Utopia, you are standing in it!

Didn’t know this at all. Olympics in LA were mostly through private efforts:

Put off by the financial setbacks experienced by Montréal and still grappling with the turmoil and political unrest left by the Cold War, the 1984 Summer Games were not particularly popular when it came to attracting potential host cities. In fact, only two cities even officially bid to host the 1984 Olympic Games: New York City and Los Angeles.

Los Angeles won the bid in the end, but its residents were not enthusiastic about this decision nor were they willing to foot the bill. The people of Los Angeles were so adamant about protecting their tax dollars from wasteful spending that they proceeded to pass a city charter prohibiting the use of public funds to be used for Olympic facilities. The city now had the honor of hosting the Olympic Games, but no way to pay…

In response to my skepticism about monetary frictions, Stephen Williamson says that I “need to learn some monetary economics”. We’ll see.

It’s useful to think about the precise difference between the “New Keynesian” (Woodford) and “New Monetarist” (Williamson) effects of monetary policy. In New Keynesian models, monetary policy is important primarily because it affects the real interest rate, shaping patterns of consumption and investment across time. If interest rates are high, it’s expensive to buy a car or build a factory, and even ordinary consumption becomes less attractive compared to the return from saving. If interest rates are too high, consumers spend less than the economy can produce, and we see a recession. A good example of this type of model is in Eggertsson and Woodford’s classic piece on the liquidity trap.

In New Monetarist models, monetary policy is important for a completely different reason. Certain kinds of…

When I listen to discussions of monetary policy, I’m often struck by the extent to which outdated terms and concepts are fundamental to the conversation. I don’t mean that the academic discourse is backward—in fact, it moves along rather quickly. But discussions among practitioners, and in the financial press, fall back on the same obsolete ideas over and over.

Obsolete idea #1: The CPI as a central indicator for monetary policy

When the conversation turns to inflation, most of the time it’s assumed that we’re talking about the Consumer Price Index, as if that were the only price index that could conceivably matter. In reality, of course, there are plenty of other price indices—the Producer Price Index, the GDP deflator, nominal wages—with an equal or better claim to relevance in monetary policy. The CPI is not even close to the correct measure for the purposes of either output stabilization or efficient…

In his recent Economist debate with Brad DeLong on whether the inflation target should be raised, eminent monetary economist Bennett McCallum emphasizes the Friedman rule as an important determinant of the optimal long-term rate of inflation:

First, in the absence of the ZLB, the optimal steady-state inflation rate—according to standard new Keynesian reasoning—lies somewhere between the Friedman-rule value of deflation at the steady-state real rate of interest (therefore something like –2% to 4%) and the Calvo-model value of zero, with careful calibration indicating that the weight on the latter may be considerably larger. Second, a theoretically attractive modification of the Calvo model would imply that the weight on the second of these values should be zero, so that the Friedman-rule prescription itself would be optimal (in the absence of the ZLB).

Third, even when the effects of the ZLB are added to the analysis, the optimal inflation rate is (according…

England has seen the rise of calls for speech prosecutions, including calls from powerful politicians for crackdowns on insulting or offensive comments. We have previously discussed the alarming rollback on free speech rights in the West, particularly in England ( here and here and here and here and here and here and here and here and here and here and here). The rapid decline of free speech in England has been both chilling and frightening for civil libertarians as the country appears to have abandoned this once defining right of Western Civilization. Now, a Manchester man reportedly has been arrested and sentenced for making “grossly offensive” comments about Muslims on Facebook. Stephen Bennett, 39, (who has a Muslim mother-in-law and sister-in-law) has been sentenced to 180 hours of unpaid work and a 12-month community order for expressing his views.