The Unbroken Window

Earlier this week I said something that might have surprised some readers. The context had to do with orthodox Keynesian policy prescriptions. The elevator version of Keynesianism is this: run government deficits during recessions and run surpluses during boom times. If we ignore tax policy, this would mean government spending should increase during recessions and [...]

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Later down in the comments on Russ’s last post, John Papola (the director of Fear the Boom and Bust) wrote brilliantly: If keynesians REALLY believed their framework, they would be the most outspoken enemies of everything which makes prices and wages more rigid. They don’t. I’ve never seen it. The degree of wage stickiness is [...]

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In a response to this Russ Roberts post, Tim Worstall argues: “My eleven year-old understands that spending on rebuilding means less spending on something else.” Now introduce savings into your 11 year old’s model. Either that people will do less saving because they are rebuilding or that they will draw down their savings to rebuild. [...]

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It is easy, even for the best economists, to get stuck thinking about only one side of a market, or on only one margin of adjustment, when discussing policy. For example, opponents of the minimum wage seem to unilaterally focus on the possibility that raising wages will cause less employment. This is undoubtedly the case. [...]

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If you subscribe to the New (and old) Keynesian orthodoxy, you would tend to consider people that increase their demand for money balances (i.e. “hoarders”) to be somewhat akin to economic villains. The simplest version of the story is this: if people irrationally stop spending money on consumption goods and services (things that are produced) [...]

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The headline to this article is irritating: Census estimates show 1 in 4 counties is “dying.” This is ridiculous. We belabor the point here that counties and corporations and states and countries and churches, etc. are not living, breathing entities. And the continual anthropormophizing of such structures is not just a harmless verbal tendency. By [...]

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At least I admit it. One thing we have seen in this crisis is the rise from the dead of fears of “debt-deflation.” This is one way through which monetary factors (negative ones) are transmitted to the “real” economy in a negative way. In another post I’ll walk through the idea that “money is neutral.” [...]

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I’ve been thinking a lot lately about the classical gold standard. This was an international monetary standard that lasted from roughly 1870 to 1914. Not perhaps coincidentally, this was a time of a vast expansion in trade (the first modern wave of globalization) and a general surge in global prosperity. Without getting into the details, [...]

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Starting in the early part of the last century economists endeavored to come up with measures of the overall economic performance of the macro-economy. The creation of the modern concept of GDP is usually attributed to the work of Simon Kuznets during the Great Depression at the NBER. For the record, I find incredible problems [...]

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Today’s we’ll address a very simple approach to a very complicated idea. How much are people “worth?” If you think of people simply as GDP machines, then the easiest way to conceptualize the value of people is to ask, “What is the present value of the income generated by all of the people in the [...]

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