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Unfortunately, Keynesians also made predictions (like fiscal spending moving rates off the zero bound, austerity hurting economic growth, etc) which did not tur

Unfortunately, Keynesians also made predictions (like fiscal spending moving rates off the zero bound, austerity hurting economic growth, etc) which did not turn out to be true, due to monetary offset. That is, Keynsians tend to over-focus on fiscal policy and ignore the monetary side, but in practice central banks end up sterilizing most if not all of what's going on the fiscal side, as far as I can tell. The only group I have seen making predictions over the last 10+ years who seem to be successful are the people suggesting that central banks do NGDP level targeting instead of what they're doing right now.

throw0101a 6y ago
In the last 10+ years fiscal spending has been half-hearted and anemic. As Krugman wrote back in 2009: > I see the following scenario: a weak stimulus plan, perhaps even weaker than what we’re talking about now, is crafted to win those extra GOP votes. The plan limits the rise in unemployment, but things are still pretty bad, with the rate peaking at something like 9 percent and coming down only slowly. And then Mitch McConnell says “See, government spending doesn’t work.” * https://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithmetic-wonkish-but-important/ https://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithm... Austerity does hurt economic growth: * https://krugman.blogs.nytimes.com/2012/04/24/austerity-and-growth-again-wonkish/ https://krugman.blogs.nytimes.com/2012/04/24/austerity-and-g... From what I've read on the topic, it's hardly ever been a good idea, especially in depressed economies: * https://en.wikipedia.org/wiki/Austerity:_The_History_of_a_Dangerous_Idea https://en.wikipedia.org/wiki/Austerity:_The_History_of_a_Da... > That is, Keynsians tend to over-focus on fiscal policy and ignore the monetary side AFAICT, Keynesians are both-and thinkers. Monetary is done first, but once you hit zero rates, then what more can you do from that angle? Printing money is only useful when you also have velocity, which has at first decreased and lately fallen off a cliff: * https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V At that point you have to move to fiscal. Krugman examined this in 1998 when Japan entered the quagmire before everyone else: * https://www.brookings.edu/bpea-articles/its-baaack-japans-slump-and-the-return-of-the-liquidity-trap/ https://www.brookings.edu/bpea-articles/its-baaack-japans-sl... > are the people suggesting that central banks do NGDP level targeting instead of what they're doing right now. Who is writing publicly on this topic, either in weblogs, articles, or Tweets?
- bzbarsky 6y ago
  > In the last 10+ years fiscal spending has been half-hearted and anemic See, this is one of those claims that is interesting to me because I never see anyone proposing what a "non-anemic" level would look like. No matter what gets proposed for fiscal spending, the response is "that won't be enough; we should spend more", without quantifying more. As a scientific claim, it's unfalsifiable, fundamentally, which makes it hard to work with usefully. > Austerity does hurt economic growth: First off, there's a lot of cherry-picking going on. The US did "austerity" things, people claimed the result would be disastrous.... and it wasn't. Europe did austerity, but _also_ very tight central bank policy at the same exact time; results were not great, but it's hard to blame this on just "austerity" given the central bank behavior. Just to be clear, I am not claiming that austerity _improves_ economic growth, which seems to be what the wikipedia link you post is about. I'm claiming that the specific predictions made about austerity by adherents of specific economics intellectual movements in the last 10-15 years did not in fact match what actually happened. > but once you hit zero rates, then what more can you do from that angle? Tons, if you want to, because you are not limited to short-term rates as your policy instrument. Those rates are correlated with monetary policy (in the short term; anti-correlated in the long term), not causative. Note that at the point when we hit "zero rates" central banks were doing all sorts of monetary tightening (positive interest rates on reserves!, the Fed raising its policy rate 9 times over the course of a few years and consistently missing its inflation target on the low side in the process, etc). https://en.wikipedia.org/wiki/Negative_interest_on_excess_reserves https://en.wikipedia.org/wiki/Negative_interest_on_excess_re... is absolutely a thing you can do to increase V when you hit "zero rates". But more importantly, a large part of monetary policy is expectations management. If people expect you to undershoot your inflation targets, they act accordingly and it actually gets harder to hit the targets. > Who is writing publicly on this topic, either in weblogs, articles, or Tweets? https://www.themoneyillusion.com/ https://www.themoneyillusion.com/ has been writing about it for a while now. Less recently, as the idea has gained more widespread traction; a lot more around the 2008 financial crisis and aftermath. Is the real question here "what is this and why is it supposed to be a good idea" or "who are these people who are making better predictions"?

