serious the US debt problem is. Here is my colleague Steve Landburg illuminating and buttressing the point. [...]

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While my wife makes her way through the stores today to cash in one some deals we’d otherwise not take advantage of (for example, it’s a great day to get your new linens and bath towels – while everyone is fighting over the latest toy, these sorts of mundane household items are often on sale [...]

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If my wife and I gave birth to a third child, the average GDP per person in our household would fall by 20%. If, instead, on that same day, someone bestowed upon us a gift of a cow, the average GDP of our home would increase.

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