throw0101a 6y ago

In the last 10+ years fiscal spending has been half-hearted and anemic. As Krugman wrote back in 2009: > I see the following scenario: a weak stimulus plan, perhaps even weaker than what we’re talking about now, is crafted to win those extra GOP votes. The plan limits the rise in unemployment, but things are still pretty bad, with the rate peaking at something like 9 percent and coming down only slowly. And then Mitch McConnell says “See, government spending doesn’t work.” * https://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithmetic-wonkish-but-important/ https://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithm... Austerity does hurt economic growth: * https://krugman.blogs.nytimes.com/2012/04/24/austerity-and-growth-again-wonkish/ https://krugman.blogs.nytimes.com/2012/04/24/austerity-and-g... From what I've read on the topic, it's hardly ever been a good idea, especially in depressed economies: * https://en.wikipedia.org/wiki/Austerity:_The_History_of_a_Dangerous_Idea https://en.wikipedia.org/wiki/Austerity:_The_History_of_a_Da... > That is, Keynsians tend to over-focus on fiscal policy and ignore the monetary side AFAICT, Keynesians are both-and thinkers. Monetary is done first, but once you hit zero rates, then what more can you do from that angle? Printing money is only useful when you also have velocity, which has at first decreased and lately fallen off a cliff: * https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V At that point you have to move to fiscal. Krugman examined this in 1998 when Japan entered the quagmire before everyone else: * https://www.brookings.edu/bpea-articles/its-baaack-japans-slump-and-the-return-of-the-liquidity-trap/ https://www.brookings.edu/bpea-articles/its-baaack-japans-sl... > are the people suggesting that central banks do NGDP level targeting instead of what they're doing right now. Who is writing publicly on this topic, either in weblogs, articles, or Tweets?

bzbarsky 6y ago
> In the last 10+ years fiscal spending has been half-hearted and anemic See, this is one of those claims that is interesting to me because I never see anyone proposing what a "non-anemic" level would look like. No matter what gets proposed for fiscal spending, the response is "that won't be enough; we should spend more", without quantifying more. As a scientific claim, it's unfalsifiable, fundamentally, which makes it hard to work with usefully. > Austerity does hurt economic growth: First off, there's a lot of cherry-picking going on. The US did "austerity" things, people claimed the result would be disastrous.... and it wasn't. Europe did austerity, but _also_ very tight central bank policy at the same exact time; results were not great, but it's hard to blame this on just "austerity" given the central bank behavior. Just to be clear, I am not claiming that austerity _improves_ economic growth, which seems to be what the wikipedia link you post is about. I'm claiming that the specific predictions made about austerity by adherents of specific economics intellectual movements in the last 10-15 years did not in fact match what actually happened. > but once you hit zero rates, then what more can you do from that angle? Tons, if you want to, because you are not limited to short-term rates as your policy instrument. Those rates are correlated with monetary policy (in the short term; anti-correlated in the long term), not causative. Note that at the point when we hit "zero rates" central banks were doing all sorts of monetary tightening (positive interest rates on reserves!, the Fed raising its policy rate 9 times over the course of a few years and consistently missing its inflation target on the low side in the process, etc). https://en.wikipedia.org/wiki/Negative_interest_on_excess_reserves https://en.wikipedia.org/wiki/Negative_interest_on_excess_re... is absolutely a thing you can do to increase V when you hit "zero rates". But more importantly, a large part of monetary policy is expectations management. If people expect you to undershoot your inflation targets, they act accordingly and it actually gets harder to hit the targets. > Who is writing publicly on this topic, either in weblogs, articles, or Tweets? https://www.themoneyillusion.com/ https://www.themoneyillusion.com/ has been writing about it for a while now. Less recently, as the idea has gained more widespread traction; a lot more around the 2008 financial crisis and aftermath. Is the real question here "what is this and why is it supposed to be a good idea" or "who are these people who are making better predictions"